Yesterday, when I was volunteering as a Tax Aide counselor, an 88-year old man told me that he was taking a very expensive drug for macular degeneration. Fortunately, he is subsidized by the manufacturer.
But I went to Gemini for the details on the new $2,000 cap on Medicare prescription drugs. This will impact many METARs and millions of people on Medicare.
Here is Gemini’s cheat sheet with comments inserted by me.
2026 Medicare Quick Reference Guide
Part D: Prescription Drugs
• Annual Out-of-Pocket Cap: $2,100
• Applies to: All covered Part D prescriptions. This only includes prescription drugs that are in your specific plan’s formulary. If you have a low-priced Part D insurance plan the formulary won’t cover many expensive drugs. That’s the catch – if you suddenly need an expensive drug but it’s not in the formulary it won’t be included in the $2,100 cap.
• Once reached: You pay $0 for covered drugs for the rest of the year.
• Note: Does NOT include insurance premiums or OTC drugs.
• Annual Deductible: Maximum $620. In the eyes of Medicare, a drug that is not on your plan’s formulary (the “non-formulary” drug) essentially doesn’t exist within the system’s protections. If a patient buys a drug that isn’t on their plan’s list, every dollar they spend on it is considered “out-of-network” or “non-covered.” * It does not count toward the $620 deductible. This explains why people pay for higher-priced Part D insurance.
• Medicare Prescription Payment Plan: Option to “smooth” costs into monthly installments.
Part B: Medical (Doctors/Outpatient)
• Annual Deductible: $283. This applies toward treatments and injections which are given in a doctor’s office, cancer clinic, etc. They are classified as “Part B” so the restrictions on Part D don’t apply.
• Coinsurance: Generally 20% of the Medicare-approved amount.
• Note: Part B drugs (like clinical injections) do NOT count toward the $2,100 Part D cap.
• Standard Monthly Premium: $196.70 (higher if income is above certain limits).
Part A: Hospital (Inpatient)
• Inpatient Deductible: $1,740 per benefit period.
• Days 1–60 Coinsurance: $0 per day.
Key Exclusions
• OTC Drugs/Supplements: Not covered by the $2,100 cap.
• Non-Formulary Drugs: Don’t count toward the cap unless a “Formulary Exception” is granted.
PSA: The 2026 Medicare $2,100 Cap – Read the Fine Print!
Many of us have been waiting for the new out-of-pocket cap on drug spending. Now that it’s 2026, the cap is officially in effect at $2,100. While this is a huge win, there are three “traps” that could leave you with a massive bill if you aren’t careful.
1. The “Formulary” Catch-22
The $2,100 cap only applies to covered drugs.
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If your plan’s formulary doesn’t list your drug, nothing you spend on it counts toward your $620 deductible or the $2,100 cap.
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The Fix: If you need a drug that isn’t on the list, you must have your doctor file a “Formulary Exception” request. If approved, your spending finally counts toward the cap.
2. The Oral Chemo & Eye Injection Trap (Part B vs. D)
Not all “drugs” are treated the same. The $2,100 cap ONLY applies to Part D (pharmacy) drugs.
- Macular Degeneration Injections: These are usually Part B. You pay 20% coinsurance with NO CAP.
- Oral Chemo Pills: If the pill is a substitute for an IV drug, it’s often Part B (No Cap). If it’s a “pill-only” formula, it’s usually Part D (Protected by the $2,100 Cap).
- The Rule: If a medical professional has to administer it (like an injection), it’s probably Part B and not protected by the new cap.
3. OTC and Vitamins
Even if a doctor “prescribes” them, over-the-counter drugs and supplements (like AREDS2 for eyes) are never covered by Part D and don’t count toward your cap.
2026 Quick Reference Table
| Benefit | 2026 Cost / Limit | Important Note |
|---|---|---|
| Part D Drug Cap | $2,100 | Only for drugs on your plan’s formulary. |
| Part D Deductible | $615 | Maximum allowed; some plans are lower. |
| Part B Deductible | $283 | For doctor visits and clinic-administered drugs. |
| Part B Coinsurance | 20% | NO ANNUAL CAP. |
| Part A Deductible | $1,736 | Per hospital benefit period. |
Bottom Line:
Before starting a new, expensive treatment, ask your doctor: “Is this Part B or Part D?”
If it’s Part B and you don’t have a Medigap supplement, you are on the hook for 20% of the total cost indefinitely. If you do have a Medigap supplement the 20% will be covered.
The new cap is a tremendous improvement over the past but the rules must be followed. Those of us with low-cost Part D policies would fall through the cracks if we suddenly needed an expensive drug treatment.
Medicare Advantage is a whole different story. I have Traditional Medicare but over half of Americans on Medicare have Medicare Advantage so I asked Gemini. The answer is so complicated that I won’t post it here.
Just as Medicare Advantage companies are known for requiring “prior authorization” for surgeries and MRIs, all Part D drug plans (both standalone plans and those bundled into Medicare Advantage) use similar “utilization management” tools.
In fact, because prescription drugs are a recurring cost, insurance companies use these hurdles even more aggressively than they do for medical procedures.
Wendy