The complete guide

Part D: the drug cap changed everything, and the plan still matters

Short answer: Part D is prescription coverage from private plans, and it works far better than it used to. The donut hole is gone, out-of-pocket spending on covered drugs now stops at $2,100 in 2026 and $2,400 in 2027, insulin is capped at $35 a month, recommended vaccines are free, and every plan must let you spread your costs monthly. What still varies enormously is which drugs a plan covers, on which tier, at which pharmacy, which is why the same prescription list can cost hundreds of dollars more on one plan than another in the same ZIP code.

By the Medicare Decoder team · Updated October 12, 2026 · 4-minute read · Figures are official CMS amounts, checked against CMS

Key takeaways

Out-of-pocket spending on covered drugs is capped: $2,100 in 2026, $2,400 in 2027, then $0 for the rest of the year.
The deductible is capped at $615 in 2026 and $700 in 2027; many plans charge less.
Insulin costs no more than $35 a month and recommended vaccines cost $0.
Every plan must offer monthly payment smoothing so big drug costs do not all land in January.
Going without creditable drug coverage triggers a permanent penalty of 1% of the base premium per month.

Jump to How the year works Formularies and tiers The permanent penalty Choosing a plan If costs are still too high FAQ

How a Part D year actually works

Phase	What happens	2026 / 2027 figures
Deductible	You pay the full negotiated price until you meet it	Up to $615 / up to $700
Initial coverage	You pay a copay or coinsurance by tier; the plan pays the rest	Varies by plan and tier
Catastrophic	Once your out-of-pocket spending hits the cap, covered drugs cost $0	$2,100 cap / $2,400 cap
Smoothing (optional, any time)	Spread your out-of-pocket costs into monthly payments instead of paying at the counter	Every plan must offer it

The coverage gap, or donut hole, was eliminated in the 2025 redesign. If a plan description still mentions it, the description is out of date.

The cap is the most consequential change to Medicare in a generation for anyone with expensive prescriptions, and it applies to covered drugs, which brings us to the part that still varies.

Formularies, tiers, and the things that cost you money

Each plan publishes a formulary: the list of drugs it covers and the tier each sits on. Tiers run roughly from preferred generics (cheapest) through preferred brands, non-preferred drugs, and specialty. The same medication can be tier 2 on one plan and tier 4 on another, which is where the hundreds of dollars hide. Three restrictions also matter:

Prior authorization: the plan must approve the drug before covering it. Decisions are generally due within 72 hours, or 24 hours when expedited (the approval rules).
Step therapy: you must try a cheaper drug first unless your prescriber documents why it is unsuitable.
Quantity limits: a cap on how much is dispensed at once.

Pharmacy choice matters too: plans have preferred pharmacies where the same drug on the same plan costs less, plus mail-order pricing. And formularies change every January, which is the entire reason for the annual re-shop. For 2027, 15 more drugs get negotiated Medicare prices, including the semaglutide family at $274 for a 30-day supply (what that means in practice), and plans are re-sorting tiers around them.

The permanent penalty

If you go 63 days or more without Part D or other creditable drug coverage after your initial window closes, Medicare adds 1% of the national base beneficiary premium for every uncovered month to your premium, for as long as you have Part D. The base is $38.99 in 2026 and $41.33 in 2027, so the dollar amount grows over time. Employer, union, VA, and TRICARE coverage generally counts as creditable; keep the annual notice that says so. If you take no medications at all, enrolling in a low-cost plan is still usually right, for reasons laid out in that article.

Choosing a plan in 20 minutes

Gather the bottles. Exact drug names, doses, and how many you take per month. Approximations produce confidently wrong answers.
Enter everything at the official Plan Finder, along with your pharmacy of choice (click by click).
Sort by total annual cost, never premium. This is the single most expensive mistake people make. CMS projects that 88% of beneficiaries without low-income assistance can find a basic plan at $10.30 a month or less in 2027, and a cheap premium tells you nothing about what your drugs will cost on it.
Open the top two or three plans and check tier placement and restriction flags for your specific drugs.
Check the pharmacy shows as preferred, and compare mail order if you take maintenance medications.
Re-shop every fall. Plans reprice and re-tier annually; loyalty is billed, not rewarded. The 20-minute method.

If costs are still too high

Extra Help is the biggest lever: it can eliminate the Part D premium and deductible and cut copays to a few dollars, and it is widely unclaimed. Qualifying for a Medicare Savings Program generally brings Extra Help automatically. Beyond that: ask about therapeutic alternatives on friendlier tiers, request a formulary exception through your prescriber when a covered alternative will not work, use monthly smoothing if costs cluster early in the year, and appeal denials, which succeed regularly (how appeals work).

Questions people also ask

How does Medicare Part D work?

Private plans cover prescriptions in phases: a deductible of up to $615 in 2026, then tier-based copays or coinsurance, then nothing once your out-of-pocket spending reaches $2,100 in 2026 or $2,400 in 2027. Every plan must also offer to spread your costs into monthly payments.

What is the Part D out-of-pocket maximum?

$2,100 in 2026, rising to $2,400 in 2027. Once you reach it, covered prescriptions cost nothing for the rest of the calendar year. The old coverage gap, or donut hole, no longer exists.

Why does the same drug cost more on one plan than another?

Because each plan sets its own formulary and tier placement, and may apply prior authorization, step therapy, or quantity limits. Pharmacy choice matters too, since preferred pharmacies price the same drug lower. This is why plans should be compared on total annual cost for your exact prescriptions.

What is the Part D late enrollment penalty?

One percent of the national base beneficiary premium for each month you went without Part D or other creditable drug coverage, added to your premium permanently. The base premium is $38.99 in 2026 and $41.33 in 2027, so the penalty amount rises over time.

How do I choose the best Part D plan?

Enter your exact prescriptions and pharmacy at medicare.gov/plan-compare, sort by total annual cost rather than premium, then check tier placement and restrictions on your specific drugs for the top two or three plans. Repeat every fall, because formularies change each January.

Sources for this article

Medicare.govPart D costs: deductible, coverage phases, the out-of-pocket cap, and smoothing.
CMS.gov2027 Part D bid announcement: the 2027 base premium and program parameters.
Medicare.govMedicare Plan Finder: comparing formularies, tiers, and total annual cost.

Figures checked against these sources on October 12, 2026. We update within days when CMS publishes new amounts.

Not sure which path fits you? Get a straight answer.

Start the decoder

The one paid thing

Stop re-reading Medicare articles. Decide, on paper, in two evenings.

The Turning-65 Decision Workbook is this site’s free explanations turned into pages you fill in, so the decision ends up written down instead of rattling around in your head.

Your enrollment dates calculated from your own birthday, with the penalty deadlines marked
Advantage vs. Medigap scored against your doctors, drugs, travel, and budget
Word-for-word scripts for the broker, HR, the pharmacy, and Social Security
The September re-shop ritual you reuse every fall, with the 2026 and 2027 numbers card

Get the workbook, $24 See 3 free sample pages

Instant PDF download. Free update when the remaining 2027 figures land. Full refund within 30 days if it doesn’t help, and you keep the PDF.