Expensive prescription drugs can strain your budget. But if you're on Medicare Part D, you can set up a payment plan to break those costs into smaller monthly payments.
The Medicare Prescription Payment Plan works like a “buy now, pay later” program for your medications. Instead of paying upfront at the pharmacy counter, you can spread out-of-pocket costs for covered drugs over the rest of the calendar year. If you tend to have high drug costs early in the year, this makes them easier to manage.
Who’s eligible for the Medicare Prescription Payment Plan?
The Medicare Prescription Payment Plan is optional for all Medicare Part D enrollees. All Medicare Part D plans must offer the Medicare Prescription Payment Plan.
You don't have to spend a minimum on out-of-pocket costs to enroll. And plans can’t limit participation based on the drugs you take.
» Can’t afford Medicare Part D premiums and drug costs? Read about the Medicare Extra Help program
How does the Medicare Prescription Payment Plan work?
Once you join the program, you stop paying coinsurance, copays and deductibles when you pick up covered drugs at the pharmacy. Instead, your Medicare Part D plan will send you a bill each month for your out-of-pocket costs.
The bill for out-of-pocket costs is separate from your bill for monthly premiums. So, you’re responsible for two separate monthly bills. You'll still pay the same total amount for your medications over time, but out-of-pocket costs will be spread out over the plan year (through December).
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Medicare Part D covers outpatient prescription drugs for people on Medicare. It’s sold by private insurance companies.
- Average monthly premium$6.69
- Average Part D deductible$615
- Out-of-pocket costsVaries
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- Average monthly premium$33.51
- Average Part D deductible$500.20
- Out-of-pocket costsLower than average
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It’s free to join
It doesn’t cost money to join a Medicare Prescription Payment Plan. And you don’t pay any more or less for your drugs — you’re just changing when and how you pay those costs. Plans can’t add extra fees or interest charges because you participate.
Your monthly bill is capped
The Medicare Prescription Payment Plan puts a cap on your monthly bill. Your monthly cap depends on three factors:
- The out-of-pocket costs you’ve incurred.
- The total out-of-pocket cap for the year ($2,100 in 2026).
- The number of months left in the year.
Each month, your Medicare Part D plan will bill you for a portion of the out-of-pocket costs you’ve incurred over the course of the year. The bill can’t be higher than your monthly cap (unless you also owe past-due balances from previous months).
How your Medicare Prescription Payment Plan bill is calculated
In your first month enrolled in the Medicare Prescription Payment Plan, your Medicare Part D plan bills you for the lesser of these amounts:
- Your actual out-of-pocket costs for covered Part D drugs for the month.
- Your first month’s monthly cap.
So if you have $400 in out-of-pocket costs for the month, but your monthly cap is $175, you’d get a bill for the lower amount: $175. The rest of that $400 would be split up and billed over the remaining months in the year.
But if your out-of-pocket costs are low, you might get a bill for the full amount in that first month. For example, if you have $80 in out-of-pocket costs, but your monthly cap is $150, you’d owe $80 in your first month in the program.
After the first month in the program, your costs are split up and billed over the months remaining in the year. This includes remaining costs you haven’t yet paid, plus any new out-of-pocket costs from the current month. Each bill can’t be higher than the monthly cap.
The plan has two different monthly caps: one for the first month you’re enrolled, and one for every month after that. Each person has their own monthly cap based on the out-of-pocket costs for their medications.
Calculating the first month’s cap
Formula for the Medicare Prescription Payment Plan monthly cap in the first month:
(Annual out-of-pocket maximum - Incurred out-of-pocket costs) / Number of months remaining in the year- Annual out-of-pocket maximum: The annual cap on Medicare Part D copays, coinsurance and deductibles — $2,100 in 2026.
- Incurred out-of-pocket costs: What you’ve paid out-of-pocket at the pharmacy during the plan year, before you enrolled in the Medicare Prescription Payment Plan.
- Number of months remaining in the year: Includes the current month. So in January, it’s 12, and it counts down from there.
If you’re enrolled right away for the start of the year in 2026, your first month’s cap would be ($2,100 - $0) / 12, or $175.
If your enrollment starts in March 2026, and you spent $600 earlier in the year, your first month’s cap would be ($2,100 - $600) / 10, or $150.
