Medicare Part D: Prescription Drug Coverage and Plan Costs

Because plan costs vary based on your specific medications, comparing Medicare Part D quotes with a SelectQuote licensed insurance agent can help ensure you don't overpay for prescription drugs.

What is a Medicare Part D plan?

Medicare Part D—a federal program that began in 2006—provides Original Medicare beneficiaries access to retail prescription drugs. Prior to the introduction of Medicare Part D, Medicare beneficiaries mostly paid for their medications as an out-of-pocket expense, as Original Medicare (Medicare Part A and Medicare Part B) doesn’t cover all prescription drug costs. Also referred to as a Medicare Prescription Drug plan, a Medicare Part D plan helps cover the cost of prescription medications.

• Part D plans are operated by Medicare-approved private insurance companies.

• Part D plans provide prescription drug coverage for both generic and brand-name medications.

• Medicare Part D has three phases of prescription drug coverage: the Deductible phase, Initial Coverage phase, and Catastrophic Coverage phase (Note: The coverage gap/donut hole has been eliminated).

• The cost varies based on the plan you choose, your medications, and your pharmacy.

• Drugs covered and costs can change from year to year, so it’s important to compare plans.

• Participation in Medicare Part D is purely voluntary (though you may face a late enrollment penalty if you delay).

What does Medicare Part D cost?

Medicare Part D costs are not fixed. They vary significantly based on where you live and the specific medications you take. Two people with the same plan type can still pay very different amounts depending on their pharmacy network, drug list (formulary), and prescription needs.

Most Part D plans organize medications into tiers, and your copay depends on which tier your drug falls into:

• Tier 1: Preferred generics (lowest cost)

• Tier 2: Non-preferred generics

• Tier 3: Preferred brand-name drugs

• Tier 4: Non-preferred or higher-cost drugs

• Tier 5: Specialty medications (highest cost)

$2,100 Out-of-Pocket Cap: A key change for 2026 is the $2,100 annual out-of-pocket cap, which limits how much you’ll spend on covered prescription drugs in a year. Once you hit this limit, your plan pays 100% of covered medication costs for the rest of the year. 

2026 Medicare Part D IRMAA Surcharges (Based on 2024 Income)

Some people with higher incomes may have to pay more for their Medicare Part D plan, like those who earned more than $109,000 filing individually or $218,000 filing jointly. This is called the Income-Related Monthly Adjusted Amount or IRMAA, and the chart below shows your estimated monthly prescription drug plan premium based on your income as reported on your IRS tax return.

Source: https://www.medicare.gov/

Note: This surcharge is paid in addition to your standard Medicare Part D plan premium

Why does Medicare look at my 2024 income? 

By law, Medicare uses a two-year lookback period to determine your Income-Related Monthly Adjustment Amount (IRMAA). This means the extra surcharge you pay for Part D in 2026 is based on the Modified Adjusted Gross Income (MAGI) you reported on your 2024 tax return. If you have experienced a life-changing event (like retirement or the death of a spouse) that significantly reduced your income since 2024, you can file an appeal with the Social Security Administration to have this surcharge lowered or removed.

Compare Medicare Part D Plans with SelectQuote

You don’t have to guess which Medicare Part D plan is right for you. SelectQuote’s licensed insurance agents will take the time to learn about your prescription needs and then compare plans on your behalf, helping you find the most cost-effective option from recognized carriers. We’ll also stay in touch after your plan is in place to offer support and keep you updated with any plan changes. The process is free, and there’s no obligation to enroll.