Prescription drug costs are one of the most common sources of frustration for Medicare beneficiaries. A medication that cost $15 last month suddenly costs $80. A drug you have taken for years disappears from your plan's formulary. A pharmacy you have always used is no longer in-network.
These surprises are not random — they are the result of how Part D plans are structured. Understanding that structure is the best way to protect yourself from unexpected costs.
How Part D Coverage Is Structured
Medicare Part D prescription drug coverage is offered through private insurance companies approved by Medicare. You can get Part D coverage in two ways: through a standalone Prescription Drug Plan (PDP) paired with Original Medicare, or through a Medicare Advantage plan that includes drug coverage (MA-PD).
Every Part D plan has a formulary — a list of covered medications organized into cost tiers. The tier determines what you pay:
- Tier 1 (Preferred Generic): Lowest cost. Common generic medications.
- Tier 2 (Generic): Slightly higher cost. Other generic drugs.
- Tier 3 (Preferred Brand): Moderate cost. Brand-name drugs the plan prefers.
- Tier 4 (Non-Preferred Brand): Higher cost. Brand-name drugs not on the preferred list.
- Tier 5 (Specialty): Highest cost. Expensive medications, often biologics or injectables.
The same medication can sit on different tiers in different plans. This is why checking the formulary is one of the most important steps when choosing or reviewing a Part D plan.
For the full details on Part D structure and costs, visit Medicare.gov.
The Coverage Gap and How It Works
Part D plans have a standard benefit structure with four phases that determine what you pay throughout the year:
- Deductible phase. You pay the full cost of your drugs until you meet the plan's deductible (some plans have no deductible or waive it for certain tiers).
- Initial coverage phase. After the deductible, you pay copays or coinsurance for each prescription until your total drug costs reach a specific threshold.
- Coverage gap. Once you pass the initial coverage threshold, you enter the coverage gap. Under current rules, your costs in this phase have been significantly reduced compared to earlier years, but you may still pay more than you did during initial coverage.
- Catastrophic coverage. After your out-of-pocket spending reaches a set amount, you pay a small copay or coinsurance for the rest of the year.
These thresholds change annually. The amounts for any given year are published by CMS before the Annual Election Period.
The key takeaway: your costs are not flat throughout the year. If you take expensive medications, you may move through these phases quickly and face higher costs mid-year before reaching catastrophic coverage.
Five Ways to Avoid Surprise Drug Costs
Most prescription cost surprises are preventable with a little upfront work.
1. Check the formulary before you enroll (and every year after). Your plan's formulary changes annually. A drug that was Tier 1 this year could be Tier 3 next year — or removed entirely. During each Annual Election Period, compare your medication list against the formularies of available plans.
2. Use your plan's preferred pharmacy. Part D plans have pharmacy networks, and many have a "preferred" pharmacy tier with lower costs. Filling prescriptions at a non-preferred pharmacy can mean significantly higher copays for the same medication.
3. Ask about generic and therapeutic alternatives. If a medication moves to a higher tier or is removed from the formulary, talk to your doctor about alternatives. There may be a generic equivalent or a different medication in the same class that is covered at a lower tier.
4. Understand prior authorization and step therapy requirements. Some medications require prior authorization from the plan before they are covered. Others require step therapy, meaning you must try a less expensive drug first before the plan will cover the more expensive option. These requirements can delay access to medications if you are not prepared.
5. Review your plan every fall during AEP. Even if you like your current plan, check whether your medications are still covered at the same tier and cost. A plan review with a licensed advisor takes a fraction of the time it takes to sort through formulary changes on your own.
When Part D Costs Signal a Need to Switch Plans
There are clear indicators that your current Part D coverage may no longer be the right fit:
- A medication you take regularly has been moved to a higher tier or removed from the formulary
- Your total monthly drug costs have increased significantly without a change in your medications
- Your preferred pharmacy is no longer in the plan's network
- You are reaching the coverage gap earlier in the year than you expected
- A new medication has been prescribed that is not covered or requires an expensive prior authorization process
None of these situations require you to wait until AEP if you qualify for a Special Enrollment Period. However, most Part D changes happen during AEP (October 15 through December 7). Our resources page has tools to help you prepare.
We do not offer every plan available in your area. Plan availability depends on your county and eligibility. Kingdom Health Group is licensed in Florida, Texas, Pennsylvania, and Ohio.
Extra Help and Low-Income Subsidies
If your income and resources are limited, you may qualify for Medicare Extra Help (also called the Low-Income Subsidy). This program helps pay Part D premiums, deductibles, and copays.
Eligibility depends on your income, assets, and other factors. You can apply through Social Security or your state Medicaid office. Even if you are not sure whether you qualify, it is worth checking — the savings can be substantial.
A licensed advisor can help you understand whether Extra Help or other assistance programs may be available to you.
Frequently Asked Questions
Can my Part D plan change which drugs it covers during the year?
Plans can make some formulary changes during the year, but they are required to notify affected members and provide a transition period. Most major formulary changes happen at the start of each new plan year on January 1, which is why reviewing your plan during AEP each fall is critical.
What happens if my drug is not on my plan's formulary?
You have several options: ask your doctor about a covered alternative, request a formulary exception from your plan (your doctor would need to provide supporting documentation), or switch to a plan that covers the medication during the next available enrollment period.
Is it worth switching Part D plans for a small premium difference?
Premium is only one factor. A plan with a slightly higher premium but better formulary coverage for your specific medications could save you hundreds of dollars over the year. Always compare total expected costs — premiums plus out-of-pocket drug costs — rather than premium alone.
How do I find out which tier my medication is on?
Every Part D plan publishes its formulary online and is required to provide it to members. You can also use the plan finder tool on Medicare.gov or ask a licensed advisor to look up your medications across available plans.
What is the Part D late-enrollment penalty?
If you go 63 or more consecutive days without creditable prescription drug coverage after your Initial Enrollment Period, you may owe a late-enrollment penalty. The penalty is calculated based on the number of months you were without coverage and is added to your Part D premium for as long as you have Part D.