Medicare, the federal health insurance program designed primarily for adults age 65 and older, can seem like an alphabet soup of parts. Medicare Part A and Part B, also known as “original Medicare,” are standard coverage, but what about Part D, the prescription drug coverage portion?
If you’re trying to determine whether it makes sense for you to add Part D to your Medicare plan, read on for more information about what it is, how much it costs and what it can do for you.
[READ: What Is Medicare-Medicaid Dual Eligibility?]
What Is Medicare Part D?
Medicare Part D is a voluntary benefit offered by private insurance companies to cover some or all of the cost of many prescription drugs.
“Original Medicare covers some drugs that might be administered in a hospital or doctor’s office setting, but Part D covers the kinds of drugs you might pick up from the pharmacy,” explains Whitney Stidom, vice president of sales enablement with eHealth Inc., a health insurance broker and online resource provider headquartered in Santa Clara, California.
If you’re signed up for a Medicare supplement plan, it will work in tandem with your Part D prescription drug plan.
[Understanding Medicare Eligibility for Individuals Under 65 With Disabilities]
Everyone Should Have Prescription Drug Coverage
According to data from the Centers for Medicare & Medicaid Services, about 68.6 million people were enrolled in Medicare as of March 2025. Of those, 81.2% had Medicare Part D coverage.
Not every Medicare enrollee takes medication daily, but most do. A September 2024 report from the Centers for Disease Control and Prevention found that from 2021 to 2022, 88.6% of older adults took prescription medication. And many seniors take multiple prescription drugs on a regular basis.
Individuals with diabetes and other chronic health conditions that require the use of a prescription medication usually benefit from having Medicare Part D coverage to help defray the cost.
Generally, Stidom urges all Medicare enrollees to secure Part D coverage.
“Everyone on Medicare needs prescription drug coverage,” she says. “It’s no secret that prescription drugs can be costly, especially without insurance. As a Medicare beneficiary, enrolling in drug coverage is one of the best things you can do to shield yourself from medical expenses.”
[READ: How Medicare Beneficiaries Can Save Money on Prescription Drugs]
What Does Medicare Part D Cover?
Medicare Part D covers a set list of prescription drugs. This list, known as a formulary, can differ from year to year and depends on your Medicare plan selections.
Both brand-name and generic medications are covered, and the formulary typically includes at least two drugs among the most commonly prescribed categories and classes to help people with various medical conditions get the medications they need at a reasonable cost.
If the formulary doesn’t cover a certain drug that a beneficiary needs, a similar or generic version of that medication is available. If there is no comparable drug in your formulary, you or your doctor can request an exception by submitting documentation of your need along with additional information to Medicare.
Your copays can fluctuate as prices and benefits change, so be sure to review the list of what’s covered and your copayment responsibilities during each annual enrollment period.
Medicare Part D Premiums and Costs
Medicare Part D plans typically include several costs:
Part D premiums
Premiums are the monthly payments you must make to remain eligible for benefits, whether you use prescription medications or not. The premium you pay for this coverage depends on the specific plan you select.
According to an eHealth report, for beneficiaries selecting a stand-alone Part D prescription drug plan in 2025, the average monthly premium was $36, a 24% increase over 2024. This is the highest Part D premium eHealth has ever recorded.
KFF data shows a similar average monthly cost of $39 among the 12 national stand-alone prescription drug plans available in 2025, including Humana, Cigna, AARP, Centene and CVS Health-Aetna. (Medicare Advantage prescription plans averaged significantly less in 2025 than stand-alone prescription drug plans at $7 per month.)
KFF reports that Wellcare Value Scripts is the only prescription drug plan with an average monthly premium of less than $10, which led to an increase of 1.2 million enrollees from the year before. The most expensive plan, according to KFF, is the Humana Premier Rx plan, which costs $128 per month.
Part D deductibles
A deductible is the set dollar amount you must spend on prescription medication before insurance benefits kick in. Not all plans have a deductible. For those that do, the deductible amounts vary. In 2025, the maximum deductible for a Medicare Part D plan is $590, but some plans may have significantly lower or even no deductible.
Check your plan’s details for more information about whether you’ll have an annual deductible and its amount.
Part D copayments
A copayment is a fixed dollar amount you must pay at the pharmacy each time you fill a prescription. Some generic drugs may have a $0 copay or a very low amount — often less than $5 — while newer or brand-name medications tend to have much higher copays. Copayment costs vary depending on the plan and the specific drug.
