PharmSurance Field Guide
The Part D
Out-of-Pocket Cap
Starting in 2026, your out-of-pocket prescription drug costs under Medicare are capped annually under federal law — a significant change. Here's what it means in practice.

For years, Medicare beneficiaries with high drug costs faced a gap in coverage that could cost thousands. The Inflation Reduction Act changed that. In 2026, your out-of-pocket Part D costs are capped annually under federal law — no matter how expensive your medications are.

📅 Reviewed and updated for 2026

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How the Cap Works
2026 Part D structure
The simple version

Once you've paid the annual cap amount out of pocket for covered drugs in a calendar year, your plan pays 100% for the rest of the year.

What counts toward the cap
  • Your deductible payments
  • Your copays and coinsurance for covered drugs
  • Amounts paid by Extra Help (Low Income Subsidy)
  • Plan premiums do NOT count toward the cap
  • Costs for drugs not covered under your plan do NOT count
After you hit the cap
  • Your plan covers 100% of covered Part D drugs for the rest of the calendar year
  • The cap resets January 1 of each year
Capped Annuallyset by federal law, adjusts every year
Who Benefits Most
High-cost medications
Big difference for some people

If you take specialty medications, insulin, cancer drugs, or multiple brand-name drugs, this cap could save you thousands per year.

Examples of who benefits
  • People on specialty biologics for autoimmune conditions
  • Cancer patients on oral chemotherapy
  • People managing multiple chronic conditions with brand-name drugs
  • Insulin users (insulin costs are also capped separately under federal law)
If your drugs are all generics
  • The cap matters less practically — your costs may never approach the annual cap
  • But it still provides a safety net if you have an unexpected high-cost drug need
Medicare Prescription Payment Plan
Spreading costs evenly through the year
An optional smoothing tool

If your drug costs are highest early in the year, you can opt into a plan that spreads your costs into equal monthly payments across all 12 months.

How it works
  • You pay nothing at the pharmacy for covered drugs
  • Your plan bills you monthly for your share, spread evenly
  • Does NOT reduce your total cost — only smooths the timing
  • Voluntary — you opt in; you can opt out if it's not working
  • If you disenroll from your plan mid-year, remaining balance becomes due
Bottom line
Does the cap change which plan you should choose?
It depends on your medications

The cap doesn't eliminate the importance of choosing the right plan — it just limits how much you can lose if your drugs are expensive. You can still pay significantly different amounts before reaching the cap depending on which plan you choose. How your specific medications are treated under a plan still matters — worth reviewing with an advisor.

Want to know what your drugs would cost under each plan?

A PharmSurance advisor will run your medication list through available Part D plans and find the lowest total cost for your situation — factoring in the cap. At no cost to you.

PharmSurance.com

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY 1-877-486-2048) to get information on all of your options. If you submit your information on this site, it will be provided to one or more licensed insurance agents, who may call, email, or text you about Medicare Advantage, Medicare Supplement, and Prescription Drug Plan options. This is a general educational overview only, not specific to any plan.

For consumer use · Not affiliated with the U.S. government or federal Medicare program.

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