Lower prescription drug costs with Medicare Part D.

What is Medicare Part D?

A Medicare Part D plan is prescription drug coverage that is an optional benefit available to everyone with Medicare. Part D coverage can reduce your out-of-pocket costs for the prescription drugs you may need. Without this important coverage, prescription drugs can be costly.

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What Does Medicare Part D Cover?

Medicare Part D covers just one type of medical expense: prescription drugs.
Part D plans are offered by private insurance companies that contract with Medicare.
Part D plans can be purchased as a standalone plan to supplement Original Medicare (Parts A and B) or to accompany a Medicare Supplement Plan.
As you research your options for prescription drug coverage, consider the following:
  • Medicare Part D is an optional program, but without it, you could pay a lot for the medications you need. If Original Medicare will be your primary coverage, you should enroll in Part D when you first become eligible at age 65.
  • Many Medicare Advantage (Part C) plans provide drug coverage. If you have one of these plans, you may not need Part D.
  • Be sure to choose a Part D plan with a formulary (list of covered drugs) that offers the medications you need.
  • The cost of prescription drug coverage varies depending upon the plan you choose, the medications you take and if your pharmacy is in network.
  • Generally, drug plans that charge a deductible up front will have lower monthly premiums and lower copays.

Four Stages of Prescription Drug Coverage

All Part D plans have four stages and Medicare sets the limits for each of these stages during the year.
Companies can offer benefits that are greater than the minimum standard but not less than that standard.
Stage 1

Deductible

During this stage, you’ll pay the plan’s full negotiated drug cost out of pocket until you reach the plan’s deductible. (Some plans have a $0 deductible, which means you’d skip this phase.) Once you’ve met the deductible, you’ll pay a copayment or coinsurance in the next stage, Initial Coverage.

You pay 100%

Stage 2

Initial Coverage

In this stage, you’ll pay a copayment or coinsurance for each prescription you fill until the amount spent by you and your insurance company totals the annual limit set by Medicare. Most people remain in this stage.

You pay copay/coinsurance

Stage 3

Coverage Gap

In this stage (also known as the donut hole), you’ll pay 25% of the cost for generics and brand name drugs. Once your yearly out-of-pocket costs are reached, you’ll move to catastrophic coverage.

You pay 25% for brand and generics

Stage 4

Catastrophic

In this phase, you’ll pay only a small copayment or coinsurance amount for each prescription you fill through the end of the year. Few people will reach this stage.

You pay copay/coinsurance

Three Stages of Prescription Drug Coverage

Effective January 1, 2025, all Part D plans now have three stages of coverage. Medicare sets the limits for each of these stages, and companies may offer benefits greater than the minimum standard but not less.

Stage 1

Deductible

During this stage, you’ll pay the full cost of your prescription drugs out of pocket until you reach the annual deductible, which is $590 for 2025 (some plans may offer a $0 deductible, allowing you to skip this phase). Once you’ve met the deductible, you’ll pay a copayment or coinsurance in the next stage, Initial Coverage.

You pay 100%

Stage 2

Initial Coverage

In this stage, you’ll pay 25% of your prescription drug costs until your total out-of-pocket spending reaches $2,000 for the year. This phase no longer has an initial coverage limit, making it easier to track your expenses. During this phase, additional discounts may apply for certain brand-name drugs. Most people remain in this stage.

You pay copay/coinsurance

Stage 3

Catastrophic

Once you reach $2,000 in out-of-pocket costs, you’ll qualify for catastrophic coverage. In this stage, you won’t pay any additional out-of-pocket costs for your prescriptions for the rest of the year. Few people will reach this stage.

You pay 0%.

Changes to Medicare Part D in 2025

In 2025, significant changes to the Part D program aim to make prescription drug coverage more accessible and predictable for enrollees. Key updates include:
  • The transition from four coverage stages to three: Deductible, Initial Coverage, and Catastrophic
  • A reduced annual out-of-pocket threshold of $2,000
  • The elimination of the Coverage Gap Discount Program (CGDP)
  • The introduction of the Manufacturer Discount Program, offering:
    • A 10% discount on brand-name drugs during the Initial Coverage phase
    • A 20% discount on brand-name drugs during the Catastrophic phase
  • Adjustments to plan premiums and cost-sharing structures, such as higher premiums for stand-alone prescription drug plans (PDP) and more Medicare Advantage Prescription Drug (MAPD) plans imposing deductibles or coinsurance
These changes are designed to make enrolling easier while ensuring the the financial responsibilities are divided more fairly between enrollees, Part D sponsors, and manufacturers.

An extra charge for higher earners

If you have a higher income, you may have to pay an extra amount in addition to your plan premium. Known as an income-related monthly adjustment amount (IRMAA), it’s a surcharge based on your modified adjusted gross income on your tax return from two years prior. To get a better idea of what your cost could be, click the Shop Our Plans button below.

Extra Help for people with limited income

Medicare offers an Extra Help program to help people with limited income and resources pay Part D premiums, deductibles, coinsurance and other costs. To qualify for Extra Help, you must have an annual income that falls below 150% of the federal poverty level based on your household size. Let us help you determine if you qualify, click the Shop Our Plans button below.

Enrolling in a Medicare Part D plan.

  • You’re eligible to enroll in Part D when you first get Medicare. This Initial Enrollment Period (IEP) lasts seven months. It includes the three months before you turn 65, your birth month, and the three months following.
  • If you already have creditable drug coverage through your employer’s health plan, you can delay enrolling in Part D. When you’re no longer covered by your employer’s plan, you can enroll in Part D during a Special Enrollment Period, provided you can show proof of creditable coverage from age 65 through your Medicare start date.
  • Once you’re enrolled in Part D, you can change plans during the annual Open Enrollment Period, October 15 – December 7.

The best way to get started

Now that you have a general working knowledge of Medicare Part D, let’s get shopping for your best plan. Don’t worry, we’re here to help you every step of the way. Just click the link below and we can continue the journey together.