How Does Medicare Part D Work? 2026 Costs, Stages and Enrollment

Reviewed October 3, 2026. Medicare Part D is optional prescription drug coverage sold by private insurance companies that Medicare approves. You get it either through a standalone Part D plan added to Original Medicare or through a Medicare Advantage plan that includes drug coverage. In 2026 you pay a plan premium, a deductible of up to $615, then 25% coinsurance, and your out-of-pocket drug costs are capped at $2,100 for the year.

Quick answer: Part D works in three stages: deductible, initial coverage and catastrophic coverage. Once you’ve paid $2,100 out of pocket for covered drugs in 2026, you pay $0 for the rest of the year. The old “donut hole” coverage gap no longer exists. For 2027, the maximum deductible rises to $700 and the cap to $2,400. You can join or switch plans during Open Enrollment, October 15 to December 7.

How you get Part D coverage

• Standalone Part D plan (PDP). Added to Original Medicare, often alongside a Medigap policy.
• Medicare Advantage plan with drug coverage (MA-PD). One plan covers medical care and prescriptions. Compare networks in our HMO vs. PPO guide.
• Other creditable coverage. Some employer, union, VA or TRICARE coverage is as good as Part D, so you can delay joining without a penalty. See TRICARE For Life and Medicare.

You must have Part A or Part B to join a standalone Part D plan, and you must live in the plan’s service area.

What you pay for Part D in 2026

The 2026 amounts come from Medicare.gov; the 2027 deductible and out-of-pocket threshold are set in the CMS CY 2027 Rate Announcement. Plans can charge less than the standard deductible, and many use copays by drug tier instead of 25% coinsurance. Monthly premiums vary by plan, and higher earners pay a Part D income-related adjustment of $14.50 to $91.00 a month in 2026 (CMS).

The three Part D payment stages

1. Deductible stage

You pay the full negotiated price of your covered drugs until you meet the plan’s deductible, up to $615 in 2026. Some plans have no deductible, and many don’t apply it to lower-tier generics.

2. Initial coverage stage

After the deductible, you pay coinsurance or copays and the plan pays the rest. What you pay depends on the drug’s tier on the plan’s formulary. Our guide to Part D drug tiers explains how tiers work and how to ask for an exception.

3. Catastrophic coverage stage

Once your out-of-pocket spending on covered drugs reaches $2,100 in 2026, Medicare.gov says you won’t pay anything for covered Part D drugs for the rest of the calendar year. For a deeper look at each phase, read Part D drug coverage phases.

Formularies: check your drugs before you choose a plan

Each plan has a formulary (a list of covered drugs) and may use prior authorization, step therapy or quantity limits. Formularies and prices change every year, so review your plan’s Annual Notice of Change each fall. Our annual plan review checklist shows what to compare. Most vaccines recommended for adults by the CDC’s advisory committee cost $0 under Part D; see which vaccines Medicare covers. Some drugs given in a doctor’s office are covered by Part B instead, as explained in Part B prescription drug coverage.

When you can enroll or switch

See AEP vs. OEP for the differences between the two fall and winter windows.

The Part D late enrollment penalty

If you go 63 days or more in a row without Part D or other creditable drug coverage after your Initial Enrollment Period, you may owe a late penalty for as long as you have Part D. It’s 1% of the national base beneficiary premium ($38.99 in 2026) for each full uncovered month (Medicare.gov). Our Part D late enrollment penalty guide shows how it’s calculated.

Help with Part D costs

• Extra Help. A federal program that lowers premiums, deductibles and copays for people with limited income and resources. People with Extra Help don’t pay a late enrollment penalty.
• Medicare Prescription Payment Plan. Lets you spread out-of-pocket drug costs into monthly payments across the year. Medicare.gov notes it doesn’t lower your total drug costs.
• Medicare Savings Programs. If you qualify for one, you automatically qualify for Extra Help too. See Medicare Savings Program income limits.

Frequently asked questions

How does Medicare Part D work in simple terms?

You join a private plan approved by Medicare, pay a monthly premium, and then pay part of the cost of your covered prescriptions through a deductible and copays or coinsurance until you hit the yearly cap ($2,100 in 2026). After that, covered drugs cost $0 for the rest of the year.

Is there still a donut hole in Part D?

No. The coverage gap ended in 2025. Part D now has three stages: deductible, initial coverage and catastrophic coverage.

Is Part D mandatory?

No, but if you go without Part D or other creditable coverage for 63 days or more after you’re first eligible, you may pay a late enrollment penalty if you join later.

What is the Part D deductible for 2026?

Plans can charge a deductible of up to $615 in 2026. Many plans charge less or exclude low-cost generics. The maximum rises to $700 in 2027.

Can I have Part D and a Medicare Advantage plan?

Usually your Advantage plan includes drug coverage. If you join a standalone Part D plan while in most Medicare Advantage plans, you’re disenrolled from the Advantage plan.

This article is general information, not medical or individual insurance advice. Medicare365 is not affiliated with or endorsed by the U.S. government or the federal Medicare program.

Official sources

• Medicare.gov: Costs in Medicare drug coverage
• Medicare.gov: Avoid late enrollment penalties
• CMS: CY 2027 Medicare Advantage and Part D Rate Announcement
• CMS: 2026 Medicare Parts A & B Premiums and Deductibles (includes Part D IRMAA)