Medicare Part D: Prescription Drug Coverage

What Is Medicare Part D?

Medicare Part D is prescription drug coverage offered by private insurance companies that contract with Medicare. It helps pay for the medications your doctor prescribes. Part D is available as a standalone plan (PDP) that works with Original Medicare, or as part of a Medicare Advantage plan (MA-PD).

Each Part D plan has its own formulary (list of covered drugs), pharmacy network, and cost structure. Plans vary significantly in what drugs they cover and how much you pay — making it important to compare plans based on your specific medications.

Drug Tiers Explained

Part D plans organize drugs into tiers, with lower tiers having lower costs. Your copay or coinsurance depends on which tier your medication falls into:

• Tier 1Preferred Generic

  $0 – $15

  Lowest-cost generic drugs. Most common medications.

• Tier 2Generic

  $5 – $25

  Other generic drugs not on the preferred list.

• Tier 3Preferred Brand

  $25 – $60

  Brand-name drugs the plan prefers. Lower copay than non-preferred.

• Tier 4Non-Preferred Brand

  $60 – $150

  Brand-name drugs not on the preferred list. Higher cost-sharing.

• Tier 5Specialty

  25% – 33%

  High-cost specialty drugs. Often coinsurance rather than copay.

The 4 Phases of Part D Coverage

Part D coverage works in phases. As your total drug spending increases throughout the year, you move through each phase:

1. 1

   Deductible Phase

   First $615

   You pay 100% of drug costs until you reach the annual deductible. Some plans cover certain generics before you meet the deductible.

2. 2

   Initial Coverage

   $615 – $2,000 total drug costs

   You pay copays or coinsurance based on drug tier. The plan pays the rest. This is where most people spend most of the year.

3. 3

   Coverage Gap (Donut Hole)

   $2,000 – $2,000 (eliminated in 2025)

   Starting in 2025, the coverage gap has been eliminated. You continue paying no more than 25% for brand-name drugs in this phase thanks to the Inflation Reduction Act.

4. 4

   Catastrophic Coverage

   After $2,000 out-of-pocket

   Starting in 2025, there is a $2,000 annual out-of-pocket cap. Once reached, you pay $0 for covered drugs for the rest of the year.

Part D Costs in 2026

When to Enroll in Part D

• Initial Enrollment Period (IEP)

  3 months before to 3 months after turning 65

  Your first chance to enroll when you become Medicare-eligible.

• Annual Enrollment Period (AEP)

  October 15 – December 7

  Switch or join a Part D plan. Changes take effect January 1.

• Special Enrollment Period (SEP)

  Varies

  Qualifying events like losing employer coverage, moving, or qualifying for Extra Help.

Late Enrollment Penalty

Frequently Asked Questions