Part D Guide
Medicare Part D: Formularies, Costs & the 2026 Out-of-Pocket Cap
Part D prescription drug coverage changed significantly under the Inflation Reduction Act — including a new $2,100 annual out-of-pocket cap. Here's how formularies work, what you'll pay, and how to compare plans with Kayla Price, licensed across 10 states.
Last reviewed: July 2026
How Part D Works
Part D plans are sold by private insurers and each maintains its own formulary — the list of covered drugs, grouped into cost tiers. Generic drugs typically sit in the lowest tiers; brand-name and specialty drugs cost more. Plans also contract with specific pharmacy networks, so your total cost depends on both the formulary tier of your medications and where you fill them.
The 2026 $2,100 Out-of-Pocket Cap
Under changes phased in by the Inflation Reduction Act, Part D now includes an annual out-of-pocket cap — $2,100 for 2026. Once your covered drug costs for the year reach that amount, your plan pays 100% of covered drug costs for the remainder of the calendar year. This effectively replaced the old "donut hole" coverage gap that used to require higher cost-sharing in the middle of the year.
Part D plans may also charge an annual deductible of up to $615 in 2026 before cost-sharing starts, though many plans set a lower deductible or none — always check the specific plan's Summary of Benefits.
Part D Cost Breakdown
Part D costs in 2026 break down into a monthly premium that varies by plan, an annual deductible of up to $615, and an annual out-of-pocket cap of $2,100 — after which your plan pays 100% of covered drug costs.
| Cost Type | 2026 Amount | Notes |
|---|---|---|
| Monthly premium | Varies by plan | Set by each private insurer; compare during AEP 2026 |
| Annual deductible | Up to $615 | Many plans set a lower deductible or none at all |
| Initial coverage phase | Cost-sharing per formulary tier | Replaced the old "donut hole" gap under the 2025+ redesign |
| Out-of-pocket cap | $2,100 | Once reached, your plan pays 100% of covered drugs for the rest of the year |
| Catastrophic coverage threshold | $2,100 | Same as the out-of-pocket cap under the redesigned benefit |
Extra Help (Low-Income Subsidy)
Extra Help is a federal program that can reduce or eliminate Part D premiums, deductibles, and copays for people with limited income and resources. Eligibility is based on income and asset limits set each year — a licensed agent or your local Social Security office can help you check whether you qualify.
Want help checking your formulary before you enroll? Schedule a consultation with a Medicare agent and we'll review your medications together.
Related Reading
- Medicare Part D: Choosing the Right Drug Plan
- Medicare's Part D Out-of-Pocket Cap for 2026
- Does Medicare Cover GLP-1 Medications Like Ozempic and Wegovy?
See also our Medicare Plans overview, the Medicare Advantage Guide, the Medigap Guide, our Medicare FAQ, and our Medicare Glossary. For a more ground-up, self-paced walkthrough of Medicare basics, our free course at LearnMedicare.org is a good complement to this guide.
Frequently Asked Questions
What is Medicare Part D?
Part D is Medicare's prescription drug coverage, offered either as a standalone plan alongside Original Medicare or bundled into many Medicare Advantage plans.
What is a drug formulary?
A formulary is the list of prescription drugs a Part D plan covers, organized into cost tiers — generic drugs are usually the cheapest tier, with brand-name and specialty drugs costing more.
What is the Part D out-of-pocket cap?
As of 2026, once you spend $2,100 out of pocket on covered prescription drugs in a calendar year, your Part D plan covers 100% of costs for the rest of the year — a result of the Inflation Reduction Act's drug pricing changes.
What is the Part D deductible?
Part D plans can charge a deductible of up to $615 in 2026 before cost-sharing begins, though many plans set a lower deductible or none at all — this varies by plan.
Do I need Part D if I'm not currently taking medications?
Generally yes — going without creditable prescription drug coverage for 63 or more days after your Initial Enrollment Period can trigger a permanent late-enrollment penalty added to your premium.
What is Extra Help?
Extra Help (the Part D Low-Income Subsidy, or LIS) is a program that helps eligible people with limited income and resources pay for Part D premiums, deductibles, and copays.
Does the Medicare 'donut hole' still exist?
The Part D coverage gap, historically called the 'donut hole,' has effectively been eliminated by the 2026 $2,100 annual out-of-pocket cap — once you hit that cap, you pay nothing more for covered drugs the rest of the year.
How do I choose the right Part D plan?
Compare plans based on whether your specific medications are on the formulary, what tier they fall into, the plan's pharmacy network, and the total annual cost — not premium alone.
Reviewed by Kayla Price
Licensed Insurance Agent | NPN: 18530055
Licensed in NC, SC, GA, FL, VA, MD, MI, KS, TX, OH
Last reviewed: July 2026
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