Medicare Part D: Prescription Drug Coverage Explained
Part D is how Medicare covers your prescription medications. Here's how plans work, what they cost, and how to make sure your drugs are actually covered.
Average Monthly Premium
$30–$80
Varies widely by plan and ZIP code
2026 Deductible Cap
$590
Maximum deductible a plan can charge
Out-of-Pocket Cap
$2,000
New 2025 cap — no more coverage gap
How Part D Works
Medicare Part D is standalone prescription drug coverage available to anyone enrolled in Medicare Part A or Part B. You purchase it from a private insurance company approved by Medicare. Each plan has its own list of covered drugs (called a formulary), its own cost tiers, and its own pharmacy network.
If you have a Medicare Supplement (Medigap) plan, you add Part D separately. If you have Medicare Advantage, drug coverage is usually bundled in (MAPD plan) — you don’t need a standalone Part D plan.
2025–2026 change: The Medicare Part D out-of-pocket maximum is now capped at $2,000 per year. This eliminated the old “donut hole” coverage gap. Once you’ve spent $2,000 out-of-pocket on covered drugs, your plan pays 100% for the rest of the year.
Understanding Formularies and Tiers
Every Part D plan has a formulary — the list of drugs it covers. Drugs are organized into tiers that determine your cost-sharing:
| Tier | Drug Type | Typical Cost |
|---|---|---|
| Tier 1 | Preferred generic drugs | $0–$5 copay |
| Tier 2 | Non-preferred generics | $5–$15 copay |
| Tier 3 | Preferred brand-name drugs | $40–$50 copay |
| Tier 4 | Non-preferred brand-name drugs | $80–$100+ copay |
| Tier 5 | Specialty drugs | 25–33% coinsurance |
Before choosing a plan, always check whether your specific medications are on the formulary and what tier they fall on. A plan with a lower premium can cost significantly more if your drugs are on a high tier.
The Late Enrollment Penalty
Important: If you don’t enroll in Part D when you’re first eligible and you go 63+ consecutive days without creditable drug coverage, Medicare adds a late enrollment penalty to your premium — permanently. The penalty is 1% of the national base premium for every month you went without coverage. This adds up over time and never goes away.
When to Enroll
Initial Enrollment Period
- 7-month window: 3 months before turning 65, the month of your birthday, and 3 months after
- Best time to enroll without penalty
- Coverage starts based on when in the window you enroll
Annual Enrollment Period
- October 15 – December 7 each year
- Switch, join, or drop a Part D plan
- New plan takes effect January 1
- Always review your plan during this window — formularies change annually
How to Choose the Right Plan
The best Part D plan for you depends entirely on your specific medications. Two people with the same premium budget can have completely different best-fit plans based on what drugs they take. Here’s what to check:
Check first:
- Is each of your drugs on the formulary?
- What tier is each drug on? What’s your copay or coinsurance?
- Is your preferred pharmacy in the plan’s network?
- Does the plan require prior authorization or step therapy for any of your medications?
Calculate total annual cost:
- 12 × monthly premium
- + annual deductible (if any)
- + estimated drug copays based on your usage
- The plan with the lowest premium is often NOT the lowest total cost
Part D plan formularies, premiums, and networks change each year. Always review your plan during Annual Enrollment (Oct 15 – Dec 7) to make sure your coverage still makes sense.
We can help you check whether your medications are covered and find the Part D plan with the lowest total annual cost for your specific drug list.
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