Part D
Medicare Part D is prescription drug coverage, and provided only through private insurance companies. There are only two ways of getting it – either through a stand alone Prescription Drug Plan (PDP) or through an integrated Medicare Advantage Prescription drug plan (MAPD).
Standalone Prescription Drug Plans
Standalone prescription drug plans are offered by private insurance companies that work with and compliment Medicare Supplements, original Medicare and VA benefits.
Medicare Advantage
Prescription Drug plans
Integrated prescription drug plans are drug plans that are built into Medicare Advantage Plans (MAPDs) for either no premium or a very modest premium. They contain the same benefits that standalone Part D plans do.
What Type of Cost is There?
There is a cost associated with Medicare Part D plans in the form of a monthly premium and copays. Some plans have a deductible and coinsurance as well. The premium, copays, deductible and coinsurance vary from company to company.
Formulary & Tiers
Each Part D plan has a formulary and can very from one Part D plan to another. A formulary is merely a list of covered drugs. Each formulary categorizes its drugs into tiers. There are five tiers with the lowest cost drugs generally in tier 1 followed by more expensive drugs in tiers 2, 3, 4 and 5. Each Part D plan must cover at least 2 medications in each therapeutic category.
What Type of Cost is There?
There is a cost associated with Medicare Prt D plans in the form of a monthly premium and copays. Some plans have a deductible and coninsurance as well. The premium, copays, deductible and coinsurance vary from company to company.
Three Parts to Part D
Regardless if you obtain coverage through an integrated plan (MAPD) or a stand alone Part D plan, there are three parts to Medicare Part D – deductible, initial coverage, and catastrophic coverage. The limits of each plan can change from year to year. In 2025 the limits are listed below.
Deductible
The standard Part D deductible for any Part D plan is $590. However, many plans have a significantly lower deductible, and some plans even have no deductible. For drugs in tiers 1 and 2, the deductible is frequently waived as well as there typically being no copay for a 90 day mail order supply. Once the deductible has been satisfied, you move to the initial coverage period.
Initial Coverage Period
The standard Part D initial coverage period consists of paying 25% of the cost of your covered drugs after your deductible until you have reached a total of $2,000 maximum out-of-pocket for covered drugs. The $590 deductible is included in the $2,000.
However, keep in mind that Part D plans are not required to follow the standard Part D cost share of 25% during the initial coverage period. Typically, the cost share is much lower or even nonexistant for tier 1 and 2 drugs while drugs in tiers 3, 4, and 5 can have a higher cost share than the standard 25%. During this time, Part D plans can also have copays and not coinsurance for drugs.
Catastrophic Coverage
Catastrophic Coverage is met once you have incurred $2,000 in total out of pocket costs for your covered drugs. Once you have met this amount, Medicare and your Part D drug plan will pick up 100% of the costs.
Part D Penalty
Part D Penalty
Part D is optional and you are not required to have it. But, if you delay enrollment until after your Initial Election Period (IEP), you may have to pay a late enrollment penalty for the rest of your life. The late enrollment penalty is calculated at 1% per month multiplied by the national beneficiary premium of $36.78 (2025 amount) and then multiplied by the number of months you delayed enrollment. This amount is added to whatever the premium is for the Part D plan you choose.