What Counts Toward the Part D Cap? 2026 & 2027 Rules

If you take expensive prescription medications, the recent changes to Medicare drug coverage likely brought a sigh of relief. With new annual limits on pharmacy spending, knowing exactly what counts toward the Part D cap is more important than ever. However, the rules about which dollars actually move you closer to that finish line can be incredibly confusing. Many people assume that every dollar they spend on healthcare, from their monthly premiums to their doctor visits, goes toward this limit. Unfortunately, that is not how Medicare works.

At Genie Medicare, we want to grant your Medicare rate wish by making these complex rules easy to understand. We believe that when you know the facts, you can make confident choices about your healthcare. In this comprehensive guide, we will break down exactly what counts toward your Part D out-of-pocket maximum, what leaves you paying full price, and how the rules differ between 2026 and 2027. Please note that Genie Medicare is not affiliated with or endorsed by the U.S. government or the federal Medicare program; we are an independent resource here to help you navigate your options.

How the Medicare Part D Spending Cap Works

To understand what counts toward the Part D cap, you first need to understand how the cap itself functions. Medicare Part D is the federal program that helps cover the cost of self-administered prescription drugs—the medications you pick up at a retail pharmacy or order through the mail. In the past, Part D was famous for its complicated phases, including the dreaded "donut hole" or coverage gap. Today, the system has been streamlined to protect you from runaway pharmacy bills.

The Part D spending cap is a hard limit on your True Out-of-Pocket (TrOOP) costs for the calendar year. TrOOP is the specific term Medicare uses to track the money you pay for covered medications. Your coverage now works in three simple phases. First is the Deductible Phase, where you pay full price until you meet your plan's annual deductible. Second is the Initial Coverage Phase, where you share the cost of your drugs with your plan through copayments (a flat fee) or coinsurance (a percentage of the drug's cost). Finally, if your TrOOP spending reaches the annual cap, you enter the Catastrophic Coverage Phase.

Once you reach the Catastrophic Coverage Phase, you pay absolutely nothing ($0) for your covered Part D drugs for the rest of the calendar year. This is a massive protection for seniors taking high-tier specialty drugs. However, the catch is in the tracking. If you spend money on something that Medicare does not consider a True Out-of-Pocket cost, that money vanishes into the ether. It does not bring you one penny closer to the safety of the Catastrophic Phase. That is why tracking what counts toward the Part D cap is vital for your household budget.

The Cap Limits: $2,100 in 2026 vs. $2,400 in 2027

The exact dollar amount of the Part D cap changes from year to year based on inflation and federal legislation. It is crucial to look at the correct year when planning your medical expenses. For the 2026 calendar year, the Part D maximum out-of-pocket cap is legally set at $2,100. This means that once your approved TrOOP spending hits $2,100, your covered pharmacy costs drop to zero. Looking ahead to the 2027 calendar year, that out-of-pocket cap will increase to $2,400.

The cap is not the only number that changes. The highest deductible a Part D plan can legally charge is $615 in 2026, and this maximum deductible rises to $700 in 2027. It is important to note that plans do not have to charge the maximum deductible; some plans offer a $0 deductible, though they often charge higher monthly premiums in return. Additionally, the national base beneficiary premium—a figure used by the government to calculate standard costs and penalties—is $38.99 in 2026 and rises to $41.33 in 2027.

When you compare Part D Drug Plans rates, you must also be aware of a major shift happening behind the scenes. In July 2026, the Centers for Medicare and Medicaid Services (CMS) announced it is ending the temporary Part D Premium Stabilization Demonstration early, concluding it at the end of 2026. This demonstration program was designed to keep premium increases artificially low. Because it is ending, 2027 standalone prescription drug plan premiums are returning to regular market conditions. This means you may see higher volatility and steeper premium increases when shopping for 2027 coverage. If you want to understand more about this shift, read our guide on Why Is There a 2027 Part D Premium Increase?

What Counts Toward the Part D Cap Each Year

Now that we know the limits, let us look at exactly what counts toward the Part D cap. Medicare is very strict about what qualifies as True Out-of-Pocket (TrOOP) spending. Essentially, TrOOP includes the money you pay out of your own wallet for approved medications, plus a few specific types of assistance. If an expense is on this list, it moves you closer to your $2,100 limit in 2026 or your $2,400 limit in 2027.

First, your annual plan deductible counts. If your plan has a $615 deductible in 2026, every dollar you spend at the pharmacy counter to satisfy that deductible goes straight toward your cap. Second, your copayments and coinsurance count. Whenever you pay a $10 copay for a generic drug or a 20% coinsurance for a brand-name drug during the Initial Coverage Phase, that money is added to your TrOOP total. It is critical to remember that this only applies to covered Part D drugs that are on your plan's official list of approved medications, known as a formulary.

