Medicare Part D
Every time we think we are getting closer to understanding how Medicare works, they add another part! Medicare Part D is for your prescription drug coverage.
That’s right — your prescription drugs are covered under a totally different part of Medicare than your hospital or outpatient coverage! Not only that, you actually have a lot of different Part D Prescription Drug Plans to choose from based on the prescriptions you take. Luckily, Part D plans will significantly help you save money on some of your more costly prescriptions. Taking charge of your healthcare and choosing the best-rated Medicare Part D plan will help alleviate many of the expenses that come with your prescription cost.
What Is Medicare Part D?
For starters, Medicare Part D began at the federal level in 2006. It was created to help those who benefit from Medicare continue their access to any of their prescription drugs. 
This was done to stop Medicare enrollees from covering the entire cost of their prescriptions and leaving them scrambling to find ways to pay them. There is no automatic enrollment, as this part of Medicare is voluntary. Before this part of the program was developed, you would always pay for all your prescriptions out of your expenses. This proved costly for many, as some life-saving medications can prove challenging to afford.
As mentioned before, by enrolling in Medicare Part D, you can get coverage for your medically prescribed drugs and compare costs based on your preferred retail pharmacies. This will give you a chance to get your prescriptions at a more cost-effective rate. This is highly beneficial as the cost of many prescription drugs can be astronomical, even for a generic brand. Other organizations, such as AARP, also offer plans to help you save money on your prescription drugs.
If you wish to enroll in this part of Medicare, you must submit a separate application for Part D, not completed through Social Security. You actually have the ability to review and enroll in Part D plans directly through Medicare, but it is crucial to work with an experienced agent to be sure that you fully understand your plan’s coverage, as well as your cost-share.
How Much Does Medicare Part D Cost?
When you look into any supplemental private insurance for Medicare Part D, there are a few things it includes. Like most insurance policies, Medicare Part D has a monthly cost that you will pay — this is the premium. On top of this, you will have to take part in the cost-sharing for any expenses you’ll be responsible for when it comes to getting your prescription medications at your pharmacy. If your plan has some form of a deductible, this may be included in your cost-sharing.
Although Medicare Part D has been around since 2006, it is going to have some major changes in 2025.
Medicare Part D in 2025
In 2025, the Inflation Reduction Act is introducing some very big changes to Medicare Part D. This act is focusing on lowering the costs that Medicare beneficiaries pay throughout the year for their prescriptions. There are two main changes to Medicare Part D that we will see:
- The elimination of the “donut hole,” also known as the Coverage Gap:
- In previous years, Medicare Part D plans had four stages of coverage. These stages are the deductible stage, initial coverage stage, coverage gap, and catastrophic coverage. If your prescriptions costs were high enough throughout the year, you landed the possibility of entering the “donut hole,” or coverage gap. During this phase, the beneficiary would become responsible for 25% of their prescription cost. The beneficiary would remain responsible for this 25%, until reaching Catastrophic Coverage, which was $8,000 in out-of-pocket costs.
- With the Inflation Reduction Act, there will no longer be a Coverage Gap stage for Medicare Part D plans, as the maximum out-of-pocket will be substantially lowered.
- In previous years, Medicare Part D plans had four stages of coverage. These stages are the deductible stage, initial coverage stage, coverage gap, and catastrophic coverage. If your prescriptions costs were high enough throughout the year, you landed the possibility of entering the “donut hole,” or coverage gap. During this phase, the beneficiary would become responsible for 25% of their prescription cost. The beneficiary would remain responsible for this 25%, until reaching Catastrophic Coverage, which was $8,000 in out-of-pocket costs.
- The lowering of the maximum-out-of-pocket drug costs:
- Previously, Medicare beneficiaries could spend up to an $8,000 out-of-pocket maximum on prescriptions, which would land them in the Catastrophic Coverage phase. In 2025, the out-of-pocket maximum for Part D plans is being lowered to $2,000 per calendar year.
Medicare Part D Monthly Premium costs
Your premiums will vary depending on the drug plan you have chosen. Remember that each insurance company will have a different set of rates. While this won’t deviate too much, consider what you need for coverage and how much you are willing or able to spend on a monthly premium. 
