Medicare is a federal health insurance program in which adults aged 65 and older can enroll. Among its offerings is Medicare Part D, a federally subsidized drug program that covers most categories of prescription medications.
Medicare Part D is separate from Medicare Part A, which focuses on hospital coverage, and Part B, which covers outpatient care. (Together, Medicare Parts A and B are known as traditional, or original, Medicare.) Unlike traditional Medicare, Medicare Part D is only available through private insurance companies.
Who Can Enroll in Medicare Part D Prescription Drug Coverage, and When?
Those enrolled in Medicare Part A or Medicare Part B (or both) can opt to enroll in a Part D standalone prescription drug plan (PDP).
Signing up for Part D benefits is optional in most cases. However, those who do not enroll when they first become eligible may face a late enrollment penalty. Seniors first become eligible three months before the month in which they turn 65. This is when one’s Initial Enrollment Period for Medicare begins.
If you instead choose to sign up for a Medicare Advantage plan, most will include prescription drug coverage.
Navigating Medicare Part D Plan Options
According to the Centers for Medicare and Medicaid Services (CMS), the average person on Medicare has access to an average of 15 standalone prescription drug plan (PDP) options, in addition to an average of 34 Medicare Advantage plans with prescription drug coverage.
For help in navigating these choices, visit the Medicare website. There, you can take advantage of an online tool that lets you search private drug plans available in your ZIP code and compare them. The information is also available by calling 1-800-MEDICARE.
What Does Medicare Part D Cost?
Part D Plan Premiums
Given the wide variety of plan options, the expense can vary. In fact, per the Kaiser Family Foundation, the monthly premium for Medicare Part D across the 12 national PDPs spans from $3 a month to $128 a month in 2025.
On average, however, the monthly cost of a Medicare Part D premium is expected to cost $45 in 2025.
Deductible
In addition to the premium, some Part D plans for traditional Medicare enrollees charge a deductible. In 2025, the standard maximum deductible is $590. (Some Part D plan sponsors do not charge a deductible.) Prescription drug plans with higher monthly premiums tend to offer more benefits.
Extra Help
For individuals with low income and limited means, Medicare Part D offers a benefit called the Extra Help program. This program assists Medicaid or Supplemental Security Income (SSI) recipients with the costs of Medicare Part D, including premiums, deductibles, and coinsurance.
Note that Extra Help expanded at the start of 2024, automatically making more people eligible for the program. At the same time, it is lowering co-payments for certain Part D participants on specific medications.
Coinsurance or Copay
After meeting a deductible (again, the 2024 maximum is $590), you must pay coinsurance or a copay; Medicare pays the remainder.
Coinsurance is usually a percentage (for example, 20 percent) of the cost of the drug. Your coinsurance amounts may vary throughout the year. A copay is a fixed fee that you pay each time.
What Prescription Drugs Does Medicare Part D Cover?
Each Part D plan will list the specific drugs that it covers; these lists are called formularies. Note that plans do not cover the cost of over-the-counter medications.
Typically, Medicare Part D plans classify prescription medications in one of five tiers:
- preferred generics
- generics
- preferred brands
- non-preferred drugs
- specialty drugs
Generic drugs tend to be the least expensive. For example, in 2024, the median standard cost sharing for a preferred generic is $0 across all PDPs. In contrast, it is $47 for a preferred brand.
The Part D participant’s share of the payment for the non-preferred tier of drugs can be as high as 50 percent. This is the maximum permissible coinsurance amount in most national prescription drug plans.
For 15 percent to 25 percent of preferred tiered brands, prescription drug plans will require coinsurance rather than copays, which can make out-of-pocket costs less predictable.
When choosing a Medicare Part D plan, be sure to review the plan’s formulary first. You will want to ensure the specific medications you may need are covered and look at how much they cost under that plan. Each Medicare drug plan will also likely give you a list of local pharmacies where you can obtain their covered drugs.
Out-of-Pocket Prescription Drug Costs
As of January 1, 2025, your total out-of-pocket spending on prescriptions as a Medicare enrollee will not exceed $2,000, thanks to the provisions in the Inflation Reduction Act, signed into law in 2022. This marks the end of what was known as catastrophic coverage, or the Medicare "donut hole."
Previously, people with chronic health conditions requiring numerous specialty drugs would find themselves spending thousands of dollars a year on medications on which they relied.
Even seniors on Medicare who did not necessarily have serious health conditions revealed in one survey that many could not afford their medications and were skipping dosages because of rising costs.
In addition to the yearly cap on out-of-pocket prescription costs, the Inflation Reduction Act resulted in several other positive changes for people on Medicare.
- The Extra Help program has expanded to make many more Part D enrollees eligible for help in covering the cost of their premiums.
- Medicare enrollee’s payments for insulin can no longer exceed $35 per month. (The price cap does not extend to all insulin products, just the ones on your plan’s formulary.)
- Many adult vaccines are now free to Part D enrollees.
- Drug manufacturers must pay rebates to Medicare for medications with costs that surpass inflation, which could help prevent unreasonable rises in drug prices for enrollees.
- The rule authorizes the federal government to negotiate the pricing of prescription medications with drug companies. These negotiated drug prices will begin to be available in 2026.
Additional Resources
For answers to questions about Medicare and long-term care planning needs, find a qualified elder law attorney near you. To learn more on your own, be sure to check out the following article topics:
- What you need to know to sign up for Medicare
- The basics on Medicare Part A, Part B, and Part C
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