Medicare Part D Prescription Drug Plans
Explore Medicare Part D options that may help cover the cost of prescription medications
Explore Medicare Part D Options
A licensed insurance professional can help you understand the Part D plans available in your area.
Why Prescription Drug Coverage Matters
According to Medicare.gov, Original Medicare (Part A and Part B) does not generally cover most outpatient prescription drugs. Medicare Part D was created to help fill this gap, providing beneficiaries with access to prescription drug coverage through private insurance plans approved by Medicare.
What Is Medicare Part D?
Medicare Part D is the federal program that provides outpatient prescription drug coverage to people enrolled in Medicare. Established in 2006, Part D coverage is offered through private insurance companies that have contracts with Medicare. These plans must meet standards set by the Centers for Medicare & Medicaid Services (CMS), but individual plan details such as which drugs are covered and the associated costs may vary.
Part D coverage is available in two ways: as a standalone Prescription Drug Plan (PDP) that supplements Original Medicare, or as part of a Medicare Advantage plan that includes drug coverage (often called an MA-PD plan). Both types of plans must provide at least the standard level of coverage defined by Medicare.
Two Ways to Get Part D Coverage:
Standalone Prescription Drug Plan (PDP)
- •Adds drug coverage to Original Medicare (Parts A and B)
- •Can also be paired with a Medicare Supplement plan
- •Each plan has its own formulary and pharmacy network
Medicare Advantage with Drug Coverage (MA-PD)
- •Combines Part A, Part B, and Part D into one plan
- •May include additional benefits such as dental and vision
- •Typically requires using network providers
How Part D Coverage Works: The Three Phases
Beginning January 1, 2025, Medicare Part D was restructured under the Inflation Reduction Act of 2022. The coverage gap — commonly known as the “donut hole” — has been eliminated. Standard Part D coverage now consists of three phases, and an annual annual out-of-pocket cap limits beneficiary spending on covered Part D drugs each calendar year. This cap was $2,000 in 2025 and increases to $2,100 in 2026, and is subject to adjustment by Medicare each year.
Deductible Phase
You pay 100% of prescription drug costs until you reach the plan's annual deductible. Medicare sets a maximum deductible each year, but individual plans may charge less — or waive the deductible entirely for certain drug tiers (such as generics). The deductible amount varies by plan and is adjusted by Medicare annually.
Initial Coverage Phase
After meeting the deductible, you pay a copayment or coinsurance for each covered drug, and the plan pays the rest. Your cost-sharing amount depends on the drug's formulary tier and your specific plan. For brand-name drugs and biologics, drug manufacturers also contribute a discount through the Manufacturer Discount Program.
This phase continues until your total out-of-pocket drug spending reaches the annual out-of-pocket cap, at which point you move into catastrophic coverage. There is no longer a separate “initial coverage limit” that triggers a coverage gap — you go directly from this phase to catastrophic.
Catastrophic Coverage Phase
Once your out-of-pocket spending reaches the annual cap — $2,100 in 2026 (up from $2,000 in 2025) — you enter catastrophic coverage and pay $0 for covered drugs for the remainder of the calendar year. The cap is set by Medicare and may be adjusted annually.
The Donut Hole Is Gone
Prior to 2025, Part D included a fourth phase called the coverage gap (“donut hole”) where beneficiaries temporarily paid a higher share of drug costs. As of January 1, 2025, the coverage gap has been fully eliminated under the Inflation Reduction Act. There are now only three phases, and your cost-sharing does not increase once you leave the initial coverage phase — instead, it drops to $0. Source: KFF
Coverage phase thresholds are set by Medicare and may change each plan year. Contact a licensed insurance professional for current year amounts. Source: Medicare.gov
Understanding Drug Formularies and Tiers
Each Part D plan maintains a formulary — a list of covered drugs organized into tiers. The tier a drug is placed on determines your cost-sharing amount. Most Part D plans use a tiered structure similar to the following:
| Tier | Drug Type | Typical Cost-Sharing |
|---|---|---|
| Tier 1 | Preferred generic drugs | Lowest copay |
| Tier 2 | Generic drugs | Low copay |
| Tier 3 | Preferred brand-name drugs | Moderate copay or coinsurance |
| Tier 4 | Non-preferred brand-name drugs | Higher copay or coinsurance |
| Tier 5 | Specialty drugs | Highest cost-sharing (often coinsurance) |
Tier structures and specific cost-sharing amounts vary by plan. Some plans may use fewer or more tiers. Always check a plan's formulary to see where your medications are listed.
Formulary Tip: Before enrolling in a Part D plan, check that your current medications are on the plan's formulary. You can search formularies on Medicare Plan Finder or ask a licensed insurance professional for assistance.
When Can You Enroll in Medicare Part D?