Calculating subsequent months’ caps
Formula for the Medicare Prescription Payment Plan monthly cap each month after your first month:
(Total remaining out-of-pocket costs not yet billed + Additional out-of-pocket costs incurred this month) / Number of months remaining in the year- Total remaining out-of-pocket costs not yet billed: Costs from previous months that you haven’t yet been billed for.
- Additional out-of-pocket costs incurred this month: New out-of-pocket costs you incurred since the last bill.
- Number of months remaining in the year: Includes the current month. So in February, it’s 11, and it counts down from there.
Say it’s February. You have $233.33 in remaining out-of-pocket costs from January, but no new drug costs. Your monthly cap is $233.33 divided by 11 remaining months, or $21.21.
Say it’s July. You have $675 in remaining out-of-pocket costs from earlier in the year, plus a new $75 prescription. That’s $750 in total. Your monthly cap would be $750 divided by 6 remaining months, or $125.
Costs stop when you reach the annual cap
You stop incurring out-of-pocket costs once your total out-of-pocket costs for the year reach the annual cap ($2,100 in 2026). Whether or not you join a Medicare Prescription Payment Plan, your annual out-of-pocket costs can’t exceed the cap.
You’ll be able to track your progress toward the cap using Explanation of Benefits (EOB) documents from your plan. When you receive an EOB, it will show information about how much you’ve spent out of pocket, your current drug payment stage and what comes next.
🤓Nerdy Tip
You might not have to spend the full $2,100 in 2026 to hit the annual cap if you’re in an "enhanced" Part D plan. Roughly 60% of Part D beneficiaries choose these because they charge lower out-of-pocket costs than basic plans.Enhanced plans get credit toward the annual out-of-pocket cap as if they were a basic plan. If your enhanced plan charges a $50 copay where a basic plan would charge $210, you accumulate $210 toward the cap. After 10 fills, you’d hit the $2,100 cap, even though you only paid $500 in copays for the year. (But remember that enhanced plans have higher premiums than basic plans, so you’re paying more elsewhere.)
This plan works best if you have high costs earlier in the year
The Medicare Prescription Payment Plan is best for people who have high out-of-pocket drug costs earlier in the year. If most of your drug costs come in September or later, you'll benefit less from a payment plan. You'll only have a few months left in the year to spread out what you owe.
The biggest draw of the Medicare Prescription Payment Plan is that it smooths out costs that vary from month to month. This might appeal to people who:
- Will likely hit the out-of-pocket cap ($2,100 in 2026).
- Are on a fixed income.
- Get prescriptions as 90-day supplies.
Medicare Part D plans are required to reach out to enrollees whom they assess as likely to benefit from the Medicare Prescription Payment Plan, including (but not limited to) enrollees who hit the prior year’s annual out-of-pocket cap before the end of September.
If you’re likely to benefit from the Medicare Prescription Payment Plan according to your Part D plan, you might be notified at the point of sale at the pharmacy. Your plan might reach out in other ways, such as by email, mail or phone.
How to sign up for the Medicare Prescription Payment Plan
Your Part D plan must offer these options for beneficiaries to opt into the Medicare Prescription Payment Plan:
- A form included when your plan ID card is issued after you enroll in a new plan.
- A paper form that can be mailed.
- A toll-free phone number.
- An online application process on their website.
Article sources
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- 1.Centers for Medicare & Medicaid Services. What’s the Medicare Prescription Payment Plan?. Accessed Aug 11, 2026.
- 2.Centers for Medicare & Medicaid Services. Medicare Prescription Payment Plan: Final Part One Guidance on Select Topics, Implementation of Section 1860D-2 of the Social Security Act for 2025, and Response to Relevant Comments. Accessed Aug 11, 2026.
- 3.Centers for Medicare & Medicaid Services. Examples of this payment option. Accessed Aug 11, 2026.
- 4.Centers for Medicare & Medicaid Services. Technical Memorandum on the Changes to True Out-of-Pocket (TrOOP) Costs and the Calculation of the Maximum Monthly Cap for the Medicare Prescription Payment Plan. Accessed Aug 11, 2026.
- 5.Centers for Medicare & Medicaid Services. Fact Sheet: Medicare Prescription Payment Plan Final Part Two Guidance. Accessed Aug 11, 2026.
- 6.Centers for Medicare & Medicaid Services. Medicare Prescription Payment Plan: Final Part Two Guidance on Select Topics, Implementation of Section 1860D-2 of the Social Security Act for 2025, and Response to Relevant Comments. Accessed Aug 11, 2026.
