Medicare Part D covers prescription drugs for 65+ Americans and now caps out-of-pocket costs at $2,000 per year thanks to the Inflation Reduction Act. Here’s how it works in 2026.
How Part D Coverage Works
| Phase | You Pay | Triggers |
|---|---|---|
| Deductible | 100% up to deductible | First $590 in drug costs (2025) |
| Initial coverage | Copay or coinsurance (25%) | After deductible until drug costs reach ~$5,030 |
| Coverage gap (donut hole) | 25% for brand + generic | After initial coverage limit |
| Catastrophic | $0 | After $2,000 total out-of-pocket |
Key 2025/2026 change: The $2,000 annual out-of-pocket cap means no one pays more than $2,000/year for Part D drugs.
Monthly Premium Costs
| Plan Type | Monthly Premium Range | Average |
|---|---|---|
| Basic Part D plan | $0–$50 | $35 |
| Enhanced Part D plan | $30–$100 | $55 |
| Medicare Advantage with drug coverage | $0–$50 (bundled) | $18 |
IRMAA Surcharges (High Income)
| Income (Single) | Income (Married) | Monthly Surcharge |
|---|---|---|
| ≤$103,000 | ≤$206,000 | $0 |
| $103,001–$129,000 | $206,001–$258,000 | $12.90 |
| $129,001–$161,000 | $258,001–$322,000 | $33.30 |
| $161,001–$193,000 | $322,001–$386,000 | $53.80 |
| $193,001–$500,000 | $386,001–$750,000 | $74.20 |
| >$500,000 | >$750,000 | $81.00 |
How to Choose a Part D Plan
| Step | Action |
|---|---|
| 1 | List all your current medications |
| 2 | Go to Medicare.gov Plan Finder |
| 3 | Enter your drugs and pharmacy |
| 4 | Compare total annual cost (premiums + copays + deductible) |
| 5 | Check if your drugs are on the plan’s formulary |
| 6 | Verify your preferred pharmacy is in-network |
Extra Help (Low-Income Subsidy)
| Benefit | Details |
|---|---|
| Who qualifies | Income below ~$22,000 (single) / ~$30,000 (married) |
| What it covers | Premiums, deductibles, and copays reduced or eliminated |
| Copays with Extra Help | $0–$11 per prescription |
| How to apply | Social Security office or ssa.gov |
| Estimated savings | $5,000–$10,000+ per year |
$2,000 Cap: How It Works
Starting in 2025, Medicare Part D has a hard cap of $2,000 per year on out-of-pocket drug spending:
| Annual Drug Cost | What You Pay (2026) | Previous Cost |
|---|---|---|
| $1,000 | ~$250–$400 | ~$250–$400 |
| $5,000 | ~$1,200–$1,800 | ~$1,500–$2,500 |
| $10,000 | $2,000 (cap) | ~$3,000–$5,000 |
| $20,000 | $2,000 (cap) | ~$5,000–$8,000 |
| $50,000+ | $2,000 (cap) | ~$10,000–$15,000+ |
People who take expensive specialty drugs save the most under the new cap.
Bottom Line
The $2,000 annual cap is a game-changer for seniors with high drug costs. To minimize costs: use Medicare.gov Plan Finder every year during open enrollment (October 15 – December 7), always check if your drugs are on the formulary, and apply for Extra Help if your income qualifies. Don’t assume last year’s plan is still the best — formularies and prices change annually.
See our can I retire at 65 or health insurance costs by state for more.