What Part D Covers
Part D is Medicare's prescription drug benefit. You get it one of two ways: a standalone Part D plan alongside Original Medicare or a Medicare Supplement policy, or bundled into a Medicare Advantage plan (called MA-PD). Either way, it's sold through private insurance companies approved by Medicare, and each plan has its own list of covered drugs (called a formulary).
The Donut Hole Is Gone
For decades, Part D had an infamous "coverage gap" where your costs jumped up after you and your plan spent a certain amount together. The Inflation Reduction Act eliminated that gap for good, starting January 1, 2025.
In its place, Part D now works in two simple phases after any deductible: an initial coverage period where you typically pay 25% coinsurance, then a hard annual out-of-pocket cap. Once you hit that cap, you pay $0 for covered Part D drugs for the rest of the year.
For 2026 coverage, Medicare sets the maximum Part D deductible at $615 and the out-of-pocket cap at $2,100. For 2027 coverage (the plans you can join during the October 15–December 7, 2026 Annual Enrollment Period), CMS updated those defined-standard amounts to a $700 deductible and a $2,400 out-of-pocket cap. Your specific plan can charge less than the maximum deductible, but it cannot charge more.
New: The Medicare Prescription Payment Plan
If a large drug bill early in the year would be hard to absorb all at once, you can opt into the Medicare Prescription Payment Plan. It spreads your out-of-pocket drug costs into predictable monthly installments across the rest of the year instead of paying it all at the pharmacy counter. It's voluntary, doesn't change what you owe overall, and you can opt out at any time.
How to Actually Choose a Plan
The cheapest-looking premium is rarely the cheapest plan once you actually use it. The three things that matter most:
- Your exact medications are on the formulary, ideally at a favorable cost tier. The same drug can cost very different amounts from one plan to the next.
- Your pharmacy is in the plan's preferred network: using an out-of-network or non-preferred pharmacy can cost noticeably more for the exact same prescription.
- Total estimated annual cost: premium plus deductible plus what you'll actually pay for your specific medications, not just the monthly premium by itself.
When Can You Enroll or Switch?
- Initial Enrollment Period: the 7-month window around your 65th birthday.
- Annual Enrollment Period: October 15 to December 7 every year, for changes effective January 1.
- 5-Star Special Enrollment Period: if a 5-star Part D plan is available in your area, you can switch into it once between December 8 and November 30.
Note: standalone Part D plans don't get the January–March window that Medicare Advantage plans do. That period is for switching Medicare Advantage plans only.