Medigap and Part D: How to Pair Prescription Drug Coverage With Your Supplement Plan

Why Medigap Plans Don't Cover Prescription Drugs

Modern Medicare Supplement insurance is designed to fill in the cost-sharing gaps in Original Medicare (Parts A and B) such as deductibles, copays, and coinsurance. Outpatient prescription drugs sit outside that scope entirely. By federal law, every Medigap policy sold on or after January 1, 2006 is prohibited from including outpatient prescription drug benefits. The official Medicare & You 2026 handbook makes this explicit and warns that you can't have drug coverage in both Medigap and a Medicare drug plan.

If you want help paying for prescriptions while keeping Original Medicare and Medigap, you must enroll in a standalone Medicare Part D Prescription Drug Plan (PDP). This separation is permanent and applies to every Medigap letter sold today, including Plan G, Plan N, High-Deductible Plan G, K, and L.

A Brief History: Plans H, I, and J

Before 2006, three standardized Medigap letters did include limited drug benefits:

• Plan H and Plan I: $250 annual drug deductible, 50% coinsurance, and a $1,250 annual benefit cap
• Plan J: Same deductible and coinsurance with a higher $3,000 annual cap

Premiums for these plans were expensive (often $90+ per month in the late 1990s) and the benefits were so capped that fewer than one in ten Medicare beneficiaries ever bought them. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the MMA) created the Part D benefit and closed Plans H, I, and J to new enrollees as of January 1, 2006. People who already owned those plans could keep them, but CMS later determined that the drug benefits in Plans H and I were not "creditable" coverage, which meant many holders accumulated late enrollment penalties when they eventually transitioned to Part D. For a full breakdown of the modern lineup, see our Medigap plans comparison chart.

How Medigap and Part D Work Together

Think of your Medicare coverage as a stack of three independent products when you go the Medigap route:

1. Original Medicare (Parts A and B) pays the bulk of your hospital and outpatient medical costs
2. A Medigap policy covers most of what Parts A and B leave behind
3. A standalone Part D plan covers your prescriptions at the pharmacy

Each component is billed and administered separately. You'll have one premium for Part B, another for Medigap, and a third for Part D.

For a side-by-side comparison of the two paths, see our Medigap vs Medicare Advantage guide.

The Part D Late Enrollment Penalty

Skipping Part D when you're first eligible is one of the most expensive mistakes in Medicare. The penalty is permanent, recalculated every year, and added to whatever Part D premium you eventually pay. For a broader breakdown of Part A, B, and D late penalties and appeal options, see our guide to the Medicare late enrollment penalty.

How the Penalty Is Calculated in 2026

The formula uses the national base beneficiary premium, which CMS set at $38.99 for 2026, a roughly 6% increase from $36.78 in 2025 and the maximum allowed under the Inflation Reduction Act's premium stabilization provision:

1% × $38.99 × number of full months without creditable coverage

The result is rounded to the nearest $0.10 and added to your monthly Part D premium for as long as you have Medicare drug coverage.

Example: If you went 14 full months without creditable drug coverage, your 2026 penalty would be roughly $0.39 × 14 = $5.46, rounded to $5.50 per month. That amount changes each year as the base premium changes.

People who qualify for the Part D Extra Help Low-Income Subsidy, Medicaid, or certain Medicare Savings Programs do not pay the late enrollment penalty. Learn more about how dual eligibility with Medicare and Medicaid affects your drug costs.

What Counts as Creditable Drug Coverage

You can delay Part D without penalty as long as you maintain "creditable" prescription drug coverage. Creditable coverage means the plan is expected to pay, on average, at least as much as standard Part D.

Common sources of creditable coverage include:

Your plan sponsor is required to send you a written Notice of Creditable Coverage every year. Keep these notices. They are your proof to Medicare that you don't owe a penalty if you eventually enroll in Part D. If you're weighing whether to keep an employer plan or move to Medicare, see our guide on working past 65.

How to Choose a Part D Plan to Pair With Medigap

Because Medigap already handles your medical cost-sharing, your Part D decision is almost entirely about matching the plan to your specific prescriptions and pharmacies, not coordinating with your Medigap letter. For a deeper carrier-by-carrier breakdown, see our full Part D shopping guide.

