Medicare Part D Prescription Drug Coverage

Part D is Medicare's prescription drug coverage, with a $2,000 annual out-of-pocket cap on covered drugs since 2025. What a specific drug costs depends on which plan you choose and which tier that plan puts it on, which is why checking your own medications against a plan's formulary matters more than the premium alone.

By Victoria Cabrera — 20+ years in health insurance, focused on the Medicare market since 2015, NABIP speaker.

How Part D works

Part D is optional prescription drug coverage sold by private insurers, either as a standalone Prescription Drug Plan (PDP) alongside Original Medicare, or bundled into a Medicare Advantage plan (an MA-PD plan). Each plan has its own list of covered drugs, called a formulary, its own premium, and its own cost-sharing structure.

Going without Part D, or without other creditable drug coverage such as employer coverage or VA pharmacy benefits, for 63 days or more can trigger a late enrollment penalty that is added to your premium for as long as you have Part D. See the enrollment periods and penalties guide for the exact formula and a calculator.

Drug tiers, and why the same drug can cost differently on different plans

Most Part D plans sort covered drugs into tiers, typically five: preferred generic, generic, preferred brand, non-preferred drug, and specialty, in roughly increasing order of cost. Your copay or coinsurance depends on the tier, not just the drug itself.

The same medication can sit on a cheaper tier with one plan and a pricier tier with another, or carry restrictions like prior authorization or a quantity limit on one plan but not another. This is why it is worth checking your actual prescriptions against a specific plan's formulary before enrolling, not assuming a lower premium automatically means lower total cost.

The $2,000 annual out-of-pocket cap

Since 2025, Part D includes a $2,000 annual cap on what you pay out of pocket for covered drugs. Once your covered drug costs for the year reach that cap, your plan pays the rest of your covered drug costs for the remainder of the year, no more coverage gap, no more catastrophic-phase coinsurance. This cap is a permanent feature of the program going forward, not a one-year change.

How to check if your drug is covered

Medicare's own Plan Finder at medicare.gov/plan-compare lets you enter your specific medications and see which plans available in your area cover them, at what tier, and roughly what they would cost. A licensed agent can do the same comparison for you and also flag plan-specific restrictions like prior authorization that the Plan Finder summary does not always make obvious.

Extra Help: lower costs if your income qualifies

Extra Help, Medicare's Part D Low Income Subsidy, can eliminate your Part D deductible, cover your premium up to a regional benchmark amount, and cap your copays at roughly $5.10 for generic drugs and $12.65 for brand-name drugs in 2026. See the Medicaid and Dual Eligible guide for income and resource details and how Extra Help relates to Medicare Savings Programs.

Plan counts vary by county, and change every year

How many Part D and MA-PD plans are available, and at what premium, is set county by county and can change from one year to the next. Check your own county's current plan count on its guide, and recheck your formulary every Annual Enrollment Period (October 15 to December 7), even if you are happy with your current plan, since tiers and restrictions can shift year to year.

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Common questions about Part D

What is Medicare Part D?

Part D is Medicare’s prescription drug coverage, sold by private insurers either as a standalone plan alongside Original Medicare, or bundled into a Medicare Advantage plan (MA-PD). It is optional, but going without it, or without other creditable drug coverage, for 63 days or more can trigger a late enrollment penalty.

Is there a yearly limit on what I pay out of pocket for drugs?

Yes. Since 2025, Part D has a $2,000 annual cap on what you pay out of pocket for covered drugs. Once you hit it, your plan covers the rest of your covered drug costs for the remainder of the year.

How do drug tiers work?

Most plans use a 5-tier structure: preferred generic, generic, preferred brand, non-preferred drug, and specialty, in roughly increasing order of cost. The same drug can sit on a different tier, or carry different restrictions, from one plan to the next, so your actual copay depends on which plan you choose.

How do I check if my specific drug is covered?

Use Medicare’s Plan Finder at medicare.gov/plan-compare, enter your medications, and it shows which plans cover them and at what tier and estimated cost. A licensed agent can also check your specific drug list against plans available in your county.

What is Extra Help and do I qualify?

Extra Help is Medicare’s Part D Low Income Subsidy. It can eliminate your Part D deductible, cover your premium up to a regional benchmark, and cap your copays at roughly $5.10 for generics and $12.65 for brand-name drugs in 2026. Apply through Social Security at ssa.gov.

Can my plan change which tier my drug is on from year to year?

Yes. Formularies and drug tiers can change every year when plans file their new benefits for the coming contract year. Always recheck your plan’s formulary during the Annual Enrollment Period, even if you are happy with your plan, a drug that was an affordable generic tier this year is not guaranteed to stay there next year.

Sources

Figures verified 2026-10-01.