Medicare Part D pays for most outpatient prescription drugs, including brand-name and generic medications, certain vaccines, and insulin. It’s the part of Medicare specifically designed to help cover the cost of drugs you pick up at a pharmacy or receive through mail order. Every Part D plan must meet minimum coverage standards set by the federal government, but individual plans choose which specific drugs they cover and how much you’ll pay for each one.
What Part D Covers
Part D plans maintain a list of covered drugs called a formulary. Each plan’s formulary is different, but all plans must cover at least two drugs in every therapeutic category, meaning you’ll have options no matter what condition you’re treating. For six drug categories considered essential, plans are required to cover nearly all available medications: antidepressants, antipsychotics, anti-seizure drugs, immunosuppressants used after organ transplants, HIV/AIDS drugs, and cancer drugs.
Beyond prescription medications, Part D covers all adult vaccines recommended by the federal Advisory Committee on Immunization Practices. That includes shots for shingles, RSV, whooping cough, measles, and others. Your plan won’t charge a copay or apply your deductible for these vaccines.
Insulin has its own special pricing rule. You’ll pay no more than $35 for a one-month supply of each covered insulin product, with no deductible. If you get a three-month supply, your total cost caps at $105. This applies to everyone with Part D coverage, including people who receive Extra Help (the low-income subsidy program).
What Part D Does Not Cover
Federal law excludes several categories of drugs from Part D coverage entirely. The most notable exclusions:
- Weight loss or weight gain medications (though drugs for AIDS-related wasting are covered)
- Cosmetic drugs, including hair growth treatments (though medications for psoriasis, acne, rosacea, or vitiligo are not considered cosmetic)
- Cough and cold medications used for symptom relief
- Over-the-counter drugs, with the exception of insulin and supplies for injecting it
- Prescription vitamins and minerals, except prenatal vitamins and fluoride preparations
- Barbiturates and benzodiazepines
Drugs covered under Medicare Part A or Part B, such as medications administered during a hospital stay or in a doctor’s office, are also outside Part D’s scope.
How Drug Tiers Affect Your Costs
Part D plans organize their covered drugs into tiers, and the tier a drug falls into determines what you pay. While each plan structures tiers slightly differently, the general pattern looks like this:
- Tier 1 (lowest cost): Most generic drugs
- Tier 2 (medium cost): Preferred brand-name drugs
- Tier 3 (higher cost): Non-preferred brand-name drugs
- Specialty tier (highest cost): Very high-cost drugs, often for complex conditions
If your doctor prescribes a drug on a higher tier, you can sometimes ask your plan for an exception to move it to a lower tier, especially if you’ve already tried and failed on cheaper alternatives. You can also ask your doctor whether a lower-tier drug would work just as well.
The Three Coverage Phases in 2025
Starting in 2025, the Inflation Reduction Act restructured Part D into three distinct phases, eliminating the old “donut hole” coverage gap that used to leave people paying much more in the middle of the year.
Phase 1: Deductible. You pay the full cost of your drugs until you meet your plan’s annual deductible. Not all plans charge a deductible, and some waive it for certain drug tiers like generics.
Phase 2: Initial coverage. After the deductible, you pay 25% of the cost of your covered drugs. Your plan and, for certain brand-name drugs, the drug manufacturer pick up the rest. This phase continues until your total out-of-pocket spending reaches $2,000.
Phase 3: Catastrophic coverage. Once you’ve spent $2,000 out of pocket for the year, you pay nothing for covered drugs for the rest of the year. Zero. This $2,000 cap is the biggest change from previous years, when people taking expensive medications could spend thousands more before reaching catastrophic coverage.
Plans also offer the option to spread your out-of-pocket costs evenly across the year in monthly payments, which can make budgeting easier if you take expensive medications early in the year.
Negotiated Drug Prices Starting in 2026
For the first time, Medicare has negotiated prices directly with drug manufacturers on ten widely used Part D medications. These negotiated prices take effect January 1, 2026, and all Part D plans are required to include these drugs on their formularies at the new prices. CMS estimates these negotiations will save Medicare enrollees roughly $1.5 billion in the first year alone. Additional drugs will be added to the negotiated list in subsequent years, with prices adjusted annually for inflation.
Extra Help for Lower Incomes
If your income and savings fall below certain thresholds, you may qualify for Extra Help, a federal program that significantly reduces Part D premiums, deductibles, and copays. For 2025, the income limits are $23,475 for an individual and $31,725 for a married couple (slightly higher in Alaska and Hawaii). Resource limits, which count savings and investments but not your home or car, are $17,600 for individuals and $35,130 for couples. Even if you’re slightly above these numbers, it’s worth applying since the Social Security Administration makes the final determination and some income sources may not count.
The Late Enrollment Penalty
If you don’t sign up for Part D when you’re first eligible and go 63 or more consecutive days without comparable drug coverage, you’ll face a permanent penalty added to your monthly premium. The penalty is 1% of the national base beneficiary premium for every month you were without coverage. In 2026, the base premium is $38.99, so someone who went 14 months without coverage would pay an extra $5.50 per month, every month, for as long as they have Part D. That penalty never goes away and adjusts upward as the base premium increases each year.