Medicare Part D Explained: How Drug Coverage Actually Works

Medicare Part D is prescription drug coverage. It is offered through private insurance companies approved by Medicare, and it is available either as a standalone Part D plan (paired with Original Medicare) or bundled into a Medicare Advantage plan.

If you do not have creditable drug coverage from another source and you do not enroll in Part D when you are first eligible, you will face a permanent late enrollment penalty. So even if you take no medications right now, it is usually worth enrolling in a low-cost plan.

Every Part D plan has four standard phases of coverage:

You pay 100% of your drug costs until you meet your deductible. In 2026, the maximum allowable deductible is $590. Many plans have a $0 deductible for preferred generic drugs.

After your deductible, you and your plan share costs. You pay a copay or coinsurance based on the drug's tier. This continues until your total drug costs reach $2,100 in 2026.

Thanks to the Inflation Reduction Act, the coverage gap ("donut hole") has been eliminated. Once your out-of-pocket drug costs reach $2,100, you pay $0 for covered drugs for the rest of the year. This is a major improvement for seniors with high drug costs.

Every Part D plan organizes drugs into tiers, with different cost-sharing at each tier:

Tier placement varies by plan. The same drug can be on Tier 2 in one plan and Tier 4 in another -- which is why comparing plans based on your specific medications is so important.

A formulary is the list of drugs a Part D plan covers. Not every drug is on every plan's formulary.

Before enrolling in any Part D plan, always check that your medications are:

1. On the formulary (covered at all)
2. At an acceptable tier (affordable copay)
3. Without restrictive requirements like prior authorization or step therapy

You can check a plan's formulary at Medicare.gov/plan-compare or call me and I will run the comparison for you.

If your income and resources are limited, you may qualify for Extra Help -- a federal program that significantly reduces your Part D costs:

• Little or no deductible
• Reduced copays ($4.50 for generics, $11.20 for brand-name drugs in 2026)
• No coverage gap
• Special Enrollment Period to change plans at any time

To apply for Extra Help, contact the Social Security Administration at 1-800-772-1213 or apply online at ssa.gov.

The biggest mistake people make with Part D is choosing the plan with the lowest premium. A $7/month plan that puts your $400/month specialty drug on Tier 5 will cost you far more than a $35/month plan that covers it at Tier 3.

Steps to choosing the right plan:

1. Make a list of all your medications -- drug name, dosage, and how often you take them
2. Use Medicare's Plan Finder at Medicare.gov/plan-compare to compare plans based on your specific drugs
3. Look at total annual cost -- premium + deductible + copays -- not just the monthly premium
4. Check your preferred pharmacy -- some plans have preferred pharmacy networks with lower copays

Part D is more complex than it looks, and the wrong plan can cost you hundreds or thousands of dollars more per year than necessary.

I run Part D comparisons for my clients every year during Annual Enrollment Period -- at no cost to you. Call me at (386) 871-3858 and let me make sure your drug coverage is working for you, not against you.