What Is Medicare Part D?
Medicare Part D is the portion of Original Medicare that covers your Prescription Drugs, also known as a Prescription Drug Plan. These drug plans are offered by private insurance companies that are either added on to Original Medicare or included with some Medicare Advantage Plans. Although this coverage is optional, you can receive late penalties for Part D if you do not have creditable coverage through an employer or retirement benefits. Part D plans only assist in the cost of your prescription drugs and does not include any over-the-counter medications.
How Does Part D Work?
Part D Prescription Drug Plans are either stand alone or embedded in a Medicare Advantage plan. They have their own monthly premiums, yearly deductibles, and copayments/coinsurance that will be separate from Original Medicare, your Supplement Plan or your Advantage Plan. Prescription Drug Plans use a formulary, which is a list of drugs the insurance company covers, which we can use to determine your yearly costs for prescriptions and any out of pocket costs you might incur.
Formulary
We enter your current prescriptions into the plans formulary in order to find the cost of your Part D coverage throughout the year. By doing so we’ll know if you have to meet your deductible and any copayments or coinsurance you will need to pay. Not all prescriptions cost the same, and most of your generics will have no charge or a low copayment, while more name brand drugs will have higher copays.
It is important to search the formulary of a plan before enrolling to make sure your prescriptions are covered! Reach out to us and we can assist you with this process.
Drug Tiers
Prescription Drug Plans categorize prescriptions in 5 different tiers:
- Tier 1 (Preferred Generics)
- Tier 2 (Generics)
- Tier 3 (Preferred Brand Names)
- Tier 4 (Non-Preferred Drugs)
- Tier 5 (Specialty Drugs)
Tier 1 and tier 2 prescriptions will have the lowest copay amounts, while tier 3 drugs and higher will have more expensive copays and coinsurance, and will also require you to meet your deductible.
Monthly Premiums
Most Part D plans will have a monthly premium ranging from $0 – $20 per month depending on your zip code and the carrier. Although your plan might have a low premium it could have a high yearly deductible or higher copays/coinsurance, so its important to compare the options in your area.
Yearly Deductible
Prescription Drug Plans have a yearly deductible of $590 in 2025. Not every plan will have a deductible this high, but this is the maximum it can be for the year of 2025, with expected increases for future years. Tier 1 and 2 typically don’t require you to meet your deductible in order to be covered. Tier 3 and higher will most often cause you to meet your deductible as well as have copayments or coinsurance.
Copayments and Coinsurance
Drug plans will have their own copayments and coinsurance for certain prescription drugs depending on the cost and tier that they are on. Tier 1 & 2 prescriptions will have lower to no copays, but tiers 3 and up will, and you may need to meet your deductible as well.
Yearly Cap
As of 2025 Part D has a yearly cap of $2000 for your out of pocket expenses. This means you won’t pay more then $2000 for the year between your deductibles and any copays/coinsurance on your prescription drugs. Once you reach your cap you will not have to pay out of pocket for your prescriptions for the rest of the calendar year.
Enrollment Periods & Deadlines
Initial Enrollment Period (IEP)
If you’re turning 65 you will have a 7 month window to enroll in a Part D Prescription Drug Plan with no penalties, unless you are still working and have creditable coverage. This window ranges 3 months before your 65th birthday, the month of your birthday, and ends 3 months after you turn 65. During this period you can enroll into Original Medicare (Parts A & B) as well as a Supplement or Advantage Plan that may have Part D included.
Annual Enrollment Period (AEP)
The Annual Enrollment Period starts October 15th and ends December 7th of each year. During this period you can change Prescription Drug Plans as well as change your Advantage Plan that may have a drug plan embedded into it. You are able to make as many changes to your coverage as needed with changes taking effect January 1st of the following year.
Open Enrollment (for those in Medicare Advantage)
If you’re enrolled in a Medicare Advantage plan you have another period to make changes to your coverage. From January 1st to March 31st you can make a final change to your Medicare Advantage plan. Changes will be active the 1st day of the following month.
Special Enrollment Periods (SEPs)
Special Enrollment Periods are available to certain individuals based on life circumstances such as retirement, loss of coverage, and moving out of your current zip code. For those retiring you will have a 63 day window to be enrolled in a Prescription Drug Plan or a Medicare Advantage Plan with an embedded Part D plan to avoid late penalties. If you are losing coverage or moving you will have the same time frame to get enrolled into one of these plans as well.
