The 2026 Part D Cap and Creditable Coverage Determination

Last year at this time, we discussed how the new $2,000 out-of-pocket cap under Medicare Part D (set by the Inflation Reduction Act) might nudge clients off employer-group plans and onto Medicare (+ Part D).

Key Points from Last Year’s Article

• Medicare Part D will now include a $2,000 out-of-pocket maximum on covered prescriptions (beginning in 2025), protecting enrollees from excessive drug costs.
• Employers must annually notify Medicare-eligible individuals and CMS whether their employer drug coverage remains "creditable."
• Without creditable coverage, retirees face a lifetime late enrollment penalty. And, due to the new cap, the creditable coverage status of many plans could soon change.
• Agents have a unique opportunity to collaborate with group agents on helping Medicare-eligible employees evaluate their coverage options.

So, what’s new for 2026? A few things:

1. Increased Part D Cost Sharing: Kiplinger reports that the annual out-of-pocket cap will rise to $2,100 in 2026, up from $2,000 in 2025. The standard deductible will also increase slightly to $615.

Like other Medicare costs (like the Part A deductible and coinsurance and the monthly Part B premium), these numbers are tied to inflation, so expect them to creep up over time.

2. Part D Plan Adjustments: Some Part D plans are responding to the out-of-pocket cap by:

• Narrowing their formularies (since the cap applies only to covered drugs), or
• Raising premiums (by up to $50 in 2026 – see below)

These changes mean fewer plans will be a good fit for most beneficiaries, and annual Part D reviews are more critical than ever. With formularies, premiums, and coverage rules changing, clients may find that the plan that worked in 2025 no longer delivers the best value in 2026.

3. The Uniform Premium Subsidy: To help stabilize premiums during these changes, CMS explains in a July 28 Fact Sheet that it is continuing its Part D Premium Stabilization Demonstration:

• In 2025, participating plans received a $15 per member per month subsidy and were limited to a $35 monthly premium increase.
• In 2026, the subsidy drops to $10 per member per month, and the maximum monthly premium increase limit rises to $50.

While this helps prevent extreme jumps in premiums, clients should still expect to see higher prices in 2026, especially if their plan makes other benefit changes.

4. Updated Creditable Coverage Methodology: CMS’s Final CY 2026 Part D Redesign Program Instructions confirm that employers may choose between:

• The existing simplified test (unchanged from prior years), or
• A revised simplified determination requiring coverage of at least 72% of expected drug costs (up from 60%), plus biological drug coverage and certain pharmacy access requirements.

Because the existing simplified test remains available, the status of most employer plans likely won’t change (which is different than what we originally expected). But for some, especially those with higher deductibles or a narrowed formulary in the new plan year, creditable coverage status could shift, creating a penalty risk for Medicare-eligible employees.

What Agents Should Do Now

• Remind clients with high drug costs that they could benefit significantly from the new $2,100 cap in 2026. Yes, it’s a little higher than in 2025, but it’s still much lower than what many people paid in the past.
• Work with group contacts. Employers may need to re-evaluate creditability for 2026. When they do, some employees may decide to drop off the group plan and sign up for Medicare.
• Encourage Medicare clients to review their Part D options during the AEP since formularies and premiums will likely change.
• Educate clients that failing to maintain creditable drug coverage could trigger lifetime penalties.
• Make sure clients understand that the new cap only applies to covered drugs. Choosing the right plan matters more than ever.

Final Thought

The Part D cap can definitely benefit Medicare beneficiaries, but only if they understand how it works and enroll in the right plan for them. With the new $2,100 cap, revised tests for creditability, and changing carrier responses, clients will likely need even more guidance from their trusted advisors this AEP.