KFF reports that in 2025, the median Part D copayment cost ranges from $0 to $5 for generic medications to a median of $47 for some preferred brand medications. Medicare Advantage prescription plan enrollees have a median copayment of $0 to $5 for generic medications, $47 for preferred brands and $100 for non-preferred drugs.
Part D coinsurance
During the initial coverage stage (more on that below), you’ll pay a coinsurance fee, calculated as a percentage, for your generic and brand-name drugs. The out-of-pocket spending limit is $2,000, as of 2025.
KFF reports that in 2025, the median Part D coinsurance rate is about 21%. For non-preferred drugs, coinsurance averages about 40%. Medicare Advantage prescription plan enrollees face a steep median coinsurance of 42% for certain non-preferred drugs.
[What Is the Medicare Prescription Payment Plan?]
Understanding Part D Coverage Costs
Medicare drug plan stages
Most Medicare Part D plans and Medicare Advantage plans that include drug coverage have three stages:
— Deductible stage. If your plan has a deductible, you’ll pay out of pocket for medications until you reach the specified dollar threshold.
— Initial coverage stage. Once you’ve met that deductible, your coverage plan kicks in and you’ll start paying 25% of the cost as coinsurance for your generic and brand-name drugs until your out-of-pocket spending on drugs covered by your Part D plan reaches $2,000 (more on that below). This includes certain payments made on your behalf, such as those from the Extra Help program, which helps low-income individuals afford their prescription medications.
— Catastrophic coverage stage. If your out-of-pocket spending during the initial coverage stage hits $2,000, you’ll automatically get catastrophic coverage. This means you’ll no longer have to pay anything out of pocket for covered Part D drugs for the rest of the calendar year.
The Medicare Part D cap
As of January 2025, Medicare Part D beneficiaries have an annual limit on the amount they must pay out for prescription medications in a calendar year. Also known as the Medicare Part D cap, this rule limits annual prescription medication expenditures to $2,000.
That means that if your out-of-pocket spending on medications exceeds that amount, you’ll tip into catastrophic coverage and no longer have to make copayments for your prescriptions.
The same law also capped the cost of insulin at $35 per month and eliminated the deductible requirement for Part D-covered insulin. For people who get three months of insulin at a time, the cost can’t exceed $105.
The law also expanded the Extra Help program, which is intended to cover people who earn less than 150% of the federal poverty level. If you qualify for Extra Help, you’ll typically pay no more than $4.90 for each generic drug and $12.15 for each brand-name drug you use in 2025.
Medicare Part D tiers
Many Medicare Part D plans classify drugs according to a tiered pricing system to help lower costs. The lower the tier, the lower the cost of medication.
These tiers vary from plan to plan, but a typical plan usually includes:
— Tier 1: mostly generic prescription drugs with the lowest copayment
— Tier 2: preferred, brand-name prescription drugs with a moderate copayment
— Tier 3: non-preferred, brand-name prescriptions with a significantly higher copayment
— Specialty tier: very high-cost prescription drugs with the highest copayments
If your prescriber believes you need a drug in a higher tier when there is a similar or generic version of that medication available, you or your provider can request an exception to get a lower coinsurance or copayment price for a higher-tier drug.
[SEE: 11 Foods Not to Mix With Prescription Medications.]
Are Medicare Part D Premiums Based on Income?
Medicare’s income-related monthly adjustment amount, or IRMAA, is an income-based surcharge that you may have to pay in addition to your Medicare Part B and Part D premiums. This extra fee is based on your modified adjusted gross income, or MAGI. That figure is calculated from your tax filings for the two years preceding your Medicare enrollment date.
Medicare’s IRMAA can be tricky to parse. Here’s what it means, who qualifies and how it affects your coverage and costs.
If your calculated MAGI meets or exceeds the income thresholds set by CMS, you’ll have to pay an additional fee for your Part B and Part D coverage. In 2025, that threshold is $106,000 for individual filers and $212,000 for joint tax return filers. These fees are used to fund the Medicare Trust Fund.
