How Much Does a Medicare Part D Plan Cost?

Medicare Part D provides prescription drug coverage. This optional program is offered through private insurance companies approved by Medicare, and its costs vary significantly depending on the chosen plan and individual circumstances.

Understanding Part D Premiums

The monthly premium is a direct cost of a Medicare Part D plan. This is a regular payment made to the insurance company for coverage, regardless of whether prescription drugs are used that month. Premiums are not uniform and vary widely, as private insurance companies set their own rates.

Factors influencing premiums include the specific insurance company, the plan’s formulary (its list of covered drugs), and the pharmacy network. For 2025, the average estimated monthly premium for a stand-alone Part D plan is projected to be around $46.50. Medicare establishes a “base beneficiary premium” for certain calculations, such as late enrollment penalties, which is $36.78 for 2025.

Additional Costs Affecting Total Out-of-Pocket

Beyond the monthly premium, other costs contribute to a Part D plan’s total out-of-pocket spending. These include deductibles, copayments, coinsurance, and potential income-related adjustments or penalties.

Deductibles

A deductible is the amount an individual must pay for covered prescription drugs before their plan begins to pay. For 2025, the standard Part D annual deductible is $590. Some plans may have a lower or $0 deductible, often in exchange for a higher monthly premium. Once the deductible is met, the plan typically begins to cover a portion of drug costs, moving the beneficiary into the initial coverage phase.

Copayments and Coinsurance

After the deductible, beneficiaries typically pay a copayment or coinsurance for their prescription drugs. A copayment is a fixed dollar amount for a prescription, such as $10 for a generic drug. Coinsurance is a percentage of the drug’s cost. These amounts often depend on a plan’s tiered formulary, with generic drugs typically having lower costs. For 2025, during the initial coverage phase, enrollees generally pay 25% coinsurance for covered Part D drugs.

The Coverage Gap (Donut Hole)

Starting January 1, 2025, the Medicare Part D “coverage gap” (or “donut hole”) has been eliminated due to the Inflation Reduction Act. This simplifies the Part D benefit structure, meaning beneficiaries will no longer face this period of increased out-of-pocket responsibility.

Catastrophic Coverage

With the elimination of the coverage gap, the Part D benefit structure for 2025 consists of a deductible phase, an initial coverage phase, and a catastrophic coverage phase. For 2025, there is a new annual cap on out-of-pocket spending for covered prescription drugs, set at $2,000. Once a beneficiary’s out-of-pocket costs (including deductibles, copayments, and coinsurance) reach this threshold, they enter the catastrophic coverage phase and pay nothing for covered prescription drugs for the remainder of the calendar year.

Income-Related Monthly Adjustment Amount (IRMAA)

Individuals with higher incomes may pay an additional amount called the Income-Related Monthly Adjustment Amount (IRMAA) on top of their standard Part D premium. This surcharge is determined by the modified adjusted gross income from tax returns two years prior (e.g., 2023 income for 2025 IRMAA). The Social Security Administration (SSA) determines who pays IRMAA and notifies affected beneficiaries. For example, in 2025, individual filers with incomes above $106,000 and joint filers above $212,000 will incur an IRMAA. These additional amounts are paid directly to Medicare, not the plan.

Late Enrollment Penalty

A late enrollment penalty may be assessed if an individual does not enroll in a Medicare Part D plan when first eligible and goes 63 or more days without creditable prescription drug coverage. Creditable coverage is prescription drug coverage considered at least as good as Medicare Part D. The penalty is calculated by multiplying 1% of the national base beneficiary premium by the number of full, uncovered months an individual was eligible but not enrolled. This amount is added to the monthly premium and is typically a permanent addition for as long as the individual has Part D coverage.

Finding and Comparing Plan Costs

The official Medicare Plan Finder tool on Medicare.gov is a primary resource for comparing plans and estimating costs based on individual needs. This tool allows users to input their specific prescription drugs and preferred pharmacies to receive personalized estimated annual costs, including premiums, deductibles, and anticipated out-of-pocket drug expenses.

When comparing plans, consider more than just the monthly premium. Review the plan’s formulary to ensure necessary prescription drugs are covered and to understand their cost-sharing tiers. Consider the pharmacy network, as some plans may offer lower costs for using preferred pharmacies. Medicare’s Star Rating system provides insights into a plan’s quality and performance (one to five stars).

The Annual Enrollment Period (AEP), from October 15 to December 7 each year, is the time to review and change Part D plans for the upcoming year. Special Enrollment Periods (SEPs) may also be available for individuals experiencing specific life events, such as moving or losing other coverage. Financial assistance programs, such as “Extra Help” (Low-Income Subsidy or LIS), are available for eligible individuals with limited income and resources. This program can significantly reduce Part D costs, including premiums, deductibles, and copayments.