Navigating Medicare can feel like a maze, especially when it comes to understanding the costs associated with Medicare Part D. This article breaks down the expenses tied to Medicare Part D to help you make informed decisions about your prescription drug coverage.

What is Medicare Part D?

Medicare Part D is the part of Medicare that covers prescription drugs. You can get Part D coverage through two main ways: a standalone Prescription Drug Plan (PDP) or a Medicare Advantage Plan (Part C) that includes drug coverage. Part D helps reduce the cost of your medications, making it easier to manage your health needs without breaking the bank. Learn more about Medicare Part D.

Understanding the Costs

There are several types of costs associated with Medicare Part D:

  • Premiums: This is the monthly amount you pay to keep your Medicare Part D coverage active. The cost varies depending on the plan you choose. For 2026, the average total monthly Part D premium is projected to decrease from $38.31 in 2025 to $34.50 in 2026 (a decrease of $3.81). Learn more about Medicare Part D premiums.
  • Deductibles: The deductible is the amount you pay out-of-pocket before your Medicare Part D plan begins to cover your prescriptions. For 2026, the maximum deductible allowed by Medicare is $615. And the out-of-pocket maximum for a Medicare Part D prescription drug plan is $2,100.
  • Copayments and Coinsurance: After meeting your deductible, you'll generally pay a portion of the cost for your prescriptions. This could be a copayment (a flat dollar amount) or coinsurance (a percentage of the drug's cost). Learn how copayments and coinsurance affect your Medicare Part D costs.
  • Coverage Gap (Donut Hole): Before 2025, you entered a coverage gap after you and your plan spent a set amount on prescriptions. In that gap, you paid 25% of your drug costs until you hit a higher out-of-pocket limit. Starting January 1, 2025, that system disappeared. Once you spend $2,000 out of pocket, your covered medications will cost you nothing for the rest of the year. Understand more about the Medicare Part D coverage gap.
  • Catastrophic Coverage: After you've spent a certain amount out of pocket, you reach catastrophic coverage. At this point, you only pay a small coinsurance or copayment for your medications for the rest of the year. Learn more about catastrophic coverage.

Extra Help for Those Who Qualify

If you have limited income and resources, you might qualify for Extra Help, a program that assists with paying Medicare Part D costs. Started in 2024, Extra Help will further reduce out-of-pocket costs for people with incomes between 135-150% of the Federal Poverty Level. Find out if you qualify for Extra Help.

Tips to Manage Your Part D Costs

  • Shop Around: Use the Medicare Plan Finder to compare options annually, as premiums, formularies, and costs can change. Compare Medicare Part D plans.
  • Use Preferred Pharmacies: Many plans offer lower copayments and coinsurance at preferred pharmacies.
  • Ask About Generics: Whenever possible, opt for generic drugs, which can be more affordable than their brand-name counterparts.
  • Review Your Medications Annually: Each year, review your medications and see if your current plan still offers the best coverage for your needs.

Income-Related Monthly Adjustment Amount (IRMAA)

If your income is above a certain limit, you might pay an extra amount in addition to your plan premium, known as IRMAA. For 2026, this applies to individuals with income above $109,000 or married couples with income above $218,000. Learn more about IRMAA and how it affects your Medicare Part D costs.

Understanding Medicare Part D costs can feel overwhelming, but breaking them down into these categories can make them more manageable. By staying informed and reviewing your plan annually, you can ensure you're getting the most value from your coverage while keeping your medication costs in check.

Reviewed By: Keith Gilbert