Definition
What Is Medicare Part D?
Last updated
Medicare Part D is optional Medicare prescription drug coverage, offered through private insurance companies approved by Medicare, that helps pay for brand-name and generic drugs. Each Part D plan sets its own formulary, or list of covered drugs, along with its own premiums, deductible, and cost-sharing structure within rules set by CMS.
How it affects what you pay
What you pay under Part D depends heavily on which specific plan you choose, since Medicare.gov confirms Part D is optional and offered by private and other companies approved by Medicare, each setting its own costs (Medicare.gov, What's Medicare Drug Coverage (Part D)?). Costs typically include a monthly premium, a deductible (which varies by plan), and then copayments or coinsurance tied to each drug's formulary tier. A major recent change affects the total amount you can be asked to pay in a year: CMS confirmed that starting in 2025, Part D added an annual out-of-pocket cap for covered drugs, with the threshold set at $2,100 for calendar year 2026, up from the original $2,000 cap, adjusted annually (CMS, Final CY 2026 Part D Redesign Program Instructions). Once you reach that threshold in a given year, you generally owe nothing further for covered Part D drugs for the rest of that year.
Example
Consider a hypothetical Medicare beneficiary taking several maintenance medications covered under their Part D plan's formulary. Early in the year, they pay their deductible and then copays or coinsurance per fill. If their combined spending on covered drugs reaches the annual out-of-pocket threshold, they would generally stop owing further cost-sharing for covered drugs for the remainder of that plan year. This is a general illustration, not a real beneficiary's costs.
Choosing a Part D plan
Because each plan has its own formulary, premium, and cost-sharing rules, comparing plans against your specific medication list during Medicare's annual enrollment period can meaningfully affect your yearly costs. Plans may also apply prior authorization or step therapy requirements to specific drugs, which is worth checking before enrolling if you take a specialty or higher-cost medication.
If you're struggling to afford Part D costs
Ask about Extra Help, the federal program that assists people with Medicare who have limited income and resources in paying Part D premiums, deductibles, and copayments; applications go through the Social Security Administration. See our guide on patient assistance programs: who qualifies and how to apply for related options if a specific medication remains unaffordable even under Part D. Compare prescription prices on BetterBuyRx to check cash pricing as a comparison point for any drug your Part D plan doesn't cover well.
Reviewing your coverage each year
Part D plan formularies and costs can change annually, so search your medication on BetterBuyRx and review your plan's coverage each fall during open enrollment to make sure your plan still fits your medication needs and budget.
Frequently asked questions
Is Medicare Part D mandatory?
No. Medicare.gov describes Part D as optional coverage offered by private insurance companies approved by Medicare, though delaying enrollment without other creditable drug coverage can lead to a late enrollment penalty.
Does every Part D plan cover the same drugs?
No. Each Part D plan sets its own formulary, so covered drugs, tier placement, and cost-sharing can vary significantly from one plan to another, even though all must meet certain minimum coverage standards.
Is there a limit on what I'll pay out of pocket under Part D?
Yes, as of 2025. CMS confirmed the annual out-of-pocket threshold for covered Part D drugs is $2,100 for CY 2026, up from the original $2,000 cap introduced in 2025, after which enrollees generally owe nothing further for covered drugs that year.
Sources
Compare prices & find savings
This page is for cost and savings education only. It is not medical advice. Talk to your doctor or pharmacist about your specific medications and coverage. Prices vary by pharmacy, location, quantity, and eligibility.
Related terms & guides
- What Is an Out-of-Pocket Maximum?
Out-of-pocket maximum definition: the most you'll pay in a plan year, what counts toward it, and how it interacts with prescription costs.
- What Is a Formulary?
Formulary definition: what a drug list is, how tiers set your copay, and what to do if your medication isn't on your plan's formulary.
- What Is a Patient Assistance Program?
Patient assistance program definition: how manufacturer programs provide free or reduced-cost medication, and who typically qualifies.