Selecting a Part D prescription drug plan is one of the hardest Medicare decisions because there are so many factors to consider: the medications you take; where to buy them; the cost of Part D premiums, deductibles and co-insurance. On top of that, the plans and government rules change every year, so this is an annual project.
The high cost of prescription drugs
Taking the time to figure out which plan is right is vitally important for the 53 million Medicare beneficiaries with prescription drug coverage.
“You need to make sure you’re getting the best plan for you and your coverage needs at the best price,” says Kristina Raner, program manager for the Medicare Improvements for Patients and Providers Act at the National Council on Aging.
Here’s why: Prices of many prescription drugs are rising faster than inflation, Medicare beneficiaries take an average of four to five per month and, according to the Commonwealth Fund health research group, prescription drugs comprise roughly 20% of out-of-pocket health care costs for people 65+.
If you’re married or have a partner, don’t assume their Part D plan is the one you should get, too. You’re probably taking different medications, so a different plan might cost you less.
“You are a unique individual; your needs are not the same as your spouse’s or your sister’s or your neighbor down the street,” Raner notes.
Who needs a Part D plan?
Virtually everyone on Medicare with Part A (hospital insurance) and Part B (doctor’s bills) should have a Part D plan, advises Tricia Neuman, executive director for the Program on Medicare Policy at KFF, a nonpartisan health research nonprofit. (Chief exception: people with prescription drug coverage from their employer.)
If you sign up for Original Medicare (Parts A and B), you’ll need to buy a Part D plan. Roughly 12 standalone plans are now sold in each state, according to KFF. In addition, a private insurer’s Medicare Advantage plan (Part C) likely includes Part D; otherwise, you need to purchase a plan.
Injections and other drug treatments given at a doctor’s office are covered under Medicare Part B. Over-the-counter prescriptions, vitamins and supplements aren’t covered by Medicare at all.
You can get Part D when you become eligible for Medicare and buy or switch a plan during open enrollment, from October 15 to December 7 (coverage starts the following January 1). Those in Medicare Advantage can also switch during its open enrollment season from January 1 through March 31.
You’ll want to sign up for Part D as soon as you’re allowed. Otherwise, you’ll owe a late penalty, and your Part D premium will rise roughly 12% every year you put off enrolling. Raner calls Part D “a voluntary, mandatory program.”
New rules to lower drug costs
Federal rules taking effect in 2024 and beyond, due to the Inflation Reduction Act of 2022, could lower your out-of-pocket Medicare prescription costs considerably. That law has already limited insulin co-pays to $35 a month and made many vaccines free for people with Part D plans.
A recent change in Medicare’s rules is especially helpful for low-income Americans: starting in 2024, roughly 400,000 of them qualify for bigger subsidies on their Part D premiums, deductibles, co-insurance and co-payments through Medicare’s Low-Income Subsidy program.
The National Council on Aging’s online Benefits CheckUp tool lets you see if you’re eligible for these subsidies.
Getting help to make the right Part decision
To purchase the right Medicare Part D plan, you’ll first want to decide whether to do the research yourself or get help.
If you have time and patience, you can pick a Part D plan by using the Medicare site’s interactive Medicare Plan Finder where you put in your medications and dosages and then see what each plan would charge for them, as well as its premium, deductible and co-pays.
For expert advice, you could call your State Health Insurance Assistance Program or SHIP, where free, unbiased Medicare authorities can guide you through Plan D options and answer questions, though they can’t recommend plans.
Alternatively, you could hire a Medicare broker or agent, as roughly one in three beneficiaries do. Your doctor or friends or family members might be able to suggest one or you could choose a company on the National Council on Aging’s Medicare Standards of Excellence list.
Key factors when choosing a Part D plan
These are the prime considerations when selecting a Part D plan.
Whether it covers your medications and what you’d pay for them
Your price per drug will be based on, among other things, whether the plan will let you buy it, which of the five “tiers” it’s in and whether you’ll purchase it mail order or at a local pharmacy.
Some Part D plans restrict the drugs you can take in one of two ways. There’s step therapy, which means before you can get the medication you want, you must start with a less expensive one the insurer prefers. With prior authorization, you need the insurer’s approval to buy a certain prescription drug.
Part D plans group medications into five price tiers. “Preferred generics” (ones the insurer prefers) are the least expensive. Then come generics, preferred brands, non-preferred drugs (brands and generics) and specialty drugs, which can cost tens of thousands a year.
“If you keep digging with the Plan Finder, you can find out whether the plan requires step therapy or prior authorization,” says Neuman.
Mail-order drugs aren’t necessarily less expensive than ones bought at a local pharmacy. You can’t even be sure either of those options will be best for every medication you take with a particular Part D plan.
What’s more, insurers deem certain pharmacies “preferred” (less expensive for you) and others not. In other words, one drugstore in your area may be pricier than another for the same medication.
So, you (or your agent) will need to do the painstaking work of comparing what you’d pay for each prescription drug by mail order and at nearby drug stores for every Part D plan you’re considering.
What the plan’s monthly premium will be
The average national Part D premium is 2025 is roughly $45. But some plans charge much more and others have zero premiums.
High-income beneficiaries get hit with a Part D premium surcharge of up to $1,030 annually (in 2025) known as an Income-Related Monthly Adjustment Amount or IRMAA.
The Inflation Reduction Act will limit Part D premium increases to 6% from 2024 through 2029.
What the Part D plan’s annual deductible will be
This amount (what you’ll pay before coverage kicks in) also varies by plan. It can’t be more than $590 in 2025 and some plans have zero or lower deductibles, in exchange for higher premiums.
What your out-of-pocket co-pays and co-insurance will be
For many years, this was one of the most complicated parts of Part D coverage. That has changed.
In 2025, a key part of the Inflation Reduction Act goes into effect, with a cap on out-of-pocket Part D drug costs at $2,000. “I think that will have the most significant and direct impact helping people who would otherwise have very high drug costs,” says Neuman.
KFF estimates the average out-of-pocket cost to take the cancer drug Revlimid in 2020 was $6,200, for example. Some 1.4 million Part D enrollees paid more than $2,000 for prescription drugs in 2020, says KFF, averaging $3,335 per person. They’d have saved $1,335, on average, with the $2,000 cap.
3 coming changes to help lower drug prices further
Three other parts of the Inflation Reduction Act could make your prescription drug costs more manageable in the coming years.
“The Inflation Reduction Act is an enormous step in the right direction,” says Leigh Purvis, a prescription drug policy expert at AARP.
Starting in 2025, the law will let people with Part D plans spread their out-of-pocket costs over the year, rather than get socked in January and February when they owe their deductible.
“That’s a really helpful provision,” says Neuman.
Another part of the law requires pharmaceutical companies to pay Medicare rebates if their drug prices rise faster than inflation, as half of all drugs covered by Medicare did from 2019 to 2020, according to KFF.
AARP found the 25 top-selling Part D prescription drugs tripled in price, on average, since coming on the market.
The inflation rebates could lower costs for Medicare beneficiaries, or at least tamp down price hikes. But, Neuman says, they could also lead manufacturers to compensate by raising prices of their new drugs or other medications they sell.
Medicare will also be allowed to negotiate with drug companies the prices of America’s most popular prescription medications, starting in 2026.
In August 2024, the Centers for Medicare & Medicaid Services (CMS) announced 10 drugs that would, after negotiations with drug companies, be covered at a significant discount for Medicare drug plan enrollees, starting in 2026.
The 10 drugs include those are some of the most commonly prescribed and expensive ones, that treat common conditions such as cancer, diabetes, heart disease, and arthritis, according to CMS.
