Starting January 1, 2025 (and continuing in 2026), Medicare Part D includes a $2,000 annual out-of-pocket cap on covered prescription drugs. Once you spend $2,000 on covered drugs at in-network pharmacies in a calendar year, you pay $0 for any additional Part D drugs for the rest of the year. This is a major change from prior years when there was no cap and members could face thousands of dollars in catastrophic-phase coinsurance.
The $2,000 cap applies to:
- All standalone Part D plans (PDPs)
- Medicare Advantage plans that include Part D (MAPD)
- Both brand-name and generic drugs that are on your plan's formulary and dispensed at an in-network pharmacy
It does not apply to:
- Drugs not on your plan's formulary
- Drugs covered under Part B (typically infused/injected drugs given in a doctor's office)
- Over-the-counter medications
- Drugs purchased outside your plan's pharmacy network without prior authorization
Medicare Prescription Payment Plan (M3P): Also new for 2025+, you can opt to spread your out-of-pocket Part D costs across 12 monthly payments instead of paying at the pharmacy. The total cost is the same, but cash-flow is smoother — useful if you take an expensive specialty drug early in the year.
Why it matters for plan choice: Before the cap, formulary placement of expensive specialty drugs (cancer, MS, autoimmune) could create catastrophic costs. Now, the cap protects you regardless of formulary tier — but getting a drug covered at all still requires it to be on your plan's formulary. Always confirm your specific medications are on the formulary before enrolling.
What to do next: [Look up your drugs on every Part D plan in your ZIP](/tools/drug-pricing/) using our formulary tool, or call (866) 534-1886 — we run your medication list against every plan and total your projected annual drug spend on each. Free.