Step-by-Step Selection

1. List every medication you take including name, strength, monthly quantity, and whether brand or generic
2. Identify your preferred pharmacies (chain, independent, and mail order)
3. Use the Medicare.gov Plan Finder to enter your drugs and ZIP code
4. Sort plans by estimated total annual cost (premium + deductible + cost-sharing), not just the monthly premium
5. Verify formulary coverage for every drug, including tier placement and any prior authorization or step therapy requirements
6. Check pharmacy status to confirm your pharmacies are "preferred" in-network rather than just "standard"

2026 Part D Cost Benchmarks

The $2,100 out-of-pocket cap is a major win for beneficiaries with high drug costs. Once your cumulative out-of-pocket spending on covered Part D drugs hits $2,100 (up from $2,000 in 2025), you pay $0 for the rest of the calendar year. Premiums do not count toward the cap, and drugs not on your plan's formulary don't count either. Learn more about how the closing donut hole affects your 2026 costs.

Two other 2026 developments worth flagging:

• Medicare-negotiated drug prices for the first 10 Part D drugs (Eliquis, Xarelto, Januvia, Jardiance, Farxiga, Entresto, Enbrel, Stelara, Imbruvica, and NovoLog/Fiasp insulins) took effect January 1, 2026. CMS estimates the negotiated prices will save beneficiaries about $1.5 billion in annual out-of-pocket costs, with roughly $6 billion in projected Medicare program savings compared to previous list prices. The negotiated Maximum Fair Prices are 38% to 79% below the drugs' 2023 list prices, with Januvia seeing the largest reduction and Imbruvica the smallest.
• ACIP-recommended adult vaccines (shingles, RSV, Tdap, Hepatitis A and B) remain covered at $0 with no deductible under Part D

2026 PDP Market Shakeup

The standalone Part D market is going through significant turbulence in 2026. The average monthly premium for Part D coverage decreased for PDPs in 2026 (from $39 to $36), while increasing modestly for MA-PDs. The number of PDPs is decreasing by 22%, falling from 464 plans in 2025 to 360 plans in 2026, and just five companies (Aetna, Health Care Service Corporation, Humana, UnitedHealthcare, and Wellcare) now account for about 94% of all PDPs. On the bright side, some regions still offer multiple $0-premium PDPs depending on where you live. If your current PDP is being terminated or repriced, you'll receive an Annual Notice of Change and should use the first-time Medicare enrollment guide framework to reshop.

The Medicare Prescription Payment Plan (Auto-Renewal in 2026)

If you take expensive medications and don't want to pay a large lump sum at the pharmacy, the Medicare Prescription Payment Plan (MPPP) lets you spread your out-of-pocket Part D costs across monthly bills from your plan (January through December). Participation is voluntary, there is no interest or fees, and every Part D and MA-PD plan is required to offer it.

Key rules for 2026:

• You must opt in through your Part D plan (by phone, online, or paper form), not at the pharmacy
• CMS is finalizing new requirements for an automatic election renewal process that extends a Part D enrollee's participation in the program for the next calendar year, unless the enrollee opts out
• If you switched Part D plans for 2026, you need to opt in again with the new plan
• The drug plan is required to send out renewal notifications after the annual coordinated election period concludes but before the new plan year begins
• You can opt out at any time by contacting your plan
• If you fall at least two months behind on your MPPP payments, your plan can disenroll you from the payment option (though your Part D coverage itself continues)

For someone hitting the $2,100 cap early in the year, MPPP can turn a $2,100 January bill into roughly $175/month spread over the calendar year.

Part D Enrollment Windows

There are three main opportunities to enroll in or change a Part D plan.

Initial Enrollment Period (IEP)

When you first become Medicare-eligible, you get a 7-month window to enroll in Part D: the 3 months before your birthday month, your birthday month, and the 3 months after. This is the same period covered in our Medicare enrollment step-by-step guide.

