Choosing a Medicare Part D drug plan — and what to do if you cannot afford the cost
This page explains how Medicare Part D prescription drug coverage works, what it costs, how to compare and pick a plan, and — most importantly for anyone on a limited income — how to get significant help paying for it. If you are on Medicare and struggling with drug costs, the Extra Help program covered below can reduce your costs to almost nothing and is worth reading about even if you skip everything else.
- PRO TIP: Medicare can be challenging to understand and navigate. It is possible to get free advice, focused on your specific needs, from the State Health Insurance Assistance Program (SHIP) (website: https://www.shiphelp.org/). Counselors can help you find a Part D plan for your specific needs.
In addition to Medicare, there are other programs available. For other ways to lower prescription costs outside of Medicare, also see free and low-cost prescription medication page.
What Medicare Covers — and What It Does Not
Original Medicare — Parts A and B — covers hospital care, doctor visits, lab work, and outpatient services. It does not cover most prescription drugs you take at home. To get coverage for those, you need to enroll in Part D.
Part D is prescription drug coverage offered through private insurance companies that have contracts with the federal government. You pay a monthly premium for it on top of what you pay for the rest of your Medicare coverage. While the cost will often change each year, Part B premium are usually around $200 per month for most people. Part D premiums are separate and vary by plan, but the national average for a standalone Part D plan runs around $50 per month. Some plans cost less, some cost more, depending on what drugs they cover and where you live.
Part D does not cover over-the-counter medications — things like aspirin, antacids, or cold medicine. Most drugs that are injected or given intravenously at a doctor's office are covered under Part B instead, not Part D.
How Part D Coverage Works Now — the “Donut Hole” Has Been Eliminated
Starting in 2025, Medicare Part D works differently than it did for years before. The coverage gap — also commonly called the “donut hole” — has been eliminated. That was a phase where you previously paid a much higher share of drug costs until you hit a threshold. It no longer exists. Part D now works in three straightforward stages.
- First is the deductible stage. If your plan has a deductible, you pay the full cost of your prescriptions until you reach it. There will be annual caps to the deductible. Many plans set it lower than the cap, and some have no deductible at all — those plans typically charge a higher monthly premium.
- Second is the initial coverage stage. Once you have met your deductible, you pay 25% of the cost of your covered drugs and your plan pays the rest. This continues until your total out-of-pocket spending on covered drugs reaches the maximum for the year.
- Third is the catastrophic coverage stage. Once you have spent the maximum out of pocket on covered drugs in a calendar year, you pay nothing for the rest of that year.
The PAN Foundation tracks the caps each year at https://www.panfoundation.org/understanding-the-medicare-part-d-cap/. The annual cap covers your deductible, copays, and coinsurance on covered drugs. It does not count your monthly premiums.
Spreading Out Costs — The Medicare Prescription Payment Plan
You do have an option to spread your out-of-pocket drug costs over monthly payments throughout the year rather than paying large amounts at the pharmacy at once. This is called the Medicare Prescription Payment Plan. It does not reduce what you owe — it just spreads it across the calendar year so you are not hit with a large expense early in the year when deductibles are highest. Ask your Part D plan if you want to enroll in this option.
How Plans Differ — What to Compare When Choosing
Every Part D plan covers different drugs at different prices. Before picking one, you need to check whether your specific medications are on the plan's list of covered drugs, called the formulary. A drug that one plan covers at a low copay may cost much more under a different plan — or not be covered at all. Beyond the formulary / list of covered medications, compare these four things across plans available in your area.
- First, the monthly premium — what you pay every month regardless of how many prescriptions you fill.
- Second, the deductible — what you pay before coverage kicks in.
- Third, the copays or coinsurance for your specific drugs at each tier. Plans divide drugs into tiers, with generics typically in the lowest tier and expensive brand-name drugs in higher tiers. Your share of the cost rises with each tier.
- Fourth, the pharmacies in the plan's network — using a pharmacy outside the network usually costs more.
The federal government's Medicare Plan Finder at https://www.medicare.gov/plan-compare/ lets you enter your specific medications and zip code to see exactly what each plan in your area would cost you for those drugs. This tool does the comparison work for you and is the best place to start.
Medicare Advantage — When Part D Is Already Included
Medicare Advantage plans, also called Part C, are an alternative to Original Medicare offered through private insurers. Most Medicare Advantage plans include prescription drug coverage built in, so you may not need a separate Part D plan. If you have a Medicare Advantage plan, check whether it includes drug coverage before enrolling in a standalone Part D plan.
Medicare Advantage plans vary significantly in what they cover, what pharmacies they work with, and how much drugs cost. Use the same Plan Finder tool at https://www.medicare.gov/plan-compare/ to compare.
Extra Help — If You Cannot Afford Part D Costs
If your income is limited, a federal program called Extra Help — also known as the Low-Income Subsidy — may reduce your Part D costs to near zero. It covers most or all of your monthly premium, eliminates the deductible, and caps what you pay per prescription at the pharmacy. The estimated average annual value is around $5,500 to $6,000 per person.
To apply: People who receive Medicaid, SSI, or are enrolled in a Medicare Savings Program qualify automatically. Others can apply at any time through Social Security at 1-800-772-1213 or at https://www.ssa.gov/medicare/part-d-extra-help. For additional details on who qualifies and a plain-English guide, see the page on Extra Help for Medicare prescription drug costs.
When to Sign Up — and the Late Penalty
You can sign up for Part D when you first become eligible for Medicare. If you delay and go without drug coverage for more than 63 days without other qualifying coverage, you may be charged a late enrollment penalty added permanently to your monthly premium. The penalty is 1% of the national average Part D premium for each month you went without coverage.
To avoid the penalty, sign up during your initial enrollment window even if you are not currently taking any prescription drugs. Choose a low-cost plan if you have no current drug needs — you can switch during open enrollment if your situation changes.
Open enrollment runs each year from October 15 through December 7. Any changes take effect January 1 of the following year. As noted at the top of the page, your State Health Insurance Assistance Program, known as SHIP, offers free one-on-one counseling to help you understand your options. Call 1-877-839-2675 to reach your state SHIP program, or visit shiphelp.org.
State Pharmaceutical Assistance Programs
Many states have their own programs that help pay Part D premiums and copays for residents who do not qualify for Extra Help or who need additional help beyond it. These are called State Pharmaceutical Assistance Programs, or SPAPs. Eligibility and benefits vary by state. Ask your SHIP counselor or check with your state's Medicaid office to find out what is available where you live.
This page provides general information about Medicare Part D based on publicly available data for 2025 and 2026. Premiums, deductibles, and program details change annually. Verify current figures at medicare.gov or by calling 1-800-633-4227 (1-800-MEDICARE) before making enrollment decisions. This is not a substitute for personalized advice from a SHIP counselor or licensed insurance professional.
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