What is Medicare Part D (Medicare PDP) and do I need it?
In order to receive Medicare drug coverage, you may join a Part D Medicare Prescription Drug Plan (PDP), run by a private insurance company approved by Medicare. Typically ‘PDPs’ are either Cost Plans, Private Fee-for-Service (PFFS) Plans, or Medical Savings Accounts (MSA). Which plans are available to you depends on your geographic area. Part D plans offered in 2025 vary in benefits and costs.
Medicare Part D eligibility and enrollment
When you are eligible for Medicare, you are also eligible to enroll in Part D. You may join a plan when you first become eligible during your Initial Enrollment Period (3 months before and after the month you become eligible for Medicare), or you may enroll in or switch plans each year during the Open Enrollment Period between October 15 and December 7.
Which drugs are covered?
Each plan has a formulary (a list of covered generic and brand-name drugs), which must meet Medicare’s minimum standards. No plan needs to or will include all available prescription drugs on the market. Many plans classify drugs into tiers, with a drug in a lower tier generally being less expensive and having a lower co-payment than a drug in a higher tier.
If the medication your doctor prescribes is not on the list, your doctor may request an exception, which may or may not be granted. Also, if your doctor believes you need a drug that is in a higher tier, instead of a similar drug in a lower tier, you or your doctor may ask your plan for an exception in order for you to have a lower co-payment.
You need to check with your plan to find out which pharmacies in your neighborhood you may use. Many plans also offer an option to order prescription drugs by mail, which often results in a lower co-payment.
Most plans have rules, which may include prior authorization, quantity limits or step therapy (= you must try one or more similar lower cost drugs before the plan will cover a prescribed drug in a higher tier), although you or your prescriber can under specific circumstances ask your plan for a rule to be waived.
Part D late enrollment penalty 2025
Although enrollment in a Part D plan is optional, if you didn’t enroll when you first were eligible, or you were without Medicare drug coverage for a period of more than 63 days, and haven’t had other ‘creditable coverage’ in the meantime, you will face a ‘late enrollment penalty’ when you join a plan at a later date. The late enrollment penalty is 1% of the ‘national base beneficiary premium’ for each month you were eligible but did not sign up. This base premium for 2025 is $36.78. So if you enroll in 2025 after you were without creditable coverage for e.g. one year, an additional $4.41 ($0.3678 times 12 months, rounded) would be added onto your monthly premium.
Part D premiums
Your monthly premium is not based on your health, but it varies by plan, and may be higher for beneficiaries with higher income levels. You will have the following costs: monthly premium, annual deductible, co-payments or coinsurance. Some persons may have also costs in the coverage gap (donut hole), or costs for late enrollment. Your actual costs will depend on your plan, the medication you use and whether they are in your plan’s formulary.
Extra help
Your costs may be less if you qualify for Extra Help, for example, if you have both Medicare and Medicaid. Check here to see if you meet the requirements.
New in 2025: $2,000 out-of-pocket spending cap for prescriptions
Starting in 2025, Medicare Part D beneficiaries will not have to spend more than $2,000 out-of-pocket for their prescription drugs. Medicare Part D plans will have three phases: First, the phase where you will have to pay the initial deductible (if any). Second, the coverage phase until you have met your $2,000 out-of-pocket spending limit. Third, the catastrophic coverage phase, where you won’t have additional cost-sharing for formulary drugs for the remainder of the year. There will not be a coverage gap (formerly known as the donut hole) anymore.
Part D and other health plans that cover prescription drugs
Joining a Medicare drug plan may have significant effects on your other insurance that includes drug benefits!
If you join a Medicare Part D plan, and have a Medicare Advantage Plan that includes prescription drug coverage, you will be dis-enrolled from your Medicare Advantage Plan and returned to original Medicare.
In case you have a Medigap policy that was issued before 2006 and includes prescription drug benefits, your provider needs to take off the drug coverage from your Medigap policy.
If you have other private insurance, such as a group health plan by your employer or the union, contact the plan administrator before you enroll in a Part D plan to find out how this may affect your coverage.