There are specific enrollment periods during which you can join, switch, or drop a Part D plan. Missing these windows may result in late enrollment penalties unless you have other creditable drug coverage. Key enrollment periods include:
Initial Enrollment Period (IEP)
This 7-month window surrounds your 65th birthday (or when you first become eligible for Medicare). It begins 3 months before the month you turn 65, includes your birthday month, and extends 3 months after. This is typically the first opportunity to enroll in Part D without a late enrollment penalty.
Annual Enrollment Period (AEP)
Running from October 15 through December 7 each year, the AEP allows all Medicare beneficiaries to join a new Part D plan, switch plans, or drop Part D coverage. Changes made during this period take effect January 1 of the following year.
Medicare Advantage Open Enrollment Period (MA OEP)
From January 1 through March 31 each year, people already enrolled in a Medicare Advantage plan can switch to a different Medicare Advantage plan or return to Original Medicare and join a standalone PDP. This period allows one plan change.
Special Enrollment Periods (SEPs)
You may qualify for a Special Enrollment Period if you experience certain life events, such as moving to a new area, losing other creditable drug coverage, qualifying for Extra Help, or entering or leaving a nursing facility. SEPs allow you to make plan changes outside of the standard enrollment windows.
Understanding the Late Enrollment Penalty
If you go 63 or more consecutive days without Medicare Part D or other creditable prescription drug coverage, you may be charged a late enrollment penalty when you do enroll. This penalty is added to your monthly Part D premium for as long as you have Part D coverage.
Creditable coverage means prescription drug coverage that is expected to pay, on average, at least as much as Medicare's standard Part D coverage. Examples may include employer-sponsored plans, TRICARE, or VA benefits. If you have creditable coverage, be sure to keep documentation in case you need to prove it when you enroll in Part D.
Need Help Choosing a Part D Plan?
Let us help you compare Part D plans and understand how your medications may be covered.
Who Is Eligible for Medicare Part D?
To be eligible for a Medicare Part D plan, you generally must meet the following criteria:
Basic Eligibility
- •Enrolled in Medicare Part A and/or Part B
- •Live in the service area of the Part D plan you want to join
- •A United States citizen or lawfully present in the U.S.
Common Situations
- •Turning 65 and enrolling in Medicare for the first time
- •Under 65 with a qualifying disability and receiving Medicare
- •Losing employer-sponsored drug coverage and transitioning to Medicare
- •Diagnosed with End-Stage Renal Disease (ESRD) or ALS
Extra Help with Part D Costs (Low Income Subsidy)
Medicare offers a program called Extra Help (also known as the Low Income Subsidy or LIS) that may help people with limited income and resources pay for Part D prescription drug costs. If you qualify, Extra Help may cover:
Part D Premiums
Full or partial help paying your monthly Part D plan premium
Deductibles
Reduction or elimination of the annual Part D deductible
Copayments
Reduced copayments or coinsurance for covered prescriptions
How to Apply for Extra Help
- •Apply online at Social Security's website
- •Call Social Security at 1-800-772-1213 (TTY 1-800-325-0778)
- •Contact your local New York State Medicaid office
- •Speak with a licensed insurance professional who can help guide you through the application process
Spreading Out Your Drug Costs: The Medicare Prescription Payment Plan (M3P)
Starting in 2025, Medicare beneficiaries with Part D coverage have access to an optional payment program called the Medicare Prescription Payment Plan (M3P). This program allows you to spread your out-of-pocket drug costs into equal monthly payments across the calendar year, rather than paying large amounts at the pharmacy all at once.
How M3P Works
- •You opt in through your Part D plan
- •You pay $0 at the pharmacy; the plan covers costs upfront and bills you monthly
- •Your total annual costs remain the same — this is a payment smoothing option, not a discount
- •All Part D plans are required to offer this option
Who May Benefit Most
- •Beneficiaries who fill expensive prescriptions early in the year
- •Those who would otherwise reach the annual out-of-pocket cap in the first few months of the year
- •Note: those who qualify for Extra Help (Low Income Subsidy) may find Extra Help more advantageous than M3P
What Medicare Part D Typically Covers
Part D plans must cover a broad range of prescription drugs. While each plan's formulary is different, Medicare requires that all Part D plans cover drugs in each therapeutic category and class. Plans must cover at least two drugs in each category, and all or substantially all drugs in certain protected classes.
Generally Covered
- ✓Brand-name prescription drugs on the plan's formulary
- ✓Generic prescription drugs
- ✓Biological products and biosimilars
- ✓Some vaccines not covered by Part B (such as shingles)
- ✓Insulin and certain diabetes supplies
Generally Not Covered
- ✗Drugs for weight loss or cosmetic purposes
- ✗Over-the-counter medications (with some exceptions)
- ✗Drugs covered under Medicare Part A or Part B
- ✗Drugs not on the plan's formulary (may require an exception request)
- ✗Drugs from out-of-network pharmacies (unless in an emergency)
Coverage details vary by plan. Plans may impose utilization management requirements such as prior authorization, step therapy, or quantity limits on certain medications.
