As we age, prescription medications often become an essential part of managing our health. Whether it’s for controlling blood pressure, treating diabetes or easing arthritis pain, the cost of medications can add up quickly.
About 4 in 5 adults (82%) ages 50 to 80 report taking at least one prescription medication in a typical week, with 26% taking three or four prescription medications and 28% taking five or more drugs, according to a report by the Institute for Healthcare Policy and Innovation at the University of Michigan.
Understanding how Part D works, including coverage, costs and when to enroll can help beneficiaries make confident, informed choices about their health coverage and avoid unexpected expenses at the pharmacy.
[Read: Medicare vs. Medicare Advantage: How to Choose.]
What Is Medicare Part D?
Original Medicare, which includes Part A (hospital insurance) and Part B (medical insurance), only covers medications in specific situations, such as when you’re admitted to the hospital and drugs are part of the treatment plan or when a medication is administered in a doctor’s office. Medicare Part D helps you pay for the cost of outpatient prescription medications. Most Medicare Advantage plans, also known as Part C, offer prescription drug coverage as part of their benefits.
In 2025, the average Medicare beneficiary can choose from 48 drug plan options, which include 14 stand-alone prescription drug plans for original Medicare and 34 Medicare Advantage plans that offer drug coverage, according to KFF.
[Understanding Medicare Eligibility for Individuals Under 65 With Disabilities]
Part D Coverage
Not all Medicare Part D plans have the same benefits. Plans may also change what they cover, so it is essential to review your plan’s benefits annually to ensure it remains the best fit for your needs.
“Make sure to open your plan’s annual notice of changes, which typically arrives in late September, and check for any changes in premium, costs per tier and pharmacy networks,” advises Diane Omdahl, president and founder of 65 Incorporated, a company that provides unbiased Medicare guidance to individuals, families and employers in Mequon, Wisconsin.
These plans typically use a tiered system, which categorizes medications by cost and coverage level. These tiers help determine the cost of each prescription. Many plans have five tier levels with tier 1 being preferred generics and the least expensive and tier 5 being specialty drugs, and therefore the most expensive.
Plans do not necessarily automatically pay for a drug just because it is on the plan’s formulary. Many plans have additional requirements for more expensive drugs, including:
— Prior authorization. Before some plans will cover a medication, they ask for your doctor to document and submit to them why that medication is necessary for you.
— Quantity limits. Plans may limit the amount of medicine that can be given at one time. If you need more, your doctor will have to show that extra medicine is necessary to treat your condition.
— Step therapy. Some plans want you to try lower-cost options first before approving the use of the more expensive medication.
“When evaluating plans, don’t fail to check coverage restrictions. Prior authorization of medications has become a concern. One plan may require it, and another plan does not,” Omdahl says. “It may be worth paying a bit more not to have to worry about coverage of an important medication.”
Breakdown of Part D Costs
The cost for Medicare Part D can include monthly premiums, annual deductibles and co-payments or coinsurance. Your Medicare Part D premiums and what you pay depends on the plan you choose, the medications you take and whether you use preferred pharmacies. Costs may include:
— Coinsurance or co-pays. After your deductible is met, you typically pay either a fixed amount or a percentage of the medication’s cost until you hit the out-of-pocket maximum.
— Deductible. The maximum that plans can charge is $590 in 2025, which will rise slightly to $615 in 2026. Many plans have a lower deductible, with some even having a $0 deductible.
— Out-of-pocket costs. The maximum out-of-pocket amount that you can be charged for medications is $2,000 in 2025 and $2,100 in 2026. After you hit that amount, the plan covers 100% of your medication costs. You must still pay your premium.
— Preferred pharmacies. You may pay less for medications that are filled at a preferred pharmacy. When choosing a plan, make sure to verify that there is one you like nearby. Some plans have smaller networks with fewer choices, while others have larger networks, such as SilverScript, which gives access to over 65,000 nationwide.
— Premiums. Premiums vary by plan. In 2025, the average Part D premium for Medicare Advantage with prescription coverage plans was $7 a month and $45 for stand-alone part D plans, KFF reports.
[HSA and Medicare: Using HSA To Pay for Medicare Premiums]
Effect of the Inflation Reduction Act
In 2022, former President Joseph Biden signed the Inflation Reduction Act into law, which significantly enhanced Medicare by expanding benefits, reducing drug costs and contributing meaningfully to the program’s long-term sustainability.
