What Is Medicare Part D?
Medicare Part D is a federal prescription drug plan program administered through private insurance companies. Medicare beneficiaries can enroll in a standalone Part D plan to supplement their benefits under Original Medicare, or they can choose to enroll in a Medicare Advantage (Part C) plan that includes prescription drug coverage.
The only way to get prescription coverage is through a Part D plan (or a Medicare Advantage Prescription Drug plan, also known as an MAPD plan). Original Medicare (Parts A and B) does not include coverage for prescriptions that you’d usually get at your local pharmacy. Part D plans require a separate monthly premium and have their own deductibles, copayments, and coinsurance costs.
If you enroll in a Part D plan, you’ll get a separate Part D insurance card that you’ll need to present when you refill your prescriptions.
How Does Medicare Part D Work?
Part D plans are a bit complicated. They work in several phases, each having different costs associated with your prescriptions. Whether you have a standalone Part D plan or have one built into your Medicare Advantage plan, your drug coverage works the same way.
Up until 2025, prescription plans have had four phases of coverage. In 2025, you will see lower prescription drug costs and an improved prescription drug program.
Phase 1: The Deductible Phase
Each year, the Centers for Medicare and Medicaid Services (CMS) sets a standard deductible for Part D plans. For 2025, the Part D deductible is capped at $590. Insurance companies can choose to use this standard amount or set a lower amount. You will remain in the first phase of coverage until your deductible has been met.
The good news is that most plans waive the deductible for the first tier or two of their drug formularies. A drug formulary is the list of prescriptions covered by the plan. The formulary is divided into tiers. Drugs in lower tiers cost less than those in higher tiers. If you are filling a prescription that falls into the first tier of the formulary, it’s likely you won’t have to pay the deductible.
Phase 2: Initial Coverage
Once you’ve met your deductible, you’ll enter the initial phase of coverage. During this time, you pay 25 % for each prescription.
You’ll remain in the initial phase of coverage until you and your plan have spent a certain amount. That amount changes each year, but in 2025, it’s set at $2,000.
Phase 3: The Donut Hole
The infamous Donut Hole has gotten a facelift over the years, and as of 2025, we’re in a much better spot. In the past, this phase caused costs to skyrocket for individuals with high prescription drug needs. However, it’s now much simpler: everyone pays a consistent 25% of the drug’s cost, whether it’s a brand-name or generic medication. No complex calculations or confusing steps—just a straightforward 25% until you hit your out-of-pocket maximum. This change is a game-changer, especially for those relying on costly prescriptions, as it provides much-needed relief during this phase.
Phase 4: Catastrophic Coverage
Starting in 2025, there’s a hard out-of-pocket cap at $2,000. Once you reach this limit, you won’t pay another cent out-of-pocket for the rest of the year. This is a significant relief for those managing serious conditions like cancer, diabetes, or other health issues requiring expensive medications. Plus, Part D plans are stepping up, covering 20% of total drug costs instead of 15%. This is a major win for anyone who has struggled with runaway prescription costs in the past.
Key Enhancements You Need to Know
Medicare Prescription Payment Plan: Starting 2025, CMS now requires Part D plans to offer enrollees the option of spreading out their out-of-pocket costs through capped monthly payments. This means you no longer have to pay a large sum upfront at the pharmacy when filling expensive prescriptions. Instead, you can manage costs more comfortably throughout the year.
Insulin and Vaccine Coverage: Great news for those managing diabetes: insulin costs are now capped at $35 per month for each covered prescription, making it much more affordable. Additionally, recommended vaccines are now fully covered with no cost-sharing, ensuring everyone has access to vital preventive care without any financial barriers.
How to Enroll in Medicare Part D
You should enroll in a Medicare Part D plan as soon as you are eligible – either when you turn 65 or when you lose creditable coverage, whichever comes last. It’s important to enroll in Part D right away to avoid any late-enrollment penalties.
To enroll in a Part D or Medicare Advantage Prescription Drug plan, you must first enroll in both Part A and Part B of Original Medicare. The earliest you can do so is during your Initial Enrollment Period, which is a 7-month window around your 65th birthday.
Choosing a Part D plan might be the hardest part of your Medicare enrollment. You’ll need to compare your current prescription list against all the plans offered in your zip code to find the one that’s right for you. The experts at Bobby Brock Insurance make this process easy.
First, we’ll get a list of your current medications and ask you which pharmacies you like to use. Then, we’ll determine which plan offers you the least costs throughout the year. You may find that many plans cover all your prescriptions, but some will have higher copayments than others. Bobby Brock Insurance will help you choose the plan that saves you the most money on your prescriptions.
Don’t Ignore Medicare’s Annual Election Period
Once you enroll in a Part D or Medicare Advantage plan, you’ll have to keep that plan for the rest of the calendar year. (Unless you qualify for a Special Enrollment Period.) However, you can change your plan during Medicare’s Annual Election Period (AEP).
AEP begins on October 15 and ends on December 7. During this time, you can change your Part D or Medicare Advantage plan. Even if you’re happy with your current plan, it’s important to review your options for the upcoming year.
Since Part C and Part D plans run on annual contracts, there are usually changes to the plan’s premiums, cost-sharing amounts, and even benefits. You may love your plan now, but it might make changes that negatively impact your coverage in the future. Plus, if you have changes in your prescriptions, you should shop around for plans that cover your new prescriptions in the most cost-effective way.
If you’d like to get help paying for your prescription drugs, talk to a licensed Medicare specialist at Bobby Brock Insurance today!