Starting in 2025, Medicare drug coverage has a yearly cap on what you pay out of pocket for covered drugs: $2,000 in 2025 and $2,100 in 2026. Once you hit the cap, you pay nothing for covered Part D drugs for the rest of the year. The Medicare Prescription Payment Plan is a separate, free option that lets you pay your drug costs in monthly bills from your plan instead of all at once at the pharmacy; it doesn't lower your total costs.
What is the Part D out-of-pocket cap?
The cap is the most you'll pay in a calendar year for drugs your Medicare drug plan covers. Medicare.gov says the prescription drug law caps out-of-pocket costs for covered drugs at $2,100 in 2026, and this applies to everyone with Medicare drug coverage. That includes stand-alone Part D plans and Medicare Advantage plans with drug coverage.
The Centers for Medicare & Medicaid Services (CMS) set the 2026 amount by updating the 2025 cap of $2,000 for drug cost growth. Medicare.gov's Extra Help page already lists $2,400 as the 2027 threshold, after which you pay $0 for covered drugs.
The cap resets every January 1.
What counts toward the cap?
Your out-of-pocket costs for drugs your plan covers count, like your deductible, copays, and coinsurance at the pharmacy. Medicare.gov notes that certain payments made on your behalf, like through the Extra Help program, also count.
Some things don't count:
- Your monthly plan premium.
- Drugs your plan doesn't cover.
- Drugs bought with discount cards instead of your plan. Medicare.gov says discount cards and similar programs aren't creditable coverage, and drugs bought with them don't count toward your Medicare deductible or out-of-pocket maximum.
What is the Medicare Prescription Payment Plan?
Medicare.gov describes it as a payment option that works with your current drug coverage to spread your out-of-pocket drug costs across the calendar year. Key points:
- Anyone with a Medicare drug plan or a Medicare Advantage plan with drug coverage can use it.
- All plans offer it. Joining is voluntary.
- There's no cost to participate.
- You don't pay the pharmacy for covered Part D drugs. Your plan sends you a monthly bill instead.
- You still pay your monthly plan premium separately.
Medicare.gov is clear that it might help you manage monthly expenses, but it doesn't save you money or lower your drug costs.
How is the monthly bill figured?
Medicare.gov says your monthly bill is based on what you would have paid for any prescriptions you get, plus your previous month's balance, divided by the number of months left in the year. All plans use the same formula.
Your bill can change month to month. A new prescription or refill adds cost, and with fewer months left, payments can go up.
In a calendar year, you'll never pay more than what you would have paid the pharmacy without the plan, and never more than the yearly out-of-pocket cap ($2,100 in 2026).
Who is the payment plan most likely to help?
Medicare.gov says you're most likely to benefit if you have high drug costs early in the year. Starting earlier, like before September, gives you more months to spread costs.
It may not be the best choice if:
- Your yearly drug costs are low.
- Your drug costs are the same each month.
- You'd be signing up late in the year (after September).
- You don't want to change how you pay for drugs.
- You get or qualify for Extra Help or a Medicare Savings Program.
- You get help from a State Pharmaceutical Assistance Program, a coupon program, or other coverage.
If you might qualify for Extra Help, look into that first. Extra Help lowers what you pay. The payment plan changes only when you pay.