There are also a few instances where money paid by someone else counts toward your cap. If you qualify for the Extra Help program (also known as the Low-Income Subsidy), the payments made on your behalf by this program count toward your TrOOP. Similarly, if you receive assistance from a qualified State Pharmaceutical Assistance Program (SPAP), those contributions also count. These programs are designed to help lower-income seniors, and Medicare ensures that this assistance still helps you reach the safety of the out-of-pocket maximum.

Do Monthly Part D Premiums Count Toward the Cap?

One of the most common misconceptions in Medicare is the belief that monthly premiums count toward your out-of-pocket maximum. We hear this question all the time: "I pay $50 a month for my drug plan, does that $600 a year go toward my cap?" The answer is a firm no. Monthly plan premiums never count toward the Part D cap. Your premium is simply the cost of admission to have the insurance policy; it is not considered an out-of-pocket medical expense by Medicare.

This rule also applies to surcharges and penalties. For example, higher-income earners must pay an Income-Related Monthly Adjustment Amount (IRMAA). For 2026, individuals with a Modified Adjusted Gross Income (MAGI) over $109,000 (or $218,000 for married couples filing jointly) pay an extra surcharge on top of their premium, based on their 2024 tax returns. This IRMAA surcharge does not count toward your TrOOP. You cannot use your income-based surcharges to reach the $2,100 cap faster.

Similarly, the late enrollment penalty does not count. If you go without creditable prescription drug coverage when you are first eligible, Medicare imposes a permanent penalty. This penalty is 1% of the national base beneficiary premium for every full month you were eligible but unenrolled. For example, a 10% penalty in 2026 would be 10% of $38.99, added to your monthly bill forever. Just like your base premium and IRMAA, this penalty money goes to Medicare and your insurance company, but it does absolutely nothing to help you reach your annual out-of-pocket cap.

The Part B Trap: Why Chemotherapy and Infusions Don't Count

Perhaps the most dangerous pitfall for seniors is misunderstanding the difference between Medicare Part B and Medicare Part D. Part D covers drugs you take yourself, usually pills, creams, or inhalers you get from a pharmacy. Part B covers medical services, which includes drugs that must be administered by a healthcare professional in a clinical setting. Examples of Part B drugs include intravenous chemotherapy, certain injectables for macular degeneration, and infusions for autoimmune diseases.

Here is the trap: Part B drugs do not count toward the Part D cap. They are entirely separate systems. Under Part B, Medicare covers 80% of the cost of these clinical drugs, and you are responsible for the remaining 20% coinsurance. Because these drugs are often incredibly expensive, that 20% can amount to thousands of dollars per treatment. None of that spending will help you reach your $2,100 Part D cap in 2026.

If you face high Part B drug costs, a standalone Part D plan will not protect you. This is why many seniors choose to compare Medicare Supplement rates. A Medicare Supplement (Medigap) plan, such as Plan G, covers the 20% coinsurance for Part B services, protecting you from massive infusion or chemotherapy bills. If you only have Original Medicare and a Part D plan, your Part D cap will remain untouched while you pay thousands out-of-pocket for clinical treatments. Always ask your doctor how a new medication will be billed before you start treatment.

What Happens with Non-Formulary and Excluded Drugs?

Every Part D plan has a formulary, which is a tiered list of medications the plan agrees to cover. Insurance companies negotiate prices with drug manufacturers to create these lists. If a drug is not on your plan's formulary, it is considered a non-formulary drug. If you choose to buy a non-formulary drug out of your own pocket, the money you spend does not count toward the Part D cap. You will pay full retail price, and your TrOOP balance will remain exactly where it was.

There are also certain categories of drugs that Medicare legally excludes from Part D coverage entirely. These include drugs used for weight loss, fertility, cosmetic purposes, hair growth, and over-the-counter medications like vitamins or cold medicine. Because Medicare forbids plans from covering these items as standard Part D benefits, any money you spend on them will never count toward your $2,100 or $2,400 limits.

If your doctor prescribes a drug that is not on your formulary, you have a few options. You can ask your doctor if there is a generic or alternative medication on your plan's list that would work just as well. If not, you and your doctor can file a formal exception request, asking the plan to cover the drug because it is medically necessary. If the plan approves your exception, the drug becomes covered, and your copays or coinsurance for it will then count toward your Part D cap. If they deny it, you must pay out-of-pocket, and those dollars will not count.

How Manufacturer Discounts and Copays Add Up

The rules around manufacturer discounts have changed significantly due to recent federal legislation known as the Inflation Reduction Act. If you have been on Medicare for a few years, you likely remember the coverage gap, widely known as the donut hole. We have good news: the coverage gap was permanently eliminated starting in 2025. You no longer have to worry about falling into a phase where you pay a massive percentage of your drug costs. If you want to read more about this historic change, check out our article: Is the Medicare Part D Donut Hole Gone Forever?

However, the end of the donut hole brought a crucial rule change regarding how manufacturer discounts are calculated. Under the old donut hole rules, drug manufacturers provided a 70% discount on brand-name drugs, and that 70% actually counted toward your TrOOP progress as if you had paid it yourself. It was a strange accounting trick that helped seniors reach catastrophic coverage faster.

