Prescription drugs can be a major part of staying healthy—but also a big expense. That’s where Medicare Part D comes in. If you’ve ever asked, “What exactly is Part D?” or “Do I need it?”—you’re in the right place.

This guide breaks it all down for you—what it is, how it works in 2026, and how to choose a plan that fits your needs and your budget.

What Is Medicare Part D?

Medicare Part D is prescription drug coverage offered to people with Medicare. It helps pay for the medications your doctor prescribes. While Original Medicare (Part A and B) covers hospital and medical services, it does not include most prescription drugs you take at home. That’s where Part D comes in.

Part D is run by private insurance companies approved by Medicare. You can get Part D in one of two ways:

  1. A standalone drug plan (PDP) – if you have Original Medicare or a Medigap (supplement) plan.
  2. As part of a Medicare Advantage plan (MAPD) – which includes hospital, medical, and drug coverage all in one.

Learn more about Part D basics (Medicare.gov).

Why Was Part D Created?

Part D was added to Medicare in 2006 to help people afford the rising cost of prescription drugs. Medications can be expensive—especially for chronic conditions like diabetes, high blood pressure, or cancer. Part D gives you access to coverage that can lower those costs significantly.

How Does Medicare Part D Work in 2026?

Part D coverage is structured in phases, and those numbers change slightly each year. Here’s how it works in 2026:

1. Deductible Phase

You pay 100% of your drug costs until you meet your deductible.

  • In 2026, the standard deductible is $615 (up from $590 in 2025).

2. Initial Coverage Phase

After the deductible, you enter the cost-sharing phase.

  • You pay a copay or coinsurance, depending on your drug’s tier.
  • Your plan pays the rest.

3. Out-of-Pocket Cap

Once you’ve paid $2,100 out of pocket, you’re done paying for the year.

  • Medicare pays 100% of covered drug costs for the rest of the year.
  • This annual cap was introduced in 2025 ($2,000) and rises to $2,100 in 2026 due to inflation adjustments.

What Is a Drug Formulary?

Each Medicare drug plan has a formulary—a list of covered prescription drugs. These drugs are grouped into tiers, and the tier determines how much you pay.

Here’s a typical example of drug tiers:

  • Tier 1 (lowest cost): Most generic drugs
  • Tier 2 (medium cost): Preferred brand-name drugs
  • Tier 3 (higher cost): Non-preferred brand-name drugs
  • Specialty tier (highest cost): Very high-cost drugs

Some drugs may also have restrictions, such as:

  • Prior authorization: Your doctor must get approval before it’s covered
  • Step therapy: You must try a lower-cost drug first
  • Quantity limits: There may be a limit on how much you can fill at once

Tip: Always review your plan’s formulary during Open Enrollment (Oct 15–Dec 7) to make sure your medications are still covered—and at the lowest possible cost.

Where Do I Get Part D?

You have two options:

  • Standalone Drug Plan (PDP): If you’re on Original Medicare or a Medigap plan.
  • Medicare Advantage Plan (MAPD): Includes drug coverage, along with hospital and doctor coverage.

If you don’t sign up when you’re first eligible and don’t have creditable coverage (such as from an employer), you may face a late enrollment penalty that adds to your monthly premium.

What If My Drug Isn’t Covered?

If your drug isn’t on the plan’s formulary:

  • You can ask for a formulary exception
  • You can file an appeal
  • Or, you can switch to another plan during Open Enrollment

How Do I Choose the Right Plan?

Here’s what to consider:

  • Your prescriptions: List all your medications, dosages, and how often you take them
  • Your preferred pharmacy: Some plans offer lower prices at certain pharmacies
  • The plan’s formulary and tiers: This affects how much you’ll pay
  • Your budget: Compare monthly premiums, deductibles, and copays

Need help? You can call 1-800-MEDICARE, work with a SHIP counselor, or take a Medicare class on GetSetUp to walk through the process with expert guidance.

Why Is Part D Important?

Even if you’re not taking many medications now, enrolling in Part D when you're first eligible protects you from:

  • Late penalties
  • Unexpected drug costs
  • Gaps in coverage if your health changes

Medications can be expensive, and Part D offers peace of mind.

Learn more about Medicare Part D (Medicare.gov).