Medicare Part D and Drug Coverage: How Prescriptions Really Work

Part D is where Medicare loses people. The vocabulary — formulary, tier, deductible, coverage phases — makes prescription coverage feel more complicated than it is. Here’s the whole thing in plain language.

First: how you get drug coverage

There are two roads, and they price drugs the same way:

• Built in: Most Medicare Advantage plans include drug coverage (an “MA-PD” plan). One card, one plan.
• Stand-alone: If you stay on Original Medicare or pair it with Medigap, you buy a separate Part D drug plan.

Either way, what you pay for a given prescription comes down to the plan’s formulary and the tier your drug sits on.

The formulary and tiers

A formulary is the plan’s list of covered drugs. Each drug is placed in a pricing tier:

The same medication can sit on a different tier in every plan you compare. That’s why “Does this plan cover my drug?” is the wrong question. The right one is “What tier is my drug on, and what does that tier cost?”

The coverage phases

Part D spending moves through phases across the year. In simple terms, you may first pay a deductible, then move into a phase where you and the plan share costs, and — thanks to changes that took effect in 2025 — there’s now an annual cap on what you pay out of pocket for covered Part D drugs. That cap is one of the most important recent improvements in Medicare, because it puts a ceiling on