Medicare Part D

Prescription Drug Plan

Medicare Part D has undergone significant structural changes recently due to the Inflation Reduction Act. For 2026, the system is more streamlined but has specific cost thresholds you should know.

1. Coverage Phases in 2026

The "Donut Hole" (coverage gap) was officially eliminated in 2025. In 2026, there are now only three distinct phases:

• Deductible Phase: You pay 100% of your drug costs until you reach your plan's deductible. The maximum allowable deductible in 2026 is $615. Some plans may offer a $0 deductible.

• Initial Coverage Phase: Once the deductible is met, you pay a copay or coinsurance (standard is 25%). You remain in this phase until your total out-of-pocket spending reaches $2,100.

• Catastrophic Coverage Phase: Once you hit the $2,100 out-of-pocket cap, you pay $0 for all covered Part D drugs for the remainder of the year.

2. Costs and Premiums

• Monthly Premium: The average national premium for a standalone Part D plan in 2026 is approximately $34.50, though this varies widely by plan and region.

• IRMAA Surcharges: If your modified adjusted gross income (from your tax return 2 years ago) is above $109,000 (individual) or $218,000 (joint), you will pay an Income Related Monthly Adjustment Amount (IRMAA) ranging from $14.50 to $91.00 per month on top of your plan premium.

• Payment Flexibility: You can opt into the Medicare Prescription Payment Plan, which allows you to spread out high out-of-pocket costs into monthly installments throughout the year rather than paying a large lump sum at the pharmacy.

3. Late Enrollment Penalties

If you go 63 days or more without "creditable" drug coverage (coverage as good as Medicare's) after your Initial Enrollment Period, you may face a permanent penalty.

• The Calculation: The penalty is 1% of the "National Base Beneficiary Premium" ($38.99 in 2026) for every full month you were eligible but didn't enroll.

• Example: If you waited 12 months, your penalty would be $4.70 per month (12% of $38.99, rounded), added to your premium for life.

4. When to "Combine" vs. Standalone

You generally have two ways to get drug coverage. You cannot have both at the same time:

Medicare Advantage (MAPD)

People who want a single "all-in-one" plan. The drug premium is often bundled into the health plan premium (sometimes $0).

Standalone PDP + Medigap

People who prefer Original Medicare and want to choose a specific drug plan that covers their exact medications best.

It is "good" to combine (use a Medicare Advantage Plan) when:

• The bundled plan covers your specific medications at a lower total cost (premium + copays).

• You want the simplicity of one insurance card for doctors, hospitals, and prescriptions.

• The Medicare Advantage plan includes extra benefits (dental, vision) that offset the cost of the drug coverage.

It is better to keep them separate (Standalone PDP) when:

• You have a Medigap (Supplement) policy, as you must use a standalone Part D plan with Medigap.

• Your specific medications are "specialty" drugs that are only on the formulary of a specific standalone provider.