Picking a Medicare Part D plan is one of the easiest places to overpay by hundreds or thousands a year — and the reason is simple: most people pick the wrong number to optimize. They look at the monthly premium and pick the lowest. The right number to optimize is total annual cost, and the difference between those two numbers can be enormous. Here's how to do it right.
The math most people miss
Every Part D plan has three components that determine what you actually pay:
- The monthly premium — what you pay regardless of whether you fill any prescriptions
- The deductible — what you pay full price for before benefits kick in (max $590 in 2026; many plans have $0)
- The copays/coinsurance for your specific drugs — based on which tier each drug is on in that plan's formulary
The trap is that these vary independently. Plan A might have a $15 premium with brutal drug tiers. Plan B might have a $45 premium with much better tier placement for your drugs. The "cheaper" plan can easily be the more expensive one in total.
Total annual cost is the only number that matters
Here's the right formula:
Total annual cost = (Monthly premium × 12) + Annual deductible + Sum of expected copays for the year
Run this for every plan in your zip code. The plan with the lowest total is the right plan — even if its premium is double the cheapest plan's premium.
How to actually do this
Three options, from least to most accurate:
Option 1: Medicare.gov's Plan Finder
The official tool at Medicare.gov lets you enter your drug list and zip code and shows you every plan's estimated annual cost. It's free, government-run, and pretty good. Two limitations: it relies on you entering exact drug names and dosages (one mistake throws off the estimate), and it doesn't account for some pharmacy network nuances.
Option 2: Working with an independent agent
An independent agent runs the same comparison but cross-checks pharmacy networks, preferred pharmacy pricing (which can be 30-50% lower than standard pharmacies for some plans), and any prior authorization requirements that could delay your fills. Time on your end: 15 minutes for the call. There's no fee to the client.
Option 3: Calling each carrier
You can do this. It takes about 4 hours and the carrier reps are generally reading from a script. I don't recommend this approach.
The 5 things that matter most
1. Is each of your drugs on the formulary at all?
Plans periodically drop drugs from their formulary entirely. If your medication isn't on the formulary, you'll pay full retail price or have to switch to a covered alternative. Always verify every drug is covered.
2. What tier is each drug on?
Most plans have 5 tiers:
- Tier 1: Preferred generics ($0-$5 copay typical)
- Tier 2: Other generics ($5-$15)
- Tier 3: Preferred brand-name ($35-$50)
- Tier 4: Non-preferred brand-name (often 25-40% coinsurance, which can be huge)
- Tier 5: Specialty drugs (typically 25-33% coinsurance)
The same drug can be Tier 2 on Plan A and Tier 4 on Plan B. This is where most of the price variation between plans comes from.
3. Does the plan use preferred pharmacies?
Many Part D plans designate "preferred" pharmacies (often Walmart, Walgreens, CVS, or major grocery chains) where copays are significantly lower than at "standard" pharmacies. Going from a standard to a preferred pharmacy can cut your copays in half on some plans. Check whether the pharmacy you actually use is preferred.
4. Is mail-order cheaper?
Many plans give a 90-day supply via mail-order pharmacy for a discount — typically equivalent to a 2-month copay for 3 months of drugs. For chronic medications, this can save hundreds per year.
5. Are there prior authorization or step therapy requirements?
Some plans require your doctor to submit a prior authorization before they'll cover certain drugs, or require you to fail on a cheaper drug first (step therapy). These don't directly cost money but can cause delays or force changes in your treatment.
What changed in 2026
The Inflation Reduction Act made meaningful changes to Part D starting in 2025 and continuing into 2026:
- $2,100 out-of-pocket cap on prescription drug costs per calendar year. Once you hit it, the plan pays 100% for the rest of the year. This is huge for anyone on expensive specialty drugs.
- $35/month insulin cap across all Part D plans.
- Some adult vaccines now $0 at the pharmacy (shingles, RSV, etc.).
- Smoother coverage gap (the old "donut hole" was effectively eliminated).
These changes shifted Part D economics significantly. If you last picked a plan before 2025, it's especially worth re-running the numbers — the right plan may have changed.
The annual review nobody does (and should)
Formularies change every year. The plan that's perfect this year may be terrible next year if your main drug gets moved from Tier 2 to Tier 4. Every Annual Enrollment Period (October 15 - December 7), spend 30 minutes re-running your drug list through every plan in your zip code. About a third of the time, switching saves real money.