For many families in California, prescription medications are one of the biggest costs in retirement. Medicare has coverage for that: Part D. But it works in ways that are not always easy to understand. This guide explains how it works, what it costs, what to do if your income is limited, and how to choose the right plan for your specific medications.

What Is Medicare Part D

Medicare Part D is the prescription drug benefit. Unlike Parts A and B, which the federal government administers directly, Part D is offered through private insurance companies approved by Medicare.

There are two ways to get Part D:

  • Standalone Part D plan (PDP): Added to Original Medicare (Parts A and B). A separate plan just for medications.
  • Medicare Advantage with drug coverage (MAPD): Most Medicare Advantage plans in California already include prescription drug coverage. If you have a Medicare Advantage plan that includes drugs, you already have Part D.

To understand how Medicare works in general before comparing Part D plans, see our guide What Is Medicare.

What Medicare Part D Costs in California in 2026

Part D costs have several components:

Component What It Is Range in 2026
Monthly premium What you pay each month to have the plan $0 to $120+ (varies by plan)
Annual deductible What you pay before the plan starts covering $0 to $590 (2026 maximum)
Copay or coinsurance Your share when you pick up a prescription Varies by formulary tier
Out-of-pocket cap The most you pay for drugs in the year $2,000 in 2026 (new cap)

Important change for 2026: For the first time, annual out-of-pocket drug costs are capped at $2,000 thanks to the Inflation Reduction Act. This is a major change for people with expensive medications. In prior years there was no ceiling.

How Part D Works: The Coverage Phases

Part D used to have four phases including the notorious coverage gap or "donut hole." Starting in 2025 and continuing in 2026, that system was significantly simplified. There are now three main stages:

1. Deductible

At the start of the year, you pay the full cost of your medications until you meet the plan's deductible (maximum $590 in 2026). Many generic drugs have a $0 deductible.

2. Initial Coverage

Once you meet the deductible, you and the plan share costs. You pay a fixed copay or a percentage (coinsurance) based on which tier your medication falls on in the plan's formulary. Drugs are typically classified into tiers: generic, preferred brand, non-preferred brand, and specialty.

3. Catastrophic Coverage

In 2026, once your out-of-pocket spending reaches $2,000, the plan covers 100% of your drug costs for the rest of the year. You pay nothing more. This change particularly benefits people with cancer, rheumatological conditions, Type 1 diabetes, or other conditions requiring high-cost medications.

Extra Help: If Your Income Is Limited

Extra Help (also called the Low Income Subsidy or LIS) is a federal program that pays most or all of your Part D costs if you have limited income and resources.

In 2026, you may qualify if:

  • Your annual income is below approximately $23,000 as an individual, or $31,000 as a couple.
  • Your resources (savings, bank accounts, etc., not counting your home or car) are below $16,000 as an individual or $32,000 as a couple.

With full Extra Help, you can pay as little as $0 in premium, $0 deductible, and $4.50 for generic drugs. To apply, call 1-800-Medicare or visit SSA.gov. You can also contact our office and we will help you apply at no cost.

Medi-Cal and Medicare in California: If you qualify for Medi-Cal in addition to Medicare (dual eligibility), you may automatically receive Extra Help and be enrolled in a no-cost Part D plan. To learn more about the benefits of having both programs, see our English guide on dual eligibility with Medicare and Medi-Cal.

How to Choose the Best Drug Plan in California

Not all Part D plans cover the same medications or at the same cost. To choose well, follow these steps:

Step 1: Make a list of your medications

Write down the name of each medication (generic and brand), the dose, and how often you take it. Include medications from every doctor you see.

Step 2: Find plans that cover YOUR medications

Use the Plan Finder tool at Medicare.gov to enter your medication list and see which plans in your California ZIP code cover your drugs and at what cost. Each plan has a formulary, which is its list of covered medications. If your drug is not on the formulary, you may pay the full cost.

Step 3: Compare the total annual cost, not just the premium

A $0-premium plan can cost you more by year's end if it has high copays on your medications. Add the annual premium to your estimated drug costs to see the real total.

Step 4: Confirm your pharmacy is in the network

Each Part D plan has a pharmacy network. Using a preferred pharmacy can significantly reduce your copays. California has many options, including large chains and community-based independent pharmacies.

Not sure which drug plan is right for you?

A licensed Beneficios Medicare agent can compare Part D plans against your exact medication list at no cost to you. We offer service in Spanish and English.

Speak with an Agent

The Late Enrollment Penalty

If you don't enroll in Part D during your Initial Enrollment Period (when you turn 65) and you don't have other creditable drug coverage, you will face a permanent penalty when you finally enroll.

The penalty is 1% of the national base premium for each month you could have had coverage and didn't. In 2026, the base premium is $36.78. If you wait 24 months, the penalty would be 24% of that, about $8.83 extra per month, for life.

If you have employer or retiree health coverage that includes drug coverage, ask your employer for a letter confirming that coverage is "creditable" (comparable to or better than Medicare Part D). Keep that letter. You will need it when you eventually enroll in Part D to avoid the penalty.

When You Can Change Your Part D Plan

In most cases you can only change your plan during the Annual Enrollment Period (AEP), which runs October 15 through December 7 each year. The new plan begins January 1 of the following year.

If you qualify for Extra Help, move, or lose other coverage, you may have a Special Enrollment Period during the year. If your situation changes, call Medicare or a licensed agent to find out whether you can make a change.

If someone in your family prefers to read about Medicare drug coverage in Spanish, our main site BeneficiosMedicare.com has the full Spanish version of this guide. And for broader Medicare information in English for California, visit our sister site Medicare-California.com.

Frequently Asked Questions

What is Medicare Part D?

Medicare Part D is the prescription drug benefit. It is optional coverage added to Original Medicare (Parts A and B), or it comes included in most Medicare Advantage plans. Coverage is provided through private insurance companies approved by Medicare.

How much does Medicare Part D cost in California in 2026?

Monthly premiums range from $0 to over $100 depending on the plan. The maximum annual deductible is $590, and the new out-of-pocket cap in 2026 is $2,000. Exact costs depend on the plan you choose and the medications you need.

What happens if I don't enroll in Part D when I become eligible?

If you don't enroll during your Initial Enrollment Period and don't have other creditable coverage, you will face a permanent late enrollment penalty: 1% of the base premium for each month of delay. In 2026 every 12 months of delay adds about $4.41 per month to your premium permanently.

What is Extra Help for Medicare Part D?

Extra Help (Low Income Subsidy) is a federal program that pays most or all of your Part D costs if you have limited income and resources. In 2026, you may qualify with annual income below approximately $23,000 as an individual. With full Extra Help you can pay $0 premium, $0 deductible, and $4.50 for generic drugs.

Can I change my Part D plan during the year?

In most cases, only during the AEP (October 15 through December 7). However, Special Enrollment Periods exist if you qualify for Extra Help, move to a new service area, or lose other creditable coverage.

Share this with someone you love. Many older adults overpay for their medications simply because they don't know their Medicare options. A licensed agent can review anyone's plan in California at no cost.