Medicare Part D is a federal program designed to provide prescription drug coverage for individuals eligible for Medicare. This voluntary component of Medicare helps beneficiaries manage the high costs of medications, covering both brand-name and generic drugs. Part D is offered through private insurance companies that are approved by Medicare. It can be added to Original Medicare (Parts A and B) or bundled with Medicare Advantage (Part C) plans for those who choose that route.
Medicare Part D plays an essential role in providing coverage for prescription drugs, which are not included in Original Medicare. While Medicare Part A covers hospital stays and Part B covers outpatient services, neither covers prescription medications unless they are administered in a hospital setting. Part D ensures that individuals who need regular medications can have access to them at a more affordable cost. Medicare Part D is available as stand-alone prescription drug plans (PDPs) that can be added to Original Medicare or bundled with Medicare Advantage plans that include drug coverage, eliminating the need for a separate plan.
The coverage provided by Medicare Part D includes a wide range of prescription drugs, from common generic and brand-name medications to specialty drugs used for more complex or rare conditions, such as cancer, rheumatoid arthritis, or multiple sclerosis. Every Part D plan has a formulary, which is a list of covered drugs, and these drugs are often categorized into tiers that represent different pricing levels. For instance, generic drugs typically fall into lower-cost tiers, while brand-name or specialty drugs are placed in higher-cost tiers. If a specific drug is not included in a plan’s formulary, beneficiaries may request an exception to have it covered or may be allowed to obtain a medically necessary drug not listed.
Medicare Part D comes with several costs that beneficiaries need to consider, including premiums, deductibles, copayments, and coinsurance. Premiums can vary depending on the plan and generally range from $15 to $100 or more per month. For those with higher incomes, an additional charge, known as the Income-Related Monthly Adjustment Amount (IRMAA), may apply. Plans may also have an annual deductible, which is the amount you must pay out-of-pocket before your drug coverage begins. For 2025, the maximum deductible is set at $226, but some plans may have lower or no deductible at all. After the deductible is met, beneficiaries will typically pay a copayment or coinsurance, depending on the drug’s tier in the formulary.
Medicare Part D also includes a coverage gap, commonly known as the “donut hole.” However, due to recent changes to the program, the coverage gap has been gradually closed, and now beneficiaries pay a smaller percentage of their prescription costs when they enter this phase. Once out-of-pocket spending reaches a certain threshold, which is $8,000 in 2025, beneficiaries enter “catastrophic coverage,” where they pay a small coinsurance or copayment (usually 5%) for the remainder of the year.
Enrolling in Medicare Part D is an important decision, and it must be done during specific periods. The Initial Enrollment Period (IEP) occurs when you first become eligible for Medicare, typically around age 65, and gives you a 7-month window to enroll. The Annual Election Period (AEP) takes place each year from October 15 to December 7, during which you can make changes to your plan, such as switching plans or adjusting coverage. Additionally, a Special Enrollment Period (SEP) may apply if you experience certain life events, such as losing employer coverage or moving to a new area.
Medicare Part D is a crucial program for individuals with chronic health conditions, as it provides essential financial protection for the cost of prescription drugs. Without this coverage, many beneficiaries would struggle to afford necessary medications, potentially leading to worsened health or the inability to manage long-term conditions effectively. However, it is important to note that Part D does not cover every drug. For example, over-the-counter medications, drugs covered under Medicare Part A or Part B, and some cosmetic drugs are excluded. Still, for the majority of prescription needs, Medicare Part D offers comprehensive coverage.
In conclusion, Medicare Part D is a vital program that helps reduce the financial burden of prescription medications for Medicare beneficiaries. By covering both generic and brand-name drugs, Part D ensures access to necessary treatments, improving health outcomes and quality of life. It is essential for beneficiaries to review the available plans during open enrollment each year to ensure that their medications are covered and that they are receiving the most suitable plan for their needs.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Katherine Sullivan, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security, or any security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary.
Investment advisory services offered through Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser. The views, statements and opinions expressed herein are those of the author, and not necessarily of Foundations or their affiliates. The content provided is for educational purposes only and the views reflected are subject to change at any time without notice. No investment, legal or tax advice is provided. Always consult with a professional. Foundations deems reliable any statistical data or information obtained from third party sources that is included in this article, but in no way guarantees its accuracy or completeness.
This is not endorsed or affiliated with any federal Medicare program, nor any U.S. government agency. If applicable, we do not offer every plan available in your area and contacting us will direct you to a licensed insurance agent. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.Gov or 1-800-MEDICARE to get information on all of your options.
