Part D Prescription Coverage: How the Out-of-Pocket Cap Works
Medicare Part D now includes an annual cap on out-of-pocket drug costs. Learn how the cap works, the 2026 and 2027 amounts, how payments can be spread out, and what it does not include.
The short version
- The out-of-pocket cap for covered Part D drugs is $2,100 for 2026 and is set to rise to $2,400 for 2027.
- The Medicare Prescription Payment Plan lets you spread drug costs across the year.
- The cap applies to covered drugs on your plan's formulary, not premiums or non-covered drugs.
In this guide
For years, people with high prescription costs in Medicare Part D could face significant out-of-pocket expenses with no upper limit. That changed in 2025, when an annual out-of-pocket cap took effect for covered Part D drugs. For 2026, the cap is $2,100, and for 2027 it is set at $2,400.
Here is how it works and what it means for you.
What the cap covers
Once your out-of-pocket spending on covered Part D drugs reaches the annual cap, you generally pay nothing more for covered drugs for the rest of that calendar year.
What counts toward the cap includes:
- Your deductible payments
- Copays and coinsurance for covered drugs
- Certain payments made on your behalf, such as through Extra Help
What the cap does not include
- Monthly plan premiums
- Drugs not on your plan's formulary (unless you have an approved exception)
- Drugs bought outside your plan, such as with discount cards instead of your insurance
- Drugs covered under Part B, such as certain drugs given in a doctor's office
Spreading costs: the Medicare Prescription Payment Plan
Reaching the cap can still mean a large expense early in the year. The Medicare Prescription Payment Plan lets you pay your out-of-pocket drug costs in monthly amounts spread across the calendar year, instead of all at once at the pharmacy.
Key points:
- It is available through all Part D plans and Medicare Advantage plans with drug coverage.
- It is voluntary, and there is no cost to participate.
- It does not lower your total drug costs. It changes how you pay them.
- It may be most helpful for people with high drug costs early in the year.
- People who qualify for Extra Help often already have low costs and may not benefit.
Contact your plan to sign up or ask whether it makes sense for you.
Other parts of Part D to understand
Deductible. Many plans have a deductible before coverage begins. For 2026, the maximum deductible a plan can charge is $615, though some plans have lower or no deductibles.
Formulary. Each plan has its own list of covered drugs, organized into tiers with different costs.
Pharmacy networks. Costs can be lower at preferred pharmacies or through mail order.
Insulin. Medicare limits costs for covered insulin products to no more than $35 for a month's supply.
Vaccines. Adult vaccines recommended by the federal government's advisory committee are generally covered at no cost under Part D.
Tips for managing drug costs
- Review your plan each fall during Open Enrollment, since formularies and costs change.
- Enter your drugs into the Medicare Plan Finder to compare total costs.
- Ask your doctor about generics or lower-cost alternatives.
- Ask about 90-day supplies or mail-order options.
- Check whether you qualify for Extra Help, which lowers premiums and copays for people with limited income and resources.
Avoid the late penalty
If you go 63 days or more without Part D or other creditable drug coverage after your Initial Enrollment Period, you may face a late enrollment penalty for as long as you have Part D. If you do not take many medications now, a low-cost plan can still protect you from that penalty.
Figures change annually; check Medicare.gov for the latest amounts. Terrameritavi is an independent publication and is not affiliated with Medicare or any government agency.
