What Is Medicare Part D? Prescription Drug Coverage Explained
HSChange Editorial Team
Health Policy Research Team, Consumer Health Guidance
Reviewed by Dr. Sarah Mitchell, MD, MPH, Board-Certified Internal Medicine
Last updated: April 4, 2026
Medicare Part D is prescription drug coverage. It's offered through private insurance companies, either as a standalone plan paired with Original Medicare or bundled into a Medicare Advantage plan. Part D is optional, but if you don't sign up when you're first eligible and don't have other creditable drug coverage, you'll pay a late enrollment penalty for as long as you have Part D.
2026 Part D Costs
The standard Part D deductible for 2026 is $615. After that, you pay copays or coinsurance for your medications until you reach the annual out-of-pocket cap. Thanks to the Inflation Reduction Act, that cap is $2,000 for 2026 (up from $2,000 in 2025, when the cap first took effect). Once you've spent $2,000 out of pocket on drugs, the plan covers 100% for the rest of the year. The old coverage gap (the "donut hole") is gone.
How Formularies Work
Every Part D plan has a formulary, which is its list of covered drugs organized into tiers. Tier 1 is usually preferred generics (lowest cost). Tier 2 is non-preferred generics. Tier 3 is preferred brands. Tier 4 is non-preferred brands. Tier 5 is specialty drugs (highest cost). Before enrolling in a Part D plan, check that your medications are on the formulary and see what tier they're in. The same drug can be on different tiers with different plans.
Insulin Price Cap
The Inflation Reduction Act capped insulin copays at $35 per month for all Part D plans, effective 2023. This applies to all covered insulin products regardless of tier. If you use insulin, this cap saves many people hundreds of dollars per month compared to what they paid before.
Standalone vs. Medicare Advantage Drug Coverage
If you have Original Medicare, you need a standalone Part D plan (PDP) to get drug coverage. If you have Medicare Advantage, drug coverage is usually built in (MA-PD plans). You can't have both a standalone Part D and Medicare Advantage drug coverage at the same time. During the Annual Enrollment Period (October 15 to December 7), you can switch Part D plans or change from standalone to MA and vice versa.