Medicare Part D is the federal government's prescription drug coverage program. It covers both brand-name and generic prescription drugs at participating pharmacies in your area.
Starting in 2025, Medicare Part D was simplified — the old "donut hole" coverage gap is eliminated. In 2026 there are now just three phases:
You pay 100% of prescription drug costs until you reach your plan's deductible. The maximum Part D deductible in 2026 is $615 (up from $590 in 2025). Many plans have a lower deductible or $0 deductible. Exception: Insulin is capped at $35/month from day one — you don't need to meet your deductible first.
After meeting your deductible, you pay 25% coinsurance for covered drugs. Your Part D plan pays 65% and the drug manufacturer contributes 10% for brand-name drugs. This continues until your total out-of-pocket spending reaches $2,100 in 2026.
Once you've spent $2,100 out of pocket on covered drugs, you pay $0 for the rest of the calendar year. Your plan pays 60%, Medicare pays 20%, and manufacturers pay 20%. There is no cap on the amount of covered drugs you can receive once in catastrophic coverage.
| Cost Component | 2026 Amount | Change from 2025 |
|---|---|---|
| Maximum annual deductible | $615 | ↑ from $590 |
| Out-of-pocket cap (catastrophic threshold) | $2,100 | ↑ from $2,000 |
| Coinsurance in initial coverage | 25% | No change |
| Cost after OOP cap is reached | $0 | No change |
| Avg. stand-alone Part D premium | $34.50/mo | ↓ from $38.31 |
| National base beneficiary premium | $38.99 | Updated |
| Insulin monthly cap | $35/mo | No change |
| Extra Help generic copay | $5.10 | Updated |
| Extra Help brand-name copay | $12.65 | Updated |
New in 2026: If you have high drug costs early in the year, you can opt into the Medicare Prescription Payment Plan (sometimes called M3P or "smoothing"). Instead of paying a large amount at the pharmacy counter, your out-of-pocket costs are spread across equal monthly bills throughout the year. There is no fee to participate and you pay the same total amount — it just eliminates the shock of a large upfront pharmacy bill. You must opt in annually.
If you don't join a Part D plan when first eligible and don't have other creditable drug coverage, you may pay a late enrollment penalty. In 2026, the penalty is calculated as 1% of the national base beneficiary premium ($38.99) for each month you went without coverage — added to your monthly premium for as long as you have Part D.
Peter runs a free drug plan comparison based on your specific medications, dosages, and preferred pharmacies — ensuring you get the lowest possible cost. With dozens of Part D plans in most areas, choosing the wrong plan can mean paying hundreds of dollars more per year than necessary.