Part D
(Prescription Drug Coverage)
Part D
Part D Overview
Medicare Part D is the part of Medicare that provides prescription drug coverage to eligible individuals. It is offered through private insurance companies approved by Medicare to help cover the cost of prescription drugs, which Original Medicare (Part A and Part B) doesn’t provide coverage for. Even if you aren’t taking prescription drugs, you must have a Part D plan to avoid a late enrollment penalty.
To enroll in Part D, beneficiaries can either choose a stand-alone prescription drug plan (PDP) to pair with their Original Medicare/Supplement, or they can get drug coverage through a Medicare Advantage plan (Part C) that includes prescription drug benefits. Each Part D plan has its own list of covered drugs (called a formulary), which can vary from plan to plan, so it’s important to review the list to ensure your medications are covered.
Medicare Part D also includes a monthly premium, which varies based on the plan you select and your income. In addition to the premium, there may be other costs such as deductibles, copayments, and coinsurance.
It’s essential to enroll in Part D when you’re first eligible, as missing the enrollment period can lead to late enrollment penalties. Beneficiaries can make changes to their Part D plans during the Annual Enrollment Period (AEP), which occurs every year from October 15 to December 7. This is when individuals can review their current plan, switch to a new one, or sign up for the first time if they missed the initial window.
Key CHanges in 2025
As of January 1, 2025, significant changes have been implemented to simplify and reduce out-of-pocket costs for Medicare Part D beneficiaries:
- Elimination of the Coverage Gap (Donut Hole): Previously, beneficiaries entered a coverage gap after reaching a certain spending threshold, where they paid a higher percentage of drug costs. This gap has been removed.
- $2,000 Annual Out-of-Pocket Cap: Beneficiaries will now pay no more than $2,000 out-of-pocket for covered prescription drugs each year. Once this limit is reached, the plan covers 100% of the cost for covered drugs for the remainder of the year.
Understanding the New Part D Structure
The updated Part D coverage structure includes three phases:
Deductible Phase:
If your plan has a deductible, you pay 100% of your drug costs until the deductible is met.
Initial Coverage Phase:
After meeting the deductible, you pay a share of your drug costs via a copay or coinsurance, and your plan pays the rest until your out-of-pocket costs reach $2,000.
Catastrophic Coverage Phase:
Once you have spent $2,000 out-of-pocket, you enter this phase, where you pay $0 for covered drugs for the remainder of the year.