Under the new rules for 2026 and 2027, the Manufacturer Discount Program has replaced the old system. Manufacturers now pay a 10% discount on brand-name drugs during the Initial Coverage Phase and a 20% discount in the Catastrophic Phase. The vital difference is that these new manufacturer discounts do not count toward your True Out-of-Pocket progress. Only your actual spending (your deductibles, copays, and coinsurance) counts toward the $2,100 cap in 2026. This change has caused widespread confusion, so it is essential to understand that you can no longer rely on phantom discount dollars to push you over the finish line.

What You Pay Once You Reach the Part D Cap

Reaching the Part D cap is a major financial milestone for seniors with heavy prescription needs. Let us walk through exactly what happens when your approved TrOOP spending hits $2,100 in 2026 or $2,400 in 2027. Once your pharmacy registers that your out-of-pocket spending has crossed that threshold, your plan's computer system automatically shifts you into the Catastrophic Coverage Phase.

In the Catastrophic Phase, your cost-sharing for covered Part D drugs drops to $0 for the remainder of the calendar year. You will not pay deductibles, copayments, or coinsurance for any medication on your plan's formulary. If you take a specialty drug that costs $5,000 a month, you will walk out of the pharmacy paying nothing. This protection resets on January 1st of the following year, at which point you will start over with a new deductible and a new cap.

It is important to remember that Medicare Part D costs are not based on age. Your premiums and out-of-pocket costs are determined entirely by the specific plan you choose, your geographic region, and your income. A 65-year-old and an 85-year-old on the exact same plan in the same ZIP code will have the exact same $2,100 cap in 2026. Do not let anyone tell you that your cap will increase simply because you are getting older.

How to Track Your True Out-of-Pocket Spending

Keeping track of your progress toward the Part D cap might sound like a math nightmare, but your insurance company actually does the heavy lifting for you. Every month that you use your prescription drug coverage, your plan is required to send you a document called an Explanation of Benefits (EOB). This is not a bill. It is a summary statement that shows exactly what you spent, what the plan paid, and how close you are to reaching your annual cap.

Your EOB will clearly state your total True Out-of-Pocket (TrOOP) spending for the year. It is a good habit to review this document carefully. Check to ensure that all the medications you purchased are listed and that the amounts you paid at the pharmacy match the amounts on the statement. If you notice a discrepancy, you should contact your plan's customer service department immediately to get it corrected.

If you are worried about affording high drug costs early in the year before you hit the cap, there is a new option available. The Medicare Prescription Payment Plan (M3P) allows beneficiaries to opt-in to spread their out-of-pocket pharmacy costs into capped monthly installment bills, rather than paying lump sums at the pharmacy counter. This does not change what counts toward the Part D cap, but it does make the cash flow easier to manage. To see if this program is right for you, read our guide: Is Medicare Prescription Payment Plan Worth It?

Common Mistakes When Tracking Your Out-of-Pocket Costs

Even with a clear understanding of the rules, it is easy to make mistakes at the pharmacy counter. To help you protect your wallet, we have compiled a short checklist of common errors to avoid when tracking your progress toward the Part D cap.

• Paying cash without running your insurance: If you use a third-party discount card (like GoodRx) instead of your Medicare card because it offers a lower price, that spending does not count toward your Part D cap. You must use your plan for the dollars to count.
• Assuming all doctor-administered drugs are Part D: Always ask if a new injection or infusion is billed to Part B or Part D. Part B drugs will not help you reach your pharmacy cap.
• Ignoring the formulary: If your doctor prescribes a new medication, check your plan's formulary immediately. If it is not listed, ask for an alternative or file an exception before you pay full price.
• Forgetting the annual reset: Your out-of-pocket spending resets to zero on January 1st every year. Do not assume you are still in the Catastrophic Phase just because you reached it in December.

By keeping this checklist in mind, you can ensure that every eligible dollar you spend is working hard to push you toward the safety of the out-of-pocket maximum.

Compare 2026 and 2027 Part D Rates with Genie Medicare

Understanding what counts toward the Part D cap is only half the battle; the other half is finding a plan that covers your specific medications at a price you can afford. Because plan formularies, premiums, and deductibles change every year, you should review your coverage during the Annual Enrollment Period (AEP), which runs from October 15 to December 7 every year. If you are new to Medicare, you can enroll during your Initial Enrollment Period, a 7-month window around your 65th birthday.

At Genie Medicare, we make finding the right coverage effortless. You can check Part D quotes in your ZIP code in about 30 seconds. We believe in transparency, which means you will see real prices immediately—no name, phone number, or email address required. You can browse plans in peace, without fear of endless spam calls.

If you prefer to look at the big picture, you can visit the Genie Medicare home page to compare Medicare Supplement, Medicare Advantage, Part D, final expense, and hospital indemnity rates all in one place. And if you ever want free, zero-pressure help from a licensed agent to review your specific medication list, we are just a click away. Let Genie Medicare grant your rate wish today.