Medicare Login Guide

Medicare Part D Explained: Prescription Drug Coverage

Updated June 3, 20266 min readReviewed against medicare.gov

Medicare Part D is prescription drug coverage offered through private plans approved by Medicare. You can get it as a stand-alone plan (with Original Medicare) or built into most Medicare Advantage plans. A major change: starting in 2025 the old "donut hole" coverage gap was replaced with a yearly out-of-pocket cap — $2,000 in 2025 and $2,100 in 2026 — after which your covered drugs cost you nothing for the rest of the year.

How Part D works

Each Part D plan has a formulary — a list of covered drugs organized into tiers. Lower tiers (generics) cost less; higher tiers (brand-name and specialty drugs) cost more. Plans also have their own premiums, deductibles, and pharmacy networks, so the right plan depends on the specific medications you take.

The 2026 out-of-pocket cap

Thanks to the Inflation Reduction Act, Part D now has a hard annual cap on what you pay out of pocket for covered drugs: $2,000 in 2025 and $2,100 in 2026. Once you reach it, you pay $0 for covered drugs for the rest of the calendar year. You can also spread your drug costs across the year through the Medicare Prescription Payment Plan.

Drug tiers

  • Tier 1–2: preferred and generic drugs — lowest cost.
  • Tier 3: preferred brand-name drugs.
  • Tier 4: non-preferred drugs.
  • Tier 5: specialty (high-cost) drugs.

Frequently asked questions

Is the Medicare donut hole gone?

Yes. Starting in 2025 the coverage-gap "donut hole" was replaced by a yearly out-of-pocket cap on covered drugs ($2,000 in 2025, $2,100 in 2026). After you reach the cap, covered drugs cost you nothing for the rest of the year.

Do I need Part D if I take no medications?

It is usually wise to enroll when first eligible even if you take few drugs, because going without creditable drug coverage can trigger a lifelong Part D late-enrollment penalty.

Sources

Related guides

Enrollment & Eligibility

Medicare Late Enrollment Penalties — and How to Avoid Them

Medicare Parts & Plan Types

Original Medicare vs. Medicare Advantage: How to Choose

Medicare Parts & Plan Types

Medicare Part A Explained: Hospital Insurance

Medicare Parts & Plan Types

Medicare Advantage (Part C) Explained

Medicare Login Guide is an independent resource and is not affiliated with or endorsed by Medicare, the Centers for Medicare & Medicaid Services, or any government agency. This article is for general information only — confirm current figures and your specific options at medicare.gov or by calling 1-800-MEDICARE.