by
Diane Omdahl |
Updated on
September 2, 2025 
Written by Michael LaPick
Healthcare Writer
Reviewed by Diane Omdahl
Expert Reviewer
We aim to help you make informed healthcare decisions. While this post may contain links to lead generation forms, this won’t influence our writing. We follow strict editorial standards to give you the most accurate and unbiased information.
What You Need to Know
- In 2025, the average Medicare Part D premium is projected at $45/month, up from $42 in 2024, though costs vary by plan.
- The standard deductible is $590, with some plans offering lower or zero-dollar options at higher premiums.
- Thanks to the Inflation Reduction Act, annual out-of-pocket costs will be capped at $2,000, reducing expenses for those with high drug costs.
The cost of medication can be one of the biggest contributors to healthcare expenses in retirement. Most Medicare enrollees won’t have to pay the entire cost of their medication, however. Since 2006, Americans have had the option to purchase Medicare Part D, an insurance plan that helps cover drug costs for those with Medicare.
The cost of medication can be one of the biggest contributors to healthcare expenses in retirement. Most Medicare enrollees won’t have to pay the entire cost of their medication, however. Since 2006, Americans have had the option to purchase Medicare Part D, an insurance plan that helps cover drug costs for those with Medicare.
Shop for a Medicare plan with additional benefits!
Unlike Medicare Part A and Part B, you purchase Part D from private insurers or get it as part of your Medicare Advantage Plan.
How Much Does Medicare Part D Cost?
The total cost of Medicare Part D depends on several factors: including your income, when you enroll, the number and type of drugs you take, and the pharmacy you use (whether it is in-network or preferred).
Your costs include your premiums (monthly payments), deductible (the amount you pay before insurance starts), and coinsurance or copayments (what you owe after insurance has paid its share).
What Are Medicare Part D costs?
Premiums
If you have a Medicare Advantage plan that includes prescription drug coverage, you may not have a separate premium for Medicare Part D. Otherwise, you’ll pay a separate premium for Part D.
The amount of your premium depends on your plan, and they can vary significantly.
What Is the Late Enrollment Penalty?
Another factor influencing the cost of your premium is when you enroll. For each full month after eligibility that you don’t have prescription drug coverage, you’ll typically have to pay 1% of the base premium, and you’ll have to pay that for as long as you have Medicare prescription drug coverage. The penalty amount may change from year to year.
What Is Your Deductible?
Some Medicare drug plans don’t have any deductible at all. Before choosing a low- or no-deductible plan, it’s important to calculate the total cost of your plan, including premiums and copays or coinsurance.
What Is Cost Sharing?
Once you’ve paid your deductible, you’ll share the cost of your drugs with your insurer, paying either a copayment (a fixed amount for your drugs) or coinsurance (a percentage of the cost).
What Are Drug Tiers?
Drug plans publish a formulary or list of covered drugs. Often, they separate their formularies into “tiers,” with Tier 1 drugs (usually generic drugs) costing the least and Tier 4 drugs (non-preferred, brand-name prescription drugs) costing the most. Some plans also have a “specialty tier” that includes the highest cost drugs.
What Is the Coverage Gap (Donut Hole)?
The amount that you have to pay for drugs varies depending on the amount that you’ve already paid out-of-pocket. Once the total amount of drug costs (including those paid by both you and the plan) reach your out-of-pocket maximum on plan-covered drugs, you enter the Coverage Gap, also known as the “donut hole” and have to pay 25% of your drug costs.
Can You Get Help Paying for Prescription Drug Coverage?
If you have limited resources, you can apply for “Extra Help,” worth about $5,000 from the Social Security Administration. To qualify for Medicare Part D Extra Help, you must have an income at or below 150% of the Federal Poverty Level (FPL) and may also need to meet certain resource limits.
Next Steps
It’s hard to know exactly how much Medicare Part D will cost you, since you don’t know which drugs you’ll have to take in the future. Understanding how Medicare Part D works, however, can help you estimate your expenses and make a plan for how you’ll cover them.
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Health Affairs. “Medicare Part D.” health policy brief. healthaffairs.org (accessed May 18, 2020)
U.S. Government Website for Medicare. “Your Guide to Medicare Prescription Drug Coverage.” medicare.gov (accessed May 19, 2020).
U.S. Government Website for Medicare. “How Medicare Drug Plans Use Pharmacies.” medicare.gov (accessed May 2020).
Kaiser Family Foundation. “Medicare Part D: A First Look at Medicare Prescription Drug Plans in 2022.” kff.org (accessed December 2021).
Centers for Medicare & Medicaid Services. “Monthly Premium for Drug Plans.” medicare.gov (accessed May 18, 2020).
Centers for Medicare & Medicaid Services. “The Part D Late Enrollment Penalty.” cms.gov (accessed May 18, 2020)
U.S. Government Website for Medicare. “Yearly Deductible For Drug Plans.” medicare.gov (accessed December 2021).
Medicare Rights Center. “The Part D Donut Hole.” medicareinteractive.org (accessed May 18, 2020).
Social Security Administration. “Extra Help with Medicare Prescription Drug Plan Costs.” ssa.gov (accessed May 18, 2020).
Social Security Administration. “Understanding the Extra Help with Your Medicare Prescription Drug Plan.” ssa.gov (accessed November 2020).
Centers for Medicare & Medicaid Services. “Lower Prescription Drug Costs.” cms.gov (accessed May 18, 2020).
