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Medicare Part D
Medicare Part D
Medicare Part D is private insurance to help cover the cost of prescription medications. Part D plans provide coverage for both generic and brand name medications and can be added to Medicare Part A, B or Medicare Supplement Plans. It can also be included in a Medicare Advantage Plan. You can only be enrolled in one Part D plan at a time.
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The Steps of Part D Drug Coverage
There are four steps of drug coverage during the calendar year. Your drug plan will send you statements on these amounts as you fill your prescription drugs.
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Step 1 Annual Deductible
If your plan has a deductible, you will pay the full cost of the drug until you reach the deductible amount.
For 2025 no plan may exceed a deductible of $590. Once this is reached you will pay the cost-share for the covered drug.
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Step 2 Initial Coverage
Your Medicare Drug Coverage (Part D) will have an annual out-of-pocket maximum of $2,000. This annual out of pocket (also referred to as your TrOOP) does not apply to out-of-pocket spending on Part B drugs or excluded drugs. Medicare Part B covers drugs that are administered by a doctor, nurse, or other healthcare provider in an outpatient setting such as a doctor’s office. For example, some cancer drugs and injectable drugs are covered under Part B. You may get your drugs at network retail pharmacies and mail order pharmacies
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Step 3 Catastrophic Coverage
After your yearly out-of-pocket drug costs (including drugs purchased through your retail pharmacy and through mail order) reach $2,000, you pay $0 copay for the remainder of the year.
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The Medicare Part D Late Enrollment Penalty (LEP)
This is an amount that may be added to your monthly Part D premium. If you go without Part D or other creditable prescription drug coverage for a period of 63 days or do not enroll during your Initial Election Period (IEP), you may owe this penalty.
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How Much is the Penalty?
Your penalty is 1% of the national base beneficiary premium for each month you were without creditable prescription drug coverage. In 2025 the national base premium is $36.78.
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Case Study:
Bob did not enroll in a prescription drug plan after he retired in January 2023 since he did not take any medication and did not have any other creditable coverage. He will not be able to enroll in a plan until the Annual Election Period running October 15th to December 7th of 2023. His plan will become effective January 1, 2024.