Late Enrollment Penalty
If you enroll into Part D outside of your IEP/SEP or did not have creditable coverage while delaying Part D you may incur a Part D late enrollment penalty. This penalty is a monthly fee that is added to your Part D premium, which is 1% of the “national base beneficiary premium” for every month delayed. This penalties will follow you for life, unless you qualify for Extra Help or Medicaid, so make sure you don’t delay your enrollments!
If you’re keeping employer coverage past the age of 65 its important to make sure that your coverage is deemed creditable and your employer has at least 20 employees on the payroll. If not you will be subject to these penalties! Speak to an agent to get the best advice and guidance for your Medicare decisions.
How to Choose the Right Plan
The first step to choosing the right Prescription Drug Plan for you is to check your current medications on a plans formulary. This can be easily done for both Medicare Advantage and stand alone drug plans on the Medicare.gov website. You will also be able to select your preferred pharmacy to know if they are in network with the plan of your choice.
This will allow you to get an idea of plan premiums and out of pocket costs prior to enrolling in a plan. We do this step for all of our clients to ensure they have the best coverage as well as the lowest out of pocket costs for them! The formulary will also let you see what tier your drugs are on, if you’ll meet your deductible, and what the expected copays/coinsurance will be for those drugs.
It’s important to look at both the monthly cost of a plan’s premium as well as the cost of your prescriptions. By using Medicare.gov we can compare the overall cost of your prescriptions between Medicare Advantage and stand alone drug plans and choose based on your budget and needs. You may even qualify for certain programs that can help reduce the costs of your medications!
How to Enroll In a Drug Plan
We can assist you in the enrollment process for a stand alone drug plans or a Medicare Advantage plan that will include your Part D coverage. We offer both in-person and virtual options for our clients! We make the process simple and hassle free, with most enrollments being completed in 15 minutes. Give us a call today to get started!
How to Save Money on Part D
We strive to save you money and inform you of all of your options when enrolling into Medicare. There’s a handful of programs and options available to Medicare beneficiaries to assist in the costs of their prescription drugs, which we will educate and assist you with!
Generic Drugs & Formulary Exceptions
One simple way to save money on your prescriptions is to ask your Primary Care Provider or Specialists if there are generic alternatives to any prescriptions you are currently taking or may be prescribed. This will allow you to have lower tier drugs and avoid deductibles and copays/coinsurance.
Another option is to ask the plan for an exception to be made on the formulary for the prescriptions you are taking. This decision will be up to the carrier, but they may make an exception that will help lower the costs of your prescription drugs. We recommend choosing a plan that includes your prescriptions on the formulary before considering this option because we may not get the desired outcome when doing so.
Low Income Subsidy (Extra Help)
LIS or Extra Help is a federal program that assists individuals with limited income and resources with the cost of their Part D prescription drug coverage. LIS can assist with premiums, deductibles and copayments for Part D. You may need to apply for LIS if you are not automatically deemed eligible (receiving Medicaid or Supplemental Security Income). You must be enrolled into Part D in order to receive LIS, and if your income or resources change you can lose eligibility for assistance.
Patient Assistance Programs
Pharmaceutical manufacturers will usually offer programs known as Patient Assistance Programs (PAPs) to provide assistance or free medications to those who may not be able to afford their medications. These programs generally operate outside of Medicare and Part D and will vary from manufacturer to manufacturer.
Switching Plans
If you are experiencing rising costs of your medications or drug coverage another option is to switch your Prescription Drug Plan or Medicare Advantage Plan to one that better supports your prescriptions. We can assist you in formulary searches and plan comparisons! Check the available Enrollment Periods above to know when you can make these changes.
Part D Payment Plan
As of 2025 Part D has a payment plan option for all Prescription Drug Plans and Medicare Advantage Plans. Your costs will not change throughout the year, but the payment plan allows you to break up your deductible and out of pocket expenses up throughout the course of the year, instead of having to meet these payments all at once or early in the year. Anyone that is on a Part D drug plan can enroll. Simply call your plan’s carrier and asked to be enrolled into the Part D Payment Plan. Instead of paying for your prescriptions at the pharmacy the carrier of your plan will be you for your prescription costs on a monthly basis. Monthly payments can vary month to month when utilizing the Part D Payment Plan.
Using Medicare.gov, we can show you what the payment plan would look like for you, feel free to reach out to us today!
Local Support You Can Trust
I’m a licensed Medicare broker based in Victoria, TX and servicing the surrounding Crossroads area. I help people just like you make informed decision about Medicare and their coverage options. I’m here to find you the best plan for your needs at no cost to you! Call or schedule your appointment now to get started.
- Free consultations
- In-person or over-the-phone help
- Help understanding formularies, pharmacy networks, and drug costs