Medicare Part D Payment Plan: Is It Right for You?
Medicare Lead
Medicare Part D is the prescription drug coverage portion of Medicare, the federal health insurance program for people aged 65 and older and certain younger individuals with disabilities. Part D helps cover the cost of prescription medications, including brand-name and generic drugs.
Part D plans are offered by private insurance companies approved by Medicare, and costs can vary based on the specific plan, the drugs covered, and the pharmacy used. Enrollees typically pay a monthly premium, along with copayments or coinsurance for their prescriptions. In 2025, a new law will cap annual out-of-pocket drug costs at $2,000 for those with Medicare drug coverage.
While Part D can help reduce prescription costs, it’s important to compare plans and coverage options to find one that best meets your medication needs and budget.
How does it work?
When you fill a prescription for a drug covered by Part D, you won’t pay your pharmacy (including mail order and specialty pharmacies). Instead, you’ll get a bill each month from your health or drug plan.
Even though you won’t pay for your drugs at the pharmacy, you’re still responsible for the costs. If you want to know what your drug will cost before you take it home, call your plan, or ask the pharmacist.
This payment option might help you manage your monthly expenses, but it doesn’t save you money or lower your drug costs. There are other programs that can help lower your Medicare costs, click here to learn more.
How is my monthly bill calculated?
Your monthly bill is calculated by adding the cost of any prescriptions you fill, plus any outstanding balance from the previous month, then dividing that total by the remaining months in the year. All plans use the same method to determine your monthly payments.
Your monthly payments may change from month to month, so it’s hard to know exactly what your bill will be ahead of time. If you fill a new prescription (or refill an existing one), your payment could go up because new costs will be added, and there will be fewer months left in the year to spread them out.
But don’t worry—there’s a limit. Over the course of the year (January to December), you won’t pay more than:
- The total amount you would have spent at the pharmacy without this payment option.
- The out-of-pocket maximum for prescription drugs covered by your plan, which is $2,000 in 2025.
This $2,000 cap applies to everyone with Medicare drug coverage, even if you’re not using the Medicare Prescription Payment Plan.
Will this help me?
It really depends on your situation. While this payment option can help you manage your monthly costs, it doesn’t lower your drug prices.
You’ll likely get the most benefit if you have high drug costs early in the year. You can sign up for the Medicare Prescription Payment Plan anytime, but the earlier in the year you start (ideally before September), the more months you’ll have to spread out your costs. To see if it makes sense for you, answer a few questions to find out.
If there’s a drug you want to take but it’s too expensive, and you think this plan might help make the cost more manageable, contact your plan to confirm that the drug is covered and get more details.
However, this payment option may not be the best fit if:
- Your total drug costs are low.
- Your drug costs are the same each month.
- You’re thinking about signing up later in the year (after September).
- You prefer not to change how you pay for your prescriptions.
- You get or are eligible for Extra Help from Medicare or the Medicare Savings Program.
- You receive assistance from other programs, like a State Pharmaceutical Assistance Program (SPAP), drug coupon programs, or other health coverage.
How do I sign up?
To get started with this payment option, just visit your health or drug plan’s website, or give them a call. Keep in mind, though, that signing up later in the year (after September) might not be the best move. That’s because, with fewer months left in the year, it becomes harder to spread out the new drug costs that get added to your monthly payment.
Key Takeaways
Medicare Part D provides prescription drug coverage for those 65 and older or certain younger individuals with disabilities. While it helps cover drug costs, participants pay a monthly premium and may face copayments or coinsurance. The 2025 change caps out-of-pocket costs at $2,000 for covered drugs. The payment plan spreads out costs over the year but doesn’t lower drug prices. It works best for those with high early-year drug costs and who sign up earlier in the year. However, it may not be ideal for those with low or steady drug costs or who receive other forms of assistance. For more information, reach out to your M3 Elevate Medicare team, or go to medicare.gov.