Factors to Consider When Choosing a Part D Plan
Your Medications
Check that your current prescriptions are on the plan's formulary and note which tier they fall under. The tier determines your cost-sharing for each medication.
Pharmacy Network
Verify that your preferred pharmacy is in the plan's network. Many plans offer lower costs at preferred pharmacies. Mail order options may also be available.
Total Annual Cost
Look beyond the monthly premium. Consider the deductible, copayments, and coinsurance for your specific medications to estimate your total annual drug costs.
Coverage Restrictions
Some plans require prior authorization, step therapy, or quantity limits for certain drugs. Check whether any of your medications have these restrictions.
Plan Star Rating
Medicare rates Part D plans on a 5-star scale based on quality and performance. Higher-rated plans may indicate better member satisfaction and service.
Annual Out-of-Pocket Cap
Since 2025, Part D out-of-pocket spending on covered drugs is capped each year ($2,000 in 2025; $2,100 in 2026). After reaching the cap, you pay $0 for covered drugs for the rest of the calendar year.
Frequently Asked Questions About Medicare Part D
What is Medicare Part D?
Medicare Part D is the federal prescription drug benefit program available to people enrolled in Medicare. It helps cover the cost of outpatient prescription drugs through private insurance plans approved by Medicare. Part D is available as a standalone Prescription Drug Plan (PDP) or as part of a Medicare Advantage plan that includes drug coverage (MA-PD).
When can I enroll in a Medicare Part D plan?
You can enroll during your Initial Enrollment Period (a 7-month window around your 65th birthday), the Annual Enrollment Period (October 15 – December 7 each year), or during a Special Enrollment Period if you qualify due to certain life events such as losing other creditable drug coverage.
What happens if I don't sign up for Part D when I'm first eligible?
If you go 63 or more consecutive days without Part D or other creditable prescription drug coverage, you may be subject to a late enrollment penalty. This penalty is added to your monthly premium for as long as you have Part D coverage. However, if you had other creditable coverage (such as through an employer), you generally will not face a penalty.
Is there still a Medicare Part D donut hole?
No. As of January 1, 2025, the coverage gap — commonly called the “donut hole” — has been fully eliminated under the Inflation Reduction Act. Part D now has three phases: the Deductible phase, the Initial Coverage phase (where you pay cost-sharing set by your plan), and the Catastrophic Coverage phase (where you pay $0). An annual out-of-pocket cap limits your total spending on covered drugs each year ($2,000 in 2025; $2,100 in 2026).
What is Extra Help with Medicare Part D?
Extra Help (also called the Low Income Subsidy or LIS) is a Medicare program that helps people with limited income and resources pay for Part D prescription drug costs. Those who qualify may get help paying for premiums, deductibles, and copayments. You can apply through Social Security or your state Medicaid office.
Can I change my Part D plan?
Yes. You can change your Part D plan during the Annual Enrollment Period (October 15 – December 7). If you're in a Medicare Advantage plan, you may also make a change during the Medicare Advantage Open Enrollment Period (January 1 – March 31). Special Enrollment Periods may also be available if you experience qualifying life events.
Related Medicare Coverage Options
Medicare Part D is one component of your overall Medicare coverage. Explore these related options:
Medicare Advantage
Part C plans that combine hospital, medical, and often prescription drug coverage into one plan. Many include additional benefits.
Medicare Supplement
Medigap plans that help cover costs Original Medicare doesn't pay, such as deductibles and coinsurance. Pair with a standalone PDP for drug coverage.
Medicare Overview
Learn about the different parts of Medicare and how they work together to provide health and drug coverage.
Dental Insurance
Original Medicare generally does not cover routine dental care. Explore standalone dental plans to supplement your Medicare coverage.
Important Information
This information is provided for general educational purposes only and does not constitute insurance advice or policy recommendations. Coverage features described are examples and may not be available in all policies or from all carriers. Actual coverage is subject to the terms, conditions, and exclusions of the policy as issued. Medicare Part D plan availability, formularies, pharmacy networks, and cost-sharing amounts vary by plan and may change each plan year. For the most current information about Medicare Part D, visit Medicare.gov. Please consult with a licensed insurance professional to discuss your specific coverage needs and options. Stan Steele Agency is licensed in New York State.
Help Navigate Your Medicare Part D Options
Understanding prescription drug coverage can be complex. Let us help you explore Part D plans and find coverage that may work for your medications and budget.
How We Can Help:
- ✓ Review your current medications against plan formularies
- ✓ Compare Part D plan options available in your area
- ✓ Help you understand coverage phases and cost-sharing
- ✓ Assist with enrollment during the appropriate enrollment period
- ✓ Explore whether you may qualify for Extra Help
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