You just signed up for a 2026 Medicare Part D plan and read the fine print: the new out-of-pocket cap protects you once you hit $2,100 in drug spending, but every dollar up to that ceiling still comes out of your pocket. If you take a couple of brand-name maintenance drugs, you can burn through that number by mid-year. The fix is building a small income sleeve inside your portfolio that quietly pays the pharmacy for you. Three ETFs do the heavy lifting: iShares Core High Dividend ETF (NYSEARCA:HDV), NEOS S&P 500 High Income ETF (NYSEARCA:SPYI), and SPDR Bloomberg 1-3 Month T-Bill ETF (NYSEARCA:BIL).
Together they combat the drug-cap gap from three different angles: blue-chip dividends, options-boosted monthly income, and pure Treasury cash. Own all three and the $2,100 stops feeling like a bill and starts feeling like a line item your portfolio handles on autopilot.
The Real Problem You’re Solving
The 2026 cap is a ceiling. Medicare only steps in after you have paid the full $2,100 at the counter, and that spend can hit any month depending on your refill schedule. You need income that shows up predictably, does not force you to sell shares in a down market, and does not lean on any single sector. That is why we are combining a dividend equity fund, a covered-call income fund, and a T-bill fund rather than doubling down on one.
HDV: The Blue-Chip Paycheck
HDV is iShares’ large-cap dividend workhorse, tracking the Morningstar Dividend Yield Focus Index. The portfolio leans into names retirees already know: Exxon Mobil at 8.42%, Chevron at 6.42%, Johnson & Johnson at 5.68%, AbbVie at 5.44%, Procter & Gamble at 4.46%. Energy, healthcare, and consumer staples do most of the work, which is the profile you want when the goal is a check that keeps arriving.
Over the last twelve months, HDV paid out $3.317859 per share in dividends on a quarterly schedule, with shares recently trading around $29.21. The fund manages roughly $13.57 billion in assets, and shares are up 24.6% over the past year, so you have been paid to wait. This is the anchor position that covers a big portion of your drug bill four times a year.
SPYI: Monthly Cash From the S&P 500
SPYI takes a different approach. NEOS holds S&P 500 exposure and writes call options on top, converting equity volatility into monthly distributions. That is why the fund charges a 0.68% expense ratio, higher than a plain index fund but reasonable for an actively managed options overlay.
The payoff shows up in the paycheck. SPYI has distributed $6.308826 per share over the trailing twelve months and currently runs at an annualized forward rate of $6.36 against a share price near $54.26. Monthly payments have hovered between $0.51 and $0.54 per share throughout 2026, which is exactly the cadence you want when pharmacy copays arrive every 30 days. The fund now holds about $6.9 billion in assets.
BIL: The Money You Don’t Want to Lose
BIL owns Treasury bills with one to three months to maturity. That is as close to cash as an ETF gets. With the Fed funds rate at 3.75% and 4-week T-bills yielding 3.70%, the fund is still throwing off real income. It paid $3.442831 per share over the last twelve months and distributes monthly.
Park one year of your projected $2,100 in BIL and the drug-cap money is sitting in Treasuries earning yield until you need it. The share price barely moves. Over the past year, BIL is up 3.75% including reinvested income. That is the point: it will be there in January when your first refill hits.
The Trade-Offs
None of these funds come without trade-offs. HDV concentrates in energy and healthcare, so an oil crash or pharma price rule can dent both share price and payout. SPYI’s covered-call strategy caps upside in a roaring bull market and its distributions fluctuate month to month. BIL’s yield tracks the Fed. Every cut the Fed makes lands in your check, and payments have already declined from 2024 levels above $0.40 to the $0.24 to $0.27 range in 2026.
For a Medicare enrollee staring down a fixed $2,100 obligation, those trade-offs are worth accepting. You get quarterly blue-chip dividends, monthly options income, and a Treasury reserve. Between the three, every dollar of that drug cap has a funding source, and you are not selling growth assets to pay CVS. The drug cap is only one of several Medicare costs that catch retirees off guard (we mapped the IRMAA surcharges and coverage gaps in a free Medicare guide here).
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