Some highlights include:
Drug price negotiation program
For the first time, Medicare is able to negotiate with drug companies to lower the price paid for 10 highly used medications. These new prices will go into effect on January 1, 2026. The 10 selected drugs represented $56.2 billion, or approximately 20%, of total Part D gross covered prescription drug costs, according to the Centers for Medicare and Medicaid Services. The agency estimates that next year, beneficiaries enrolled in prescription drug coverage will save an estimated $1.5 billion in out-of-pocket expenses.
Prescription payment plan
The Medicare prescription payment plan, which went into effect this year and is available across all prescription drug plans, offers a budget-friendly way to pay for medications. It allows you to spread your out-of-pocket costs evenly throughout the calendar year. Contact your plan to sign up.
Out-of-pocket maximum
Originally, Medicare Part D’s out-of-pocket drug costs were structured in a way that meant there was no true out-of-pocket maximum, leaving many beneficiaries, especially those with high drug costs, facing thousands in annual expenses. Effective in 2025, the out-of-pocket maximum that beneficiaries pay for medications is capped at $2,000 for 2025 and $2,100 for 2026. This change provides much-needed financial protection and predictability for beneficiaries.
Part D Enrollment
If you are just enrolling or if you are considering changing your plan, Medicare’s plan finder will show you what is available in your ZIP code. You can compare costs, services and other plan features. You can also explore plans and see how they compare to others by going to U.S. News’ Best Medicare Part D Insurance Companies and Best Medicare Advantage Insurance Companies for Medicare Advantage plans with drug coverage.
Once you have decided, you can sign up on the website, by calling Medicare at 800-MEDICARE (633-4227) or by contacting the plan directly during your enrollment period.
When to enroll in Medicare Part D
Different enrollment periods include:
Initial enrollment
Your initial enrollment period encompasses the three-month period before your 65th birthday, your birthday month and the following three months. To sign up, you need to contact Social Security either by visiting their website or by calling 800-772-1213.
If you’re not planning to sign up for Medicare Part D during this period, you need to show that you have what’s termed “creditable coverage.” This means you have drug coverage considered at least as good as a Part D plan. It can be from your employer, Tricare military health care or another source. If you don’t, you should sign up for at least a basic Part D plan, so you do not pay a late enrollment penalty.
“It’s important to understand that you need Part D coverage even if you are not currently taking any prescriptions. Many people assume they can skip it, but if you do not enroll when first eligible and do not have other creditable drug coverage, you will incur a late enrollment penalty. This penalty is calculated for every month you go without coverage, and it is permanent. You will pay it if you are enrolled in a Part D plan,” says Danielle Roberts, bestselling author of “10 Costly Medicare Mistakes You Can’t Afford to Make” and founding partner at Boomer Benefits, a licensed insurance agency in Fort Worth, Texas.
General enrollment
Running from January 1 through March 31, this enrollment period is for those who missed their initial enrollment period. This time period is also called the Medicare Advantage enrollment period and is only for those currently in a Medicare Advantage plan. You can switch Medicar eAdvantage plans if you are dissatisfied or return to original Medicare and sign up for a stand-alone Part D plan.
Open enrollment
Open enrollment, which runs from October 15 to December 7, is the only time all beneficiaries can adjust coverage, including their Part D plan. Changes take effect on January 1.
Special enrollment
You may qualify for a special enrollment period if you experience certain life events that affect your coverage. For example, you may qualify if you lose your current health care plan or if you move to an area outside of your current plan’s service area. You typically have a two-month window after the event to do so.
Bottom Line
Medicare Part D provides prescription drug coverage available through both stand-alone plans for those in original Medicare and as a benefit in most Medicare Advantage plans. Part D plans organize medications into cost-based tiers and may require steps like prior authorization, quantity limits or step therapy. Costs may include premiums, deductibles, co-pays or coinsurance and out-of-pocket costs.
Enrollment periods vary, but all beneficiaries may switch plans during the open enrollment period between October 15 and December 7. Do not assume your current plan will remain the same for the coming year. Compare plans carefully before you decide on the plan that best fits your needs for the coming year.
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What Is Medicare Part D? originally appeared on usnews.com
Update 07/09/25: This story was previously published at an earlier date and has been updated with new information.
