Medicare/Drug Coverage
Medicare Part D · Prescriptions
Prescription drug coverage — now with a $2,000 annual cap.
Part D covers your medications. In 2025, a new out-of-pocket cap limits your drug spending to $2,000 per year — a major improvement for anyone on expensive medications.
$2,000
2025 annual out-of-pocket cap
How your costs work
Part D cost phases in 2025
Each year your drug costs move through phases. In 2025, the process is simpler — and capped.
- 1
Deductible
You pay 100% of drug costs until you meet your plan deductible — up to $590 in 2025. Many plans waive this for generic (Tier 1–2) drugs.
- 2
Initial Coverage
After the deductible, you pay your plan's copays or coinsurance per drug tier. Your plan pays the rest for each covered prescription.
- 3
$2,000 Cap Reached
NEW in 2025: once your total out-of-pocket drug spending hits $2,000, you enter the catastrophic phase. Your plan pays 100% for the rest of the year.
- 4
Catastrophic Phase
After the $2,000 cap, your copays drop to $0 for the remainder of the calendar year. No more spending into the thousands on medications.
The $2,000 cap replaces the old "donut hole" coverage gap. The Medicare Prescription Payment Plan also lets you spread costs across monthly installments.
Formulary tiers
What tier is your drug on?
Tier placement determines your copay. Generic drugs sit at the bottom — specialty drugs at the top.
Tier 1 — Preferred Generics
Lowest copay, often $0–$5
Tier 2 — Generics
Low copay, ~$5–$15
Tier 3 — Preferred Brand
Moderate copay, ~$30–$45
Tier 4 — Non-Preferred Brand
Higher copay, ~$80–$100
Tier 5 — Specialty
25–33% coinsurance, up to $2,000 cap
Always check your plan's formulary for your specific medications before enrolling. Tier placements vary by plan and can change annually.
Extra Help (LIS) — federal drug cost assistance
The Extra Help / Low-Income Subsidy program covers Part D premiums, deductibles, and copays for people with limited income and resources. Many eligible NJ residents are not enrolled. If your income is at or below 150% of the federal poverty level, ask your advisor or call 1-800-MEDICARE to check eligibility.
NJ PAAD — additional state drug assistance
New Jersey's Pharmaceutical Assistance to the Aged and Disabled (PAAD) program provides additional cost relief on top of Part D for qualifying NJ seniors. Income limits apply. Apply through the NJ Department of Human Services at nj.gov/humanservices.
FAQ
Part D questions
What is the 2025 Part D out-of-pocket cap?+
Starting in 2025, the Medicare Prescription Payment Plan caps your annual out-of-pocket drug costs at $2,000. Once you hit that limit, your Part D plan covers 100% of your drug costs for the rest of the year — no more catastrophic phase.
What is the Part D deductible?+
The standard 2025 Part D deductible is up to $590, though many plans charge less or waive it for certain tiers. Generic-tier drugs are often exempt from the deductible entirely.
Can I use Extra Help (LIS) to lower my Part D costs?+
Yes. The federal Extra Help (Low-Income Subsidy, or LIS) program helps people with limited income and resources pay for Part D premiums, deductibles, and copays. Many eligible NJ residents are not enrolled — ask your advisor or call 1-800-MEDICARE.
What is the NJ PAAD program?+
New Jersey's Pharmaceutical Assistance to the Aged and Disabled (PAAD) program provides additional drug cost assistance to eligible NJ seniors. Income limits apply; apply through NJ DHS. PAAD can work alongside Part D.
What is the late-enrollment penalty for Part D?+
If you go 63 or more consecutive days without creditable drug coverage after becoming eligible, you'll owe a penalty equal to 1% of the national base beneficiary premium per month without coverage. The penalty is permanent and added to your monthly Part D premium.
Can I change my Part D plan outside of AEP?+
In most cases, no — you are locked into your plan until the next Annual Enrollment Period (Oct 15 – Dec 7). Special Enrollment Periods exist for certain events like moving out of your plan's service area or losing other drug coverage.
What is a formulary?+
A formulary is your plan's list of covered drugs, organized into tiers. Tier 1 (lowest copay) to Tier 5 (specialty drugs, highest copay). Your medications' tier placement determines your out-of-pocket costs — always check the formulary before enrolling.
How do I choose the right Part D plan in NJ?+
The right Part D plan depends on which drugs you take, what tier each is on under the plan's formulary, and which pharmacy is preferred. Two plans with similar premiums can have very different annual costs for the same person. A Yumi Health licensed advisor runs your exact prescription list against every plan available in your NJ ZIP code at no cost.
Do I need a Part D plan if I have Medicare Advantage?+
Most Medicare Advantage plans (MAPD) already include Part D drug coverage — you do not need a separate stand-alone Part D plan. If you have Original Medicare only, you should enroll in Part D during your Initial Enrollment Period. Going without creditable coverage for 63+ days triggers a permanent late-enrollment penalty.
Compare Part D plans in NJ.
Check your formulary, compare premiums, and find the right drug plan — with a licensed NJ advisor, no cost.