For Part D plans, the additional IRMAA monthly fee can vary significantly. Individuals in the lowest bracket — those with a MAGI of greater than $106,000 and less than or equal to $133,000 — will need to pay an additional $13.70 per month for Part D coverage. For individuals in the highest bracket — those whose MAGI is equal to or greater than $500,000 — the additional monthly fee is $85.80.
If you experience a major life-changing event, such as the death of a spouse, divorce or loss of employment that has reduced your income during your coverage year, you can request a reduction in your IRMAA. Whether you pay the IRMAA can also vary from year to year, depending on income fluctuations and adjustments to the MAGI threshold levels.
Part D Late Enrollment Penalty
It’s important to stay on top of your Medicare elections, as you could end up having to pay a late enrollment penalty for Medicare Part D coverage in some circumstances.
This can add up over time, says Adria Goldman Gross, a medical bill advocate with MedWise Insurance Advocacy, a division of MedWise Billing Inc., in Monroe, New York, and co-author of “Solved! Curing Your Medical Insurance Problems.”
What is the Part D late enrollment penalty?
“If you have late enrollment with Part D, you will have to pay 1% for each month,” Gross says.
So, if you’re a year late in signing up, you’ll be hit with a 12% penalty. If you’re two years late, that adds up to a 24% penalty.
This penalty kicks in after just 63 days. That means if you went without creditable prescription drug coverage for a period of 63 days or longer at any time after you first became eligible for Medicare, you’ll likely have to pay a late-enrollment penalty, Stidom adds.
However, you usually do not have to pay the penalty if you had drug coverage through an employer, a government program or through Medicare Advantage before enrolling in a Part D plan.
Gross notes that you have the right to appeal a late enrollment penalty if you feel there’s been an error.
“Sometimes there is incorrect information where your employer has you on a commercial health insurance plan even though you’re over the age of 65. If this happens to you, contact the Social Security Administration or your Medicare plan to begin the appeals process,” she says.
How to avoid the Part D late enrollment penalty
There are three ways to avoid the Part D late enrollment penalty:
— Enroll in Medicare Part D coverage when you first become eligible. Even if you don’t take any medications during your initial enrollment period — the seven-month period around your 65th birthday when you first become eligible for Medicare — adding the benefit means you won’t get hit with a late enrollment penalty later. These plans may not elevate your monthly premiums significantly, and it’s a good way to help offset future anticipated health care costs.
— Enroll in Medicare Part D immediately after you lose other creditable coverage. If you’re currently receiving pharmacy benefits from a former employer, union, the Department of Veterans Affairs, TRICARE, the Indian Health Service or an individual health insurance plan, you don’t need to enroll in Part D during your initial eligibility period. Ending that coverage, however, triggers a special enrollment period when you can, and should, add Part D coverage.
— Keep good records of your creditable drug coverage. To avoid being hit with a late enrollment penalty later, you’ll need to prove that you had creditable drug coverage from another source. Keep good records of that coverage so you’ll have the documentation necessary to show Medicare.
How to Reduce Your Out-of-Pocket Costs
KFF reports that in 2025, the average Medicare beneficiary has a choice of 48 Medicare drug plans — a mix of 14 stand-alone prescription drug plans and 34 Medicare Advantage drug plans. This means you have a lot of options and will need to do some research to find the best fit for your needs.
When comparing Part D Plans:
— Start by making a list of all your medications.
— Check the formularies of any plans you’re considering to ensure your medications are listed.
— Check the tier levels and where your medications fall on those schedules.
— Add up the costs of those medications annually, and compare the total to each plan’s deductible.
If your anticipated medication costs won’t exceed the deductible advertised, consider checking for other plans with lower deductibles that can start coverage sooner. Stidom also recommends consulting with licensed agents or online brokers to help you understand which plan meets your needs and budget.
You can also refine your search with U.S. News Best Medicare Part D rankings.
How to Save Money With Medicare Part D
Medicare Part D is an optional program, but even if you’re not currently taking medications, you should consider adding it to your Medicare plan. Doing so can help you avoid excessive medication costs if you get sick or develop a chronic condition. You may also be able to avoid a penalty fee if you decide later on that you want this coverage.
There are many plans and options available to Medicare-eligible individuals. Do some research and talk to a trusted adviser to figure out what’s best for you and how much it will cost.
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Medicare Part D: Coverage, Costs and Enrollment originally appeared on usnews.com
Update 07/25/25: This story was previously published at an earlier date and has been updated with new information.
