Quick Answer
In 2026, Medicare Part D has a $2,100 annual out-of-pocket cap on covered prescription drugs — up from $2,000 in 2025. Once your out-of-pocket spending on covered drugs reaches $2,100 in a calendar year, your plan pays 100% of the cost of covered medications for the rest of the year. This cap applies whether you have a stand-alone Part D plan or a Medicare Advantage plan with drug coverage, and it replaced the old "donut hole" coverage gap system entirely.
What Changed, and When
The out-of-pocket cap comes from the Inflation Reduction Act of 2022, which restructured Part D in stages:
- Before 2024: There was no hard cap. Reaching the "catastrophic coverage" phase required spending around $8,000 out of pocket in a year.
- 2025: The cap dropped to $2,000 for the first time — the single biggest change to Part D in two decades.
- 2026: The cap rose to $2,100, adjusted upward based on the annual growth in Part D drug spending. It will continue to be adjusted for inflation each year going forward.
How the 2026 Part D Benefit Works
Part D now has three simplified phases:
- Deductible phase: You pay 100% of drug costs up to your plan's deductible (maximum $615 in 2026 — many plans set it lower, or $0 for generics).
- Initial coverage phase: You typically pay 25% coinsurance and your plan pays the rest, until your total out-of-pocket spending reaches $2,100.
- Catastrophic coverage phase: Once you hit $2,100, you pay $0 for covered Part D drugs for the remainder of the calendar year.
The old "coverage gap," commonly known as the donut hole, no longer exists under this structure.
What Counts Toward the $2,100 Cap?
Counted toward your cap:
- Your deductible payments
- Copayments and coinsurance for covered drugs
- Amounts paid on your behalf through programs like Extra Help
Not counted toward your cap:
- Your monthly plan premium
- Costs for drugs your plan doesn't cover (check your plan's formulary)
- Drugs covered under Medicare Part B instead of Part D (such as many infused or injectable medications given in a clinical setting)
The Medicare Prescription Payment Plan
Alongside the cap, Medicare offers an optional program called the Medicare Prescription Payment Plan (MPPP). It doesn't reduce what you owe — it simply changes when you pay by spreading your out-of-pocket costs into monthly installments (interest-free) instead of paying the full amount at the pharmacy counter.
- Available to anyone with a Part D plan or a Medicare Advantage plan that includes drug coverage
- Voluntary — you have to opt in through your plan, not at the pharmacy
- Your monthly bill is calculated by taking your total out-of-pocket drug costs and dividing by the number of months remaining in the year
- Enrolling earlier in the year generally means lower, more predictable monthly amounts
- If you were enrolled in 2025 and stayed with the same plan, you were typically auto-renewed for 2026
This program is most useful if you take expensive specialty medications and would otherwise face a large bill early in the year.
Who Benefits Most From the Cap?
The cap provides the most meaningful savings for people taking high-cost specialty medications who previously spent well beyond $2,100 a year on covered drugs. If your annual drug costs are already below $2,100, the cap itself won't change much for you — though the elimination of the donut hole still simplifies how your costs are calculated throughout the year.
What This Doesn't Cover
- Non-covered or off-formulary drugs
- Drugs billed under Part B rather than Part D
- Your monthly premium, which you continue paying regardless of the cap
Action Steps
- Review your plan's formulary each year during Open Enrollment — premiums, deductibles, and covered drugs can change annually
- If you take expensive medications, ask your plan how to enroll in the Medicare Prescription Payment Plan
- Keep track of your out-of-pocket spending throughout the year using your plan's Explanation of Benefits
[DRAFT STATUS: Ready for pharmacist review. Cap and deductible figures reflect CMS's Final CY 2026 Part D Redesign Program Instructions and should be reverified against CMS.gov before publishing, since these figures are adjusted annually.]
