Blog / Part D

What is the annual out of pocket cap on Medicare drug costs?

Medicare drug coverage now has a yearly limit on what you pay at the pharmacy. What counts toward it, what does not, and when it starts over.

Updated September 3, 2026 · 3 min read · by Gerino Alejos

Part D, the part of Medicare that pays for prescription drugs, has a hard limit on what you pay in a year. Out of pocket means the money that comes from you, not the share the plan pays. Once you reach the limit, your covered drugs cost you nothing for the rest of the calendar year.

It replaced the old coverage gap, a stretch in the middle of the year when your share of drug costs went up. See what the donut hole was and what replaced it.

Why the cap matters

Before, a person on an expensive medication had no ceiling. Once your spending got high enough there was some relief, but you still paid a share of the price every month, with no end point.

Now there is a ceiling. You know the worst your prescriptions can cost you before the year begins, which is what insurance is supposed to do.

What counts toward the cap

• What you pay toward your deductible, the amount you pay yourself before the plan starts paying.
• Your copays, a set dollar amount per prescription, and your coinsurance, a percentage of the price.
• Amounts paid for you by Extra Help, the program that pays drug costs for people with low income.
• Certain drug maker discounts on your covered drugs.

What does not count

• Your monthly plan premium, the bill you pay to keep the coverage.
• Drugs that are not on your plan's formulary, the list of drugs it covers, when you pay for them yourself.
• Drugs you buy outside the plan, including with a discount card.
• Medicines you buy over the counter, without a prescription.

It applies to Advantage plans too

If your drug coverage comes through a Medicare Advantage plan, the same limit applies to the drug side of that plan. It sits apart from the plan's medical out of pocket maximum, the ceiling on what you pay for doctor and hospital care.

So an Advantage member has two ceilings, one for medical care and one for prescriptions. See drug coverage inside Advantage plans.

Spreading the payments across the year

You can ask to spread your drug costs into level monthly payments across the plan year, instead of paying them as they come.

That helps if you would otherwise face a large bill in January, when an expensive drug hits your deductible and your first coinsurance at once. It does not lower the total, it changes when you pay.

Ask your plan how to sign up. It does not start on its own, and most people are never told it exists.

How the cap should change your plan choice

If you take an expensive medication, the plan's premium and deductible now weigh more against its coinsurance than they used to. Your cost for the year has a ceiling either way.

The comparison to run has not changed. Add up a whole year of costs for your own drugs at your own pharmacy. See how to compare plans.

The limit is set fresh each year and starts over every January 1. Check Medicare.gov for this year's number, or call and we will look it up with you.

List the drugs you take and what each one cost you last year. Then call our McAllen office at (956) 687 3334, or enter your ZIP code in the plan pricing box on this page.

Gerino Alejos

Licensed insurance agent · License 3128710 · NPN 18243381

Owner of McAllen Insurance Group, an independent agency on North 10th Street in McAllen. Works with clients across Hidalgo, Cameron and Starr counties on Medicare, Marketplace health, life and auto coverage. Se habla español.