Medicare Part D
Medicare Part D is prescription drug coverage offered by private insurers approved by Medicare. It helps pay for the medications your doctor prescribes — whether you have Original Medicare or a Medicare Advantage plan.
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How Part D Works
Part D fills a critical gap — Original Medicare (Parts A & B) does not cover most outpatient prescription drugs.
1.
Check Your Prescriptions
List your current medications and check each plan's formulary to see if they're covered — and on which tier. This determines your costs.
2.
Choose a Plan
Pick the standalone Part D plan (PDP) or Medicare Advantage plan (MAPD) that covers your drugs at the lowest total cost — premiums + copays.
3.
Fill Prescriptions
Use an in-network pharmacy. You pay a copay or coinsurance per fill, and the plan covers the rest — subject to coverage phases.
Who Is Eligible for Part D?
Part D is available to anyone enrolled in Medicare — but it's not automatic. You must actively sign up.
You Qualify If:
- Have Medicare Part A or B
- Live in the plan's service area
- U.S. citizen or legal resident
When to Enroll
- Around your 65th birthday (IEP)
- Oct 15 – Dec 7 each year (AEP)
- When you lose employer coverage (SEP)
Late Penalty
If you go 63+ dayswithout creditable drug coverage after your IEP, you'll pay a permanent penalty of 1% of the national base premium per month without coverage — added to your premium for life.
The 4 Coverage Phases
Part D costs change as your total drug spending increases through the year. Here are the four phases.
1. Deductible
Up to $590 (2025)
You pay the full cost of your drugs until you meet the annual deductible. Some plans have $0 deductible or waive it for certain drug tiers.
2. Initial Coverage
After deductible — until $5,030 total drug costs
You pay a copay or coinsurance for each prescription. The plan pays its share. Costs depend on which formulary tier your drug is on.
3. Coverage Gap
$5,030 — $8,000 out-of-pocket
Previously called the "donut hole." Under the Inflation Reduction Act, your out-of-pocket costs are capped. Brand-name drugs have manufacturer discounts, and you pay no more than 25% for generics.
4. Catastrophic Coverage
After $8,000 out-of-pocket (2025 cap)
Starting in 2025, the new $2,000 annual out-of-pocket cap means you pay $0 for the rest of the year once you hit the limit. This is a major improvement from previous years.
2025 Update: $2,000 Annual Cap
The Inflation Reduction Act introduced a $2,000 annual out-of-pocket cap on Part D drug costs starting in 2025. Once you hit the cap, you pay $0 for covered drugs the rest of the year. Plans also offer the Medicare Prescription Payment Plan, letting you spread costs into monthly installments.
Formulary Tiers
Every Part D plan organizes its covered drugs into tiers. Lower tiers cost less. Always check that your specific medications are on the plan's formulary before enrolling.
Tier 1 — Preferred Generic
Metformin, Lisinopril, Amlodipine
Lowest copay ($0–$15)
Tier 2 — Generic
Other generics not on the preferred list
Low copay ($5–$20)
Tier 3 — Preferred Brand
Eliquis, Jardiance (when preferred)
Moderate copay ($30–$50)
Tier 4 — Non-Preferred Brand
Brand drugs not on the preferred list
Higher copay or coinsurance (25–50%)
Tier 5 — Specialty
Biologics, cancer drugs, specialty injectables
Highest cost (25–33% coinsurance)
Standalone PDP vs. MAPD
There are two ways to get Part D drug coverage. Understanding the difference helps you choose the right path.
A separate Part D plan you add to Original Medicare (+ optional Medigap).
- Works with any doctor who accepts Medicare
- Pair with Medigap for predictable costs
- Change your drug plan without affecting medical coverage
Drug coverage bundled inside a Medicare Advantage plan (Part C).
- One plan, one card — medical + drug combined
- Often $0 plan premium (Part B still applies)
- Extra benefits like dental, vision, hearing
Extra Help (Low-Income Subsidy)
If you have limited income and resources, you may qualify for Extra Help — a federal program that pays most or all of your Part D costs.
Who Qualifies?
Individuals with annual income below ~$22,590 and resources under $17,220 (2025 limits). Limits are higher for married couples.
What It Covers
Pays your Part D premium (up to a benchmark), eliminates or reduces the deductible, and lowers copays to $0–$11 per prescription.
How to Apply
Apply through Social Security (ssa.gov), your state Medicaid office, or ask a licensed Medicare advisor for help with the application.
Pros & Cons
Understanding both sides helps you decide if Part D is the right fit for your medication needs.
Advantages
- Covers prescription medications that Original Medicare does not
- New $2,000 annual out-of-pocket cap (2025+) protects against catastrophic drug costs
- Many plans offer $0 copays for preferred generics
- Extra Help (LIS) program can reduce costs to $0 for qualifying beneficiaries
- Wide range of plans available — choose one that covers your specific medications
Drawbacks
- Monthly premium required (average $30–$50/month in NJ)
- Each plan has its own formulary — your drugs may not be covered or may be on a high tier
- Late enrollment penalty if you go without creditable coverage for 63+ days
- Plans can change formularies, costs, and pharmacy networks each January
- Prior authorization or step therapy may be required for some medications
Frequently Asked Questions
Common questions about Medicare Part D prescription drug coverage.
What's the difference between a standalone Part D plan and MAPD?
A standalone Part D plan (PDP) is added to Original Medicare to get drug coverage. An MAPD (Medicare Advantage Prescription Drug plan) bundles Part D into a Medicare Advantage plan. You cannot have both — if you join an MAPD, your standalone PDP is automatically dropped.
When can I enroll in Part D?
You can enroll during your Initial Enrollment Period (3 months before to 3 months after your 65th birthday), the Annual Enrollment Period (Oct 15 – Dec 7), or during a Special Enrollment Period if you have a qualifying event like losing employer coverage.
What is the Part D late enrollment penalty?
If you go 63 or more consecutive days without creditable drug coverage after your Initial Enrollment Period, you'll pay a penalty of 1% of the national base premium for each month you were without coverage — added permanently to your monthly premium.
How do I know if my drugs are covered?
Every Part D plan publishes a formulary — a list of covered drugs organized by tier. You can search the plan's formulary online or ask a licensed agent to check which plans in your county cover your medications at the lowest cost.
What is Extra Help (Low-Income Subsidy)?
Extra Help is a federal program that pays Part D premiums, deductibles, and copays for people with limited income and resources. If you qualify, you could pay as little as $0 for your prescriptions. You can apply through Social Security or your state Medicaid office.
Find the Right Part D Plan in NJ
A licensed NJ Medicare advisor will compare Part D plans based on your medications, pharmacy, and budget — always free, no obligation.