As we age, prescription medications often become an essential part of managing our health. Whether it’s for controlling blood pressure, treating diabetes or easing arthritis pain, the cost of medications can add up quickly.

Understanding how Part D works, including coverage, costs and when to enroll can help beneficiaries make confident, informed choices about their health coverage and avoid unexpected expenses at the pharmacy.

[Read: 7 Ways to Reduce Health Care Costs in Retirement]

What Is Medicare Part D and What Does It Cover?

Original Medicare, which includes Part A (hospital insurance) and Part B (medical insurance), only covers medications in specific situations, such as when you’re admitted to the hospital and drugs are part of the treatment plan or when a medication is administered in a doctor’s office. Medicare Part D helps you pay for the cost of outpatient prescription medications. Most Medicare Advantage plans, also known as Part C, offer prescription drug coverage as part of their benefits.

In 2026, depending on their location, the average Medicare beneficiary can choose from roughly 11 stand-alone prescription drug plans for original Medicare and 32 Medicare Advantage plans that offer drug coverage, according to KFF.

[READ GoodRx and Medicare Part D: How to Use GoodRx to Save Money on Prescriptions]

5 Major Medicare Part D Changes for 2026

The 2026 plan year brings several notable changes to Medicare prescription drug coverage, continuing reforms introduced by the Inflation Reduction Act of 2022, such as:

— Auto-renewal for the Medicare Prescription Payment Plan. Enrollees in the voluntary Medicare Prescription Payment Plan, which spreads out-of-pocket drug costs into predictable monthly payments, will automatically be reenrolled for 2026 unless they opt out. While it does not lower overall costs, this plan can make expenses easier to manage throughout the year.

— The “donut hole” remains eliminated. The notorious “donut hole” coverage gap was permanently eliminated in 2025.

— Medicare drug price negotiations take effect. The first 10 drugs selected for Medicare price negotiation under the IRA have negotiated prices going into effect in 2026 (more on that below).

— Out-of-pocket cap adjusted to $2,100. The annual out-of-pocket maximum for Part D rises slightly from $2,000 in 2025 to $2,100 in 2026.

— Premium stabilization continues in 2026. The temporary Centers for Medicare & Medicaid Services (CMS) Medicare Part D Premium Stabilization Demonstration remains in place to help limit sharp premium increases as negotiated drug prices and other Part D reforms take effect. For 2026, stand-alone Part D plans participating in the program may raise premiums by up to $50 per month year over year, though actual increases can be lower and vary by plan.

[READ: How the 2026 $2,100 Part D Cap Affects Your Pharmacy Bill]

Understanding Your 2026 Medicare Drug Costs

The cost for Medicare Part D can include monthly premiums, annual deductibles and copayments or coinsurance. What you pay depends on the plan you choose, the medications you take and whether you use preferred pharmacies.

2026 Medicare Part D benefit structure

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How Medicare Drug Price Negotiations Affect Your Costs

As mentioned above, Medicare can now negotiate directly with drug manufacturers to lower the cost of certain high-use medications, and the first negotiated prices took effect on January 1, 2026. The 10 drugs selected for negotiation, listed below, accounted for roughly 20% of total Part D spending in 2023. Another benefit is all Part D plans must now cover drugs included in the negotiation program, helping expand enrollee access.

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CMS estimates that the roughly 9 million Medicare enrollees using these medications will save about $1.5 billion in out-of-pocket costs in 2026. An AARP Public Policy Institute analysis of stand-alone Part D plans in five high-enrollment states (California, Florida, New York, Pennsylvania and Texas) found that cost-sharing for the 10 negotiated drugs will drop by about 50% between 2025 and 2026 — and by more than 50% on average across the 56 plans studied.

Medicare has already selected the next 15 drugs for negotiation, with lower prices set to take effect in 2027 and 2028.

How to Choose the Best Part D Plan for Your Medications

Not all Medicare Part D plans have the same benefits. Plans may also change what they cover, so it is essential to review your plan’s benefits annually to ensure it remains the best fit for your needs.

“Make sure to open your plan’s annual notice of changes, which typically arrives in late September, and check for any changes in premium, costs per tier and pharmacy networks,” advises Diane Omdahl, president and founder of 65 Incorporated, a company that provides unbiased Medicare guidance to individuals, families and employers in Mequon, Wisconsin.

These plans generally use a tiered formulary to set prescription costs. Most include five tiers, with Tier 1 covering preferred generics at the lowest cost and Tier 5 reserved for specialty medications at the highest cost.

Plans do not necessarily automatically pay for a drug just because it is on the plan’s formulary. Many plans have additional requirements for more expensive drugs, including:

— Prior authorization. Before some plans will cover a medication, they ask for your doctor to document and submit to them why that medication is necessary for you.

— Quantity limits. Plans may limit the amount of medicine that can be given at one time. If you need more, your doctor will have to show that extra medicine is necessary to treat your condition.

— Step therapy. Some plans want you to try lower-cost options first before approving the use of the more expensive medication.

“When evaluating plans, don’t fail to check coverage restrictions. Prior authorization of medications has become a concern. One plan may require it, and another plan does not,” Omdahl says. “It may be worth paying a bit more not to have to worry about coverage of an important medication.”

[7 Reasons to Switch Medicare Part D Plans]

How to Compare and Enroll in a Medicare Part D or Medicare Advantage Plan

The following steps can you help you find and enroll in the best prescription drug coverage for your needs:

Step 1: Review available plans

Review Medicare Advantage and Part D options available in your area with:

— The Medicare plan finder tool

— U.S. News’ Best Medicare Advantage and Part D search tool

Step 2: Compare plan features

Compare plans based on:

— Monthly premiums and deductibles

— Prescription drug costs and coverage

— Formularies (covered medications)

— Pharmacy networks and extra benefits

You can also review independent summaries of plan quality and comparisons, such as U.S. News’ Best Medicare Part D Prescription Drug Plans and Best Medicare Advantage Plans with drug coverage.

Step 3: Choose a plan

Select the option that best fits your medication needs, preferred providers and budget.

Step 4: Enroll

Once you decide, you can enroll by:

— Signing up online through the Medicare plan finder

— Calling 1-800-MEDICARE (1-800-633-4227)

— Contacting the insurance plan directly

Step 5: Enroll during the correct period

Make sure you apply during your eligible enrollment window. It is important to note that when initially signing up for Medicare at 65, if you don’t enroll in Part D at that time, you must have what’s termed “creditable coverage” (such as from an employer or TRICARE) to avoid a permanent late enrollment penalty. “It’s important to understand that you need Part D coverage even if you are not currently taking any prescriptions. Many people assume they can skip it, but if you do not enroll when first eligible and do not have other creditable drug coverage, you will incur a late enrollment penalty. This penalty is calculated for every month you go without coverage, and it is permanent. You will pay it if you are enrolled in a Part D plan,” says Danielle Roberts, author of “10 Costly Medicare Mistakes You Can’t Afford to Make” and founding partner at Boomer Benefits, a licensed insurance agency in Fort Worth, Texas.

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What Is Medicare Part D? originally appeared on usnews.com

Update 05/14/26: This story was previously published at an earlier date and has been updated with new information.