Annual Enrollment Period (AEP)

Every fall from October 15 through December 7, you can join, switch, or drop a Part D plan. Changes take effect on January 1 of the following year. This is when most beneficiaries comparison-shop because plan formularies, premiums, and pharmacy networks can change significantly year to year. Given the 2026 PDP consolidations noted above, reviewing your Annual Notice of Change is more important than ever.

Special Enrollment Periods (SEPs)

Life events can open a temporary window outside AEP. Examples include:

• Moving out of your current plan's service area
• Losing creditable coverage from an employer or union
• Gaining or losing Medicaid or Extra Help
• Entering, residing in, or leaving a nursing facility
• A FEMA-declared disaster that prevented you from enrolling on time
• Switching into a 5-star plan (allowed once between Dec 8 and Nov 30)

Switching From Medicare Advantage to Medigap Without a Drug Coverage Gap

If you're leaving a Medicare Advantage plan that included prescription drugs (an MA-PD), you'll lose that drug coverage the moment your MA plan ends. Medigap won't pick it up, so you must enroll in a standalone Part D plan to keep your prescriptions covered. Our step-by-step switching guide walks through the full process, and if you're worried about health questions, our guide to Medigap underwriting when leaving MA covers the approval odds.

This transition is especially relevant in 2026. About 13% of beneficiaries enrolled in individual MA-PDs (about 2.6 million people) are in a plan that has been terminated for 2026, an increase from 2025 when nearly 1.3 million Medicare Advantage enrollees faced a termination. A broader analysis by Johns Hopkins researchers published in JAMA found that roughly 2.9 million Medicare Advantage enrollees, about 1 in 10, were forced to switch plans for 2026.

Coordinating Your Effective Dates

The goal is to make your Part D effective date match the date your MA plan ends so there's no gap.

1. Apply for Medigap first. If you don't have guaranteed-issue rights, you'll need to pass medical underwriting. Lock in your start date.
2. Choose your Part D plan. Pick one whose formulary covers your medications and confirm the effective date.
3. Disenroll from your MA plan. Enrolling in a standalone PDP while in an MA-PD plan automatically disenrolls you from the MA plan and returns you to Original Medicare.
4. Verify all three effective dates match. Medigap, Part D, and your return to Original Medicare should all start the day after your MA coverage ends.

Frequently Asked Questions

Do I need Part D if I have Medigap?

Technically Part D is optional, but practically yes. Medigap covers zero outpatient prescription drug costs, so without a Part D plan you'll pay full retail price at the pharmacy. You'll also accumulate a permanent late enrollment penalty for every month you go without creditable coverage. Even if you take no medications today, enrolling in a low-premium Part D plan when you're first eligible protects you from the penalty if you ever need drugs in the future.

Can I have both Medigap and Part D at the same time?

Yes, and that combination is the standard setup for beneficiaries who want Original Medicare plus comprehensive coverage. Medigap handles your hospital and outpatient medical cost-sharing while Part D covers prescription drugs. You'll pay separate premiums for each, but the two products are designed to work together without overlap.

What is the best Part D plan to pair with Medigap?

There's no universal "best" plan because Part D pricing depends entirely on your specific medications and pharmacies. Use the Medicare.gov Plan Finder, enter your drug list, and sort by estimated total annual cost. The plan with the lowest premium isn't always the cheapest overall once you factor in deductibles, tier copays, and pharmacy network status.

What happens to my drug coverage when I switch from Medicare Advantage to Medigap?

You lose drug coverage the day your MA plan ends, so you must enroll in a standalone Part D plan with an effective date that matches your Original Medicare and Medigap start date. As long as you do this within 63 days, you avoid the late enrollment penalty. The cleanest timing windows are the Annual Enrollment Period (Oct 15-Dec 7) and the MA Open Enrollment Period (Jan 1-Mar 31).

How much will Part D cost me in 2026?

Premiums vary widely by plan and region, but the average monthly premium for Part D coverage decreased for PDPs in 2026 (from $39 to $36). Every 2026 Part D plan caps your out-of-pocket spending on covered drugs at $2,100 per year, plan deductibles can go as high as $615, and insulin copays are capped at $35 per 30-day supply. After you hit the $2,100 cap, you pay $0 for covered Part D drugs for the rest of the year.