Understanding Part D Prescription Drug Coverage

To compare Medicare Part D coverage, start with your exact medications and pharmacies, then compare total yearly costs and coverage rules. A low premium does not tell you whether your medicines are covered or what each refill costs. Medicare explains why drug costs vary.

For 2027, the out-of-pocket limit is $2,400 for covered Part D drugs, compared with $2,100 in 2026. This is a drug-benefit limit, not a ceiling on every Medicare expense. Medicare's current cost guidance identifies both plan years.

Choose how drug coverage fits with Medicare

With Original Medicare, you can add a separate Part D plan if you have Part A or Part B, during an enrollment period, from plans serving your area. Most Medicare Advantage plans include drug coverage; joining Advantage requires both parts. Review Medicare's drug coverage basics and plan enrollment requirements.

With an Advantage Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO) plan, you generally cannot keep it and add separate Part D. Enrolling in a separate drug plan can disenroll you from Advantage and return you to Original Medicare. Some other plan types, such as Medical Savings Account plans and Private Fee-for-Service plans without drug coverage, allow separate Part D. Confirm how your plan type works before enrolling.

If you buy Medigap alongside Original Medicare, arrange drug coverage separately. Medigap policies sold after 2005 do not include prescription drug coverage. Medicare explains what Medigap covers.

Before changing employer or union coverage, contact your benefits administrator. Adding Part D could affect health and drug coverage for you or your dependents. Medicare's creditable-coverage guidance explains this coordination issue.

Check each drug's coverage and restrictions

Build a medication list with names, strengths, dosage forms, quantities, and refill frequency. Then review each candidate plan's formulary, its list of covered drugs. Plans cover a wide range of medicines, but their lists differ. A tier is a cost-sharing category; lower tiers generally cost less, and tier structures vary by plan. Medicare explains formularies and tiers.

Check the rules beside each medication:

• Prior authorization: The plan requires approval before covering the drug.
• Step therapy: You may need to try a specified alternative first.
• Quantity limits: The plan limits how much it covers over a period.

These are different coverage requirements, not just pricing labels. If a needed medicine is missing or restricted, ask your prescriber and plan about an exception. The prescriber must provide supporting medical information, and approval is not automatic. Do not assume an exception from your old plan carries over.

Compare pharmacy arrangements

An in-network pharmacy contracts with your plan. A preferred in-network pharmacy may offer lower cost sharing than a standard network pharmacy. Check your actual pharmacy location, not just the chain's name, and compare available mail-order options. If you spend part of the year in another state, include pharmacies there in your comparison.

Out-of-network purchases may require paying full price and asking the plan about reimbursement. Medicare's pharmacy guidance explains why you should confirm the network and reimbursement rules before filling a prescription.

Understand the costs and the plan-year limits

Medicare defines the main costs:

• Premium: Your monthly payment for coverage, whether you fill prescriptions or not. Higher-income beneficiaries may owe an additional income-related amount.
• Deductible: What you pay before the plan starts sharing covered drug costs. Some plans have no deductible or exempt certain tiers.
• Copayment: A fixed dollar amount for a covered prescription.
• Coinsurance: A percentage of the covered drug's cost.

Keep the coverage year attached to each limit:

Part D limit	2026	2027
Maximum permitted annual drug deductible	$615	$700
Annual out-of-pocket limit for covered Part D drugs	$2,100	$2,400

Sources: Medicare's cost page and Medicare & You 2027, pages 86 and 87. A deductible maximum is not what every plan charges.

The out-of-pocket limit includes eligible deductible and cost-sharing spending, plus certain payments made on your behalf, such as Extra Help. The deductible is not added on top of the limit. Once the limit is reached, you owe no cost sharing for covered Part D drugs for the rest of that calendar year. Premiums, uncovered medicines, and drugs billed under Part B are separate costs. Your plan's Explanation of Benefits shows what counts toward the limit. Review Medicare's cost accounting and the covered-drug limit.

This Part D limit applies to both separate drug plans and Advantage plans with drug coverage. An Advantage plan's out-of-pocket limit for covered Part A and Part B health services is separate. Medicare distinguishes the health and drug limits.

The old coverage-gap phase, often called the doughnut hole, ended in 2025. The current structure has deductible, initial coverage, and catastrophic coverage stages. CMS explains the redesign. Use your plan's actual tier costs rather than assuming one percentage applies to every medicine.

Negotiated prices for another 15 selected Part D drugs take effect January 1, 2027. These are not universal copay prices; your payment still depends on your plan's coverage and cost-sharing rules. CMS identifies the applicable year.

Separate a payment schedule from financial help

The voluntary Medicare Prescription Payment Plan spreads your covered drug out-of-pocket costs across the calendar year. All Part D plans offer it, including Advantage plans with drug coverage. You receive drug bills from the plan instead of paying the pharmacy for covered prescriptions, while continuing to pay any premium. Participation has no additional cost, but it does not reduce your drug costs. Medicare describes the payment option.

Monthly bills can change as you fill prescriptions. It is generally more useful for high costs early in the year than for steady, low costs or joining late. Ask the plan for a payment estimate. Medicare explains these tradeoffs. Reaching the drug limit does not erase bills for earlier prescriptions. Leaving the option does not erase an unpaid balance, and changing insurance plans ends participation with the old plan. Check your payment responsibilities.

For actual cost assistance, ask about Extra Help, which can lower eligible beneficiaries' Part D premiums and other costs. It also exempts you from the Part D late enrollment penalty. Medicare lists cost-help options.

Protect your enrollment rights and compare the full year

Creditable prescription coverage is expected to pay, on average, at least as much as Part D. Keep your coverage notices. After initial enrollment, a gap of 63 or more consecutive days without Part D or other creditable coverage can trigger a penalty, even if you take no medicines. It generally lasts while you have drug coverage and uses 1% of the national base beneficiary premium per full uncovered month. The base premium can change each year, and the monthly penalty is rounded to the nearest $0.10. Medicare explains creditable coverage and the penalty formula.

Discount cards are not insurance. Purchases using them instead of Medicare coverage do not count toward your Medicare deductible or out-of-pocket maximum. Medicare & You 2027, page 99, makes that distinction.

This fall's plan-enrollment period runs October 15 through December 7, 2026. The plan must receive your enrollment request by December 7 for coverage generally beginning January 1, 2027. CMS confirms the enrollment period; Medicare confirms the deadline and start date. Other opportunities depend on your Medicare enrollment period.

Review your Annual Notice of Change, enter your medicines and pharmacies in Medicare Plan Finder, and compare estimated annual premiums plus drug costs. Confirm formulary restrictions with the plan. For help evaluating drug coverage alongside your health coverage, read our Advantage versus Supplement guide and ask NavaQuote about your Medicare options.