If you take any regular medications — even just one blood pressure pill or a cholesterol drug — your Part D plan choice matters more than most people realize. Not all plans cover the same drugs. Not all plans use the same pharmacies. The plan with the lowest premium is almost never the cheapest when you add up your actual drug costs.
What Is Medicare Part D?
Part D is optional prescription drug coverage offered through private insurers approved by Medicare. There are two ways to get it: as a standalone Prescription Drug Plan (PDP) added to Original Medicare, or bundled into a Medicare Advantage plan that includes drug coverage.
Part D is technically optional — but skipping it when first eligible has permanent consequences. Go 63 or more consecutive days without creditable drug coverage and you'll owe a lifetime late enrollment penalty.
2026 Part D Costs at a Glance
| Part D Cost Component | 2026 Details |
|---|---|
| Average Monthly Premium | ~$64.96 (varies by plan and ZIP) |
| Base Beneficiary Premium | $38.99 (used to calculate penalties) |
| Maximum Annual Deductible | $615 (some plans have $0) |
| Out-of-Pocket Cap (NEW 2026) | $2,100/year — then $0 for the rest of the year |
| Late Enrollment Penalty | 1% of $38.99/month — permanent |
The $2,100 Cap — A Game-Changer
Once you spend $2,100 out of pocket on covered drugs in 2026, your plan pays 100% for the rest of the year. This matters enormously for anyone on cancer medications, specialty drugs, or treatments for chronic conditions. Before this cap, some beneficiaries faced $5,000–$10,000+ in annual drug costs with no ceiling.
How Drug Tiers Work
Every Part D plan organizes drugs into tiers, and the tier determines your cost. Plans can shift drugs between tiers year to year — a Tier 2 generic last year could become a Tier 3 brand name this year.
| Tier | Drug Type | Typical Cost |
|---|---|---|
| Tier 1 | Preferred generics | $0–$5 copay |
| Tier 2 | Non-preferred generics | $5–$15 copay |
| Tier 3 | Preferred brand-name | $30–$50 copay |
| Tier 4 | Non-preferred brand-name | $60–$100+ copay |
| Tier 5 | Specialty drugs | 25–33% coinsurance |
Critical detail: the same medication can be Tier 1 on Plan X and Tier 3 on Plan Y. Comparing plans against your specific drug list — not just the premium — can save hundreds or thousands annually.
Your Pharmacy Matters Too
Part D plans have preferred pharmacy networks. Using a preferred pharmacy means lower copays. Some plans offer $0 copays on generics at preferred pharmacies — but those same generics cost $10–$20 at a non-preferred pharmacy. Verify your pharmacy is preferred before you enroll.
Look up your specific medications to see which Part D tier they fall under across plans.
Search our California pharmacy directory to find preferred pharmacies in your city — and which plans give you the lowest copays at your local pharmacy.
IRMAA on Part D
If your 2024 income was above $109,000 (individual) or $218,000 (married), you pay a Part D IRMAA surcharge on top of your plan premium. It ranges from $14.50 to $91.00/month depending on your income bracket, and it's paid directly to Medicare — separate from your plan premium.
Extra Help (Low-Income Subsidy)
If your income and assets are limited, you may qualify for Extra Help — eliminating deductibles, reducing copays to $1.35–$4.00 per drug, and removing late enrollment penalties. Apply through the Social Security Administration.
Meet Carlos From Long Beach
Carlos — Long Beach, CA
Carlos takes four medications — two generics and two brand-name drugs. He picked the plan with the lowest premium. One brand-name drug wasn't on that plan's formulary at all, so he paid full price every month.
During the next AEP, a How2Medicare specialist compared three plans against his drug list. A plan with a slightly higher premium had $0 copay on all four medications. His annual drug spend dropped $1,400 — from one 20-minute call.
Not sure if your medications are covered?
Book a free call — we'll compare Part D plans against your specific drug list and pharmacy, at no cost.
Book a free callHow2Medicare is a free service of J Johnston Insurance. Our goal isn't to sell you a plan — it's to make sure the plan covers what you actually take.