Each state will have numerous plans for you to choose from in 2025. You may see an average of twenty in many states, so you’ll have some great choices for your healthcare needs. You could see a premium at $0 on the low end to over $160 on others with many plans. This is dependent on the insurance company and your needs. Also, not every insurance provider will cover the same medications. Each one has its list that will be covered in the plan you choose. This allows them to adjust the costs that you’ll be charged for each year. Before deciding on a specific plan, check with the provider, and see if your particular medications are covered in the plan. An agent should be able to assist you.
While a low premium may seem attractive, you do get what you pay for. They may or may not provide you with the coverage you need. That’s why it’s crucial that the plan you choose will cover the drugs that you need for your continued health. The one thing you don’t want to happen is getting tied down with an insurance plan that won’t cover your needs. Getting your medications covered is imperative, so check beforehand to make a wise decision in your purchase.
Another cost to consider is the Income Related Monthly Adjusted Amount (IRMAA). This is because if you have a higher income, you may be responsible for paying more for your plan. If you have filed individually with more than $106k or even jointly with your spouse at $212k, you’ll be responsible for paying the extra costs for your coverage. This additional cost is not part of our Medicare premium, and you won’t be paying it to your chosen plan. This cost will be paid directly to Medicare or even the Railroad Retirement Board. If you don’t pay this amount, you will lose your coverage. To see the current 2025 costs for the IRMAA, view this cost table
Cost Sharing With Medicare Part D
Cost-sharing is when you pay your share of prescription medications at your pharmacy. Essentially, you pay for a portion of your medications, and your insurance carrier pays for a portion of your medications. Your level of cost-sharing is dependent on the Medicare Part D plan you enroll into, so it is essential to understand your amounts based on your prescriptions. Cost-sharing is seen in the deductible, initial coverage, coverage gap (donut hole), and catastrophic coverage stages, although the amounts vary from stage to stage.
How to Use Medicare Drug Plan Finder
How To Choose a Medicare Part D Plan
When comparing Medicare Part D plans, it is important to assess which plan will fit your prescription needs. There are multiple factors to consider, such as monthly premiums, deductibles, and coinsurance/copayment amounts. It is important to speak with a licensed agent to review your Medicare Part D options.
Input Your Medications
When using the prescription drug plan finder on the Medicare.gov website, there is an option to input your current list of prescriptions. You will need to input the name, dosage, and frequency of your medications. You will want to be as accurate as possible when inputting these prescriptions, as this will determine the most appropriate plan options for you. You can also choose from a list of pharmacies in your area if you have a preferred pharmacy for your prescriptions.
Compare the Drug Plan Options Available
Once you have inputted your medications and preferred pharmacy, you will see a list of all of the drug plan options in your area. From this list, you will be able to compare the best-rated Medicare Part D plans side-by-side to see the differences in premium, deductibles, and coinsurance levels, as well as the overall annual cost of the plans. It is vital to utilize a trained and licensed agent to walk you through the differences between the plans available, as well as how to enroll in your selected plan.
Medicare Part D Stages of Coverage
Stage One: Deductible
When it comes to your deductibles, specific guidelines are set forth for all plans dealing with Part D on a yearly basis. 
. These are set by the Center for Medicare and Medicaid Services. Because of this organization, all private insurance company plans are instructed to adhere to the sent-out guidelines. Medicare sets the yearly threshold for all four stages of these insurance Part D drug plans.
Your deductible is the amount you pay before the insurance carrier begins to pay any portion of your prescription drug costs. The deductible is considered the first stage of coverage in a Part D plan. In 2025, the deductible maximum is $590. Some plans may have lower deductibles than these, but these maximums are common on many plans. Medicare sets the cap for the deductibles, so no Part D deductible can be higher than what CMS regulates.
Once you meet your annual deductible on your Part D plan, you will enter the initial coverage stage.
Stage Two: Initial Coverage
During the initial coverage stage, your insurance carrier begins to pay for a portion of your prescription medications. During this stage, you begin to pay either a coinsurance amount or copayment for each of your prescriptions. This amount is determined by the tier level of your medication, as well as the drug plan’s formulary. There are generally five Medicare Part D prescription tiers: preferred generics, non-preferred generics, preferred brands, non-preferred brands, and specialty medications. The copay or coinsurance will be set based on the tier of the prescription medication. Generally, the higher the medication tier, the higher your cost-share will be.
- Tier One is coverage for preferred generic drugs.
- Tier Two is for your non-preferred generic drugs.
- Tier Three is for prefe