What Is Medicare Part D?
Everything you need to know about Medicare Part D prescription drug coverage for 2026. New out-of-pocket cap, negotiated prices on 10 drugs, simplified coverage stages, and tips for choosing the right plan.
Everything you need to know about Medicare Part D prescription drug coverage for 2026. New out-of-pocket cap, negotiated prices on 10 drugs, simplified coverage stages, and tips for choosing the right plan.
Medicare Part D is prescription drug coverage for people enrolled in Medicare. Introduced in 2006, Part D helps reduce the cost of prescription medications—and 2026 brings some of the most significant improvements since the program began.
Thanks to the Inflation Reduction Act, Medicare Part D now includes an annual out-of-pocket cap, negotiated prices on expensive brand-name drugs, and simplified coverage that eliminates the confusing "donut hole." If you take prescription medications, understanding these changes could save you hundreds or even thousands of dollars in 2026.
1. $2,100 Out-of-Pocket Cap
For the first time in Medicare Part D history, there's an actual cap on what you pay for covered prescription drugs:
• Maximum out-of-pocket spending: $2,100 in 2026 (up slightly from $2,000 in 2025)
• Once you reach $2,100, your plan pays 100% of covered drugs for the rest of the year
• Cap includes deductibles, copays, and coinsurance—but not premiums
• Cap will be adjusted annually for inflation
Before 2025: Reaching "catastrophic coverage" required spending $8,000 out of pocket. Many people with chronic conditions pay thousands every year with no end in sight. The new cap provides real protection.
2. No More Coverage Gap ("Donut Hole")
The confusing "donut hole" has been eliminated. Now Part D has a simple structure:
• Pay your deductible (if your plan has one)
• Pay copays/coinsurance until you reach $2,100
• Pay $0 for covered drugs the rest of the year
3. Negotiated Prices on 10 High-Cost Drugs
For the first time, Medicare has negotiated prices directly with drug manufacturers. Starting January 1, 2026, these 10 medications will have significantly lower prices:
• Eliquis (blood clot prevention): $231/month, down from $521 (56% savings)
• Jardiance (diabetes, heart failure): $197/month, down from $573 (66% savings)
• Xarelto (blood clot prevention): $197/month, down from $517 (62% savings)
• Januvia (diabetes): $113/month, down from $527 (79% savings)
• Farxiga (diabetes, heart failure, kidney disease): $178.50/month, down from $556 (68% savings)
• Entresto (heart failure): Negotiated price available
• Enbrel (rheumatoid arthritis, psoriasis): $2,355/month, down from $7,106 (67% savings)
• Imbruvica (blood cancers): Negotiated price available
• Stelara (psoriasis, Crohn's disease): Negotiated price available
• NovoLog/Fiasp (insulin for diabetes): $119/month, down from $495 (76% savings)
Nearly 9 million Medicare beneficiaries use these drugs, and savings are estimated at $1.5 billion in out-of-pocket costs in 2026. An additional 15 drugs will have negotiated prices in 2027, including Ozempic, Wegovy, and others.
4. $35 Insulin Cap Continues
The $35/month cap on insulin copays continues in 2026. This applies to all covered insulin products, and you don't need to meet your deductible first.
5. Free Vaccines
All vaccines recommended by the CDC's Advisory Committee on Immunization Practices are covered at $0 cost—no deductible, no copay. This includes shingles, tetanus, hepatitis, and others.
6. Medicare Prescription Payment Plan
New for 2026: You can spread your out-of-pocket drug costs over the entire year instead of paying large amounts upfront. If you have high drug costs early in the year, this can help manage your monthly budget.
Two Ways to Get Part D Coverage:
1. Standalone Part D Plan (PDP): A separate prescription drug plan you add to Original Medicare (Parts A and B). You can also pair it with a Medicare Supplement (Medigap) plan.
2. Medicare Advantage with Drug Coverage (MA-PD): Most Medicare Advantage plans include Part D prescription drug coverage as part of the plan.
All Part D plans follow federal guidelines and must be approved annually by the Centers for Medicare & Medicaid Services (CMS). While plans must cover a wide range of medications, each plan has its own formulary (list of covered drugs) and cost structure.
The coverage stages are simpler than ever. Here's how they work:
Stage 1: Deductible
• Maximum deductible for 2026: $615
• Many plans have lower deductibles or no deductible at all
• You pay the full cost of drugs until you meet your deductible
• Exception: Insulin is capped at $35/month even before meeting deductible
Stage 2: Initial Coverage
• After meeting your deductible, you pay copays or coinsurance
• Standard plans: You pay about 25% of drug costs
• Costs vary by drug tier—generic drugs cost less than brand-name drugs
• This stage continues until your out-of-pocket spending reaches $2,100
Stage 3: Catastrophic Coverage
• Once you've paid $2,100 out of pocket, you enter catastrophic coverage
• You pay $0 for covered drugs for the rest of the year
• The out-of-pocket counter resets on January 1 each year
Monthly Premiums:
• Average standalone Part D premium: ~$34.50/month (down from ~$38 in 2025)
• Average Part D premium in Medicare Advantage plans: ~$11.50/month
• Premiums vary widely by plan—some as low as $0, others much higher
• Higher-income beneficiaries pay an additional Income-Related Monthly Adjustment Amount (IRMAA)
Deductible:
• Maximum for 2026: $615 (up from $590 in 2025)
• Many plans have lower or no deductible
Out-of-Pocket Maximum:
• $2,100 for 2026
• After reaching this limit, you pay $0 for covered drugs
Late Enrollment Penalty:
If you don't enroll in Part D when first eligible and don't have other creditable coverage, you'll pay a permanent penalty:
• Penalty = 1% of national base premium ($38.99 in 2026) × number of months without coverage
• This penalty is added to your premium for as long as you have Part D
Part D plans organize drugs into tiers, with different costs for each tier:
Tier 1 - Preferred Generic: Lowest cost. Common generic medications.
Tier 2 - Generic: Low cost. Other generic medications.
Tier 3 - Preferred Brand: Moderate cost. Brand-name drugs are the plan's preference.
Tier 4 - Non-Preferred Brand: Higher cost. Brand-name drugs not on preferred list.
Tier 5 - Specialty: Highest cost. Expensive specialty medications often require special handling.
Important: The same drug can be on different tiers in different plans. Always check where your specific medications fall in each plan's formulary before enrolling.
Eligibility:
You can enroll in Medicare Part D if you're enrolled in:
• Medicare Part A only
• Medicare Part B only
• Both Medicare Part A and Part B
When to Enroll:
Initial Enrollment Period: 7-month window around your 65th birthday (3 months before, birthday month, 3 months after)
Annual Enrollment Period: October 15 – December 7 each year. You can join, switch, or drop Part D coverage.
Special Enrollment Periods: Available if you lose other drug coverage, move out of your plan's service area, or have other qualifying events.
1. Make a List of Your Medications:
Include the drug name, dosage, and how often you take it.
2. Check the Formulary:
Make sure the plan covers all your medications. Check what tier each drug is on—this determines your cost.
3. Check Your Pharmacy:
Most plans have preferred pharmacies with lower costs. Verify your pharmacy is in-network, or consider using the plan's mail-order pharmacy for additional savings.
4. Compare Total Annual Costs:
Don't just compare premiums. The Medicare Plan Finder at Medicare.gov can estimate your total annual drug costs based on your specific medications.
5. Review Plan Rules:
Some plans have utilization management rules:
• Prior authorization: Plan approval required before filling certain drugs
• Step therapy: You may need to try a less expensive drug first
• Quantity limits: Limits on how much medication you can get at once
If you have limited income and resources, you may qualify for Extra Help, a program that pays Part D premiums and reduces drug costs.
Eligibility (2025 guidelines):
• Income up to 150% of the federal poverty level
• Limited resources (savings, stocks, bonds)
Benefits Include:
• Help pay monthly premiums
• Lower or no deductible
• Reduced copays
How to Apply: Apply online at SSA.gov, call Social Security at 1-800-772-1213, or visit your local Social Security office.
Do I need Part D if I don't take many medications?
Consider enrolling in a low-premium plan anyway. If you delay enrollment and don't have other creditable coverage, you'll face a permanent late enrollment penalty. Plus, your medication needs may change over time.
Can I change my Part D plan?
Yes, during the Annual Enrollment Period (October 15 – December 7). Plan formularies and costs change each year, so it's essential to review your options annually.
What if I switch plans mid-year?
Medicare tracks your out-of-pocket spending. If you switch plans, your expenditures toward the $2,100 cap transfer to your new plan.
Are all my drugs covered?
Not necessarily. Each plan has its own formulary. Some drugs may not be covered or may require prior authorization. Always verify your medications are on the plan's drug list before enrolling.
How do negotiated drug prices affect me?
If you take one of the 10 negotiated drugs, your out-of-pocket costs should be lower in 2026. All Part D plans must cover these drugs. However, your actual savings depend on your plan's cost-sharing structure.
With 12 standalone Part D plans available in North Carolina for 2026—plus Part D coverage in Medicare Advantage plans—finding the right prescription drug coverage can be challenging. At Health Plans of NC, our licensed agents can help you compare options and find the plan that covers your medications at the lowest cost.
We Can Help You:
• Review your current medications and find plans that cover them
• Compare standalone Part D plans vs. Medicare Advantage with drug coverage
• Estimate your total annual drug costs under different plans
• Check if you qualify for Extra Help
• Understand how the new negotiated prices and out-of-pocket cap benefit you
• Enroll in the right plan before the deadline
Our services are completely free. We're paid by insurance carriers, never by you. Contact Health Plans of NC today to find the Part D plan that fits your needs and budget.