Medicare Part D Explained: Coverage, Cost & How to Choose a Plan

Prescription drug coverage part of Medicare is called Medicare Part D. In contrast to Parts A and B, Part D is provided by non-governmental and privately-owned insurers approved by Medicare, rather than the federal government itself. The average monthly premium in 2026 is approximately 45USD with deductibles reaching 545 USD. In 2025 a hard, $2,000/year, out-of-pocket limit on prescription expenses took effect: the first substantial increase in several years. This is the first cap in Medicare's history.

This guide describes the part d medicare plans cover, how they work, their cost in 2026, the catastrophic coverage limit, and how to choose a plan based on your specific medications. Sources of information are Medicare.gov, CMS, and KFF. 

What is Medicare Part D?

What is Part D of Medicare? It is optional prescription drug insurance of Medicare beneficiaries. You make your own enrollment through a privately-insured company that is Medicare-approved. Each plan includes a monthly premium, deductible, copays, formulary (covered drugs list) and pharmacy network.

In the absence of Part D, you will pay retail price on the prescriptions. Ordinary drugs may cost more than thousands of dollars in out-of-pocket expenses annually. Part D is technically optional but not taking it usually does not make financial sense except when you are already covered by a credible plan (employer drug coverage, VA benefits, some retiree plans).

KFF predicts that in 2026, approximately 53 million Medicare beneficiaries will have Part D coverage through a standalone plan or as part of a Medicare Advantage plan with drug coverage.

Medicare Part D coverage and how it works

Medicare Part D coverage is structured in stages. Each stage has different cost-sharing rules. Understanding the stages is the key to understanding why two people on the same plan pay different amounts.

One of the most significant changes became effect in 2025 as a part of the Inflation Reduction Act: the coverage gap between the donut holes was eliminated and a 2,000 annual out-of-pocket maximum was introduced. Once you pay out of pocket on Part D drugs an amount of $2,000 in any calendar year, all of your covered prescriptions are free thereafter. This reform is among the greatest cost reforms in the history of Medicare and disproportionately benefits individuals who use specialty drugs that are quite expensive.

In 2025, also came a new option: the Medicare Prescription Payment Plan, which allows you to pay your annual prescription bills in monthly installments instead of paying large amounts as you go to the pharmacy counter. 

Medicare Part D cost in 2026

Medicare Part D cost varies significantly by plan. The 2026 numbers from Medicare.gov show:

• Average monthly premium: Around $45 (varies from under $20 to over $100 depending on plan)

• Maximum deductible: $545 in 2026

• Annual out-of-pocket cap: $2,000

• Late enrollment penalty: 1% of national base premium per month of delay, permanent

Higher-income beneficiaries pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of their premium, just like with Part B. Lower-income beneficiaries may qualify for Extra Help (also called Low-Income Subsidy), which can reduce or eliminate Part D premiums and copays. According to CMS, more than 14 million people receive Extra Help, often without realizing they qualify.

Medicare Part D enrollment

Medicare Part D enrollment happens during specific windows:

• Initial Enrollment Period: The same 7-month window around your 65th birthday as Parts A and B

• Annual Enrollment Period: October 15 to December 7 each year

• Special Enrollment Period: Triggered by qualifying events like moving, losing employer drug coverage, or qualifying for Extra Help

If you don't have creditable drug coverage and you delay enrolling in Part D, you'll pay a permanent late enrollment penalty added to your premium. The penalty is calculated as 1% of the "national base beneficiary premium" multiplied by the number of months you went without coverage. It applies for as long as you have Medicare drug coverage.

Example: If you delay Part D for 24 months, your premium increases by 24% permanently. At a $45 base premium, that's about $11 extra per month, or $130 per year, every year for life.

Best Medicare Part D plans: how to choose

There is no single "best" Part D plan. The best plan for you is the one that covers your specific medications at the lowest total cost. Two people on the same prescriptions can have very different "best" plans because pharmacy networks, tier placements, and formularies vary.

The right way to choose:

• List every prescription you take with the name, dose, and how often

• Use the Medicare Plan Finder at Medicare.gov, which compares plans based on your specific drugs

• Check the formulary tier for each medication. Drugs are placed in tiers (1 through 5 typically), with lower tiers costing less

• Compare total annual cost, not just the monthly premium. A plan with a $0 premium can cost more total if your drugs are placed in expensive tiers

• Verify your pharmacy is in-network for that plan's preferred pharmacy list, which usually has lower copays

• Re-shop every year during AEP because formularies and prices change annually

Many people stay on the same plan year after year and overpay by hundreds of dollars. KFF research suggests fewer than 1 in 10 Medicare beneficiaries actively compare Part D plans annually, even though most could save by switching.

Part D vs Medicare Advantage with drug coverage

Two ways to get Part D:

• Standalone Part D plan (PDP): Add a Part D plan to Original Medicare + Medigap. Premiums and drug costs are separate from your medical coverage. You pay the Part D plan directly.
• Medicare Advantage plan with drug coverage (MAPD): Get medical and drug coverage in one bundled Medicare Advantage plan. About 90% of Medicare Advantage plans include Part D coverage built in. You can't have both a standalone Part D plan and an MA plan with drug coverage at the same time.

The right choice depends on your overall Medicare strategy. If you're on Original Medicare with Plan G Medigap, you need a standalone PDP. If you're on Medicare Advantage, your drug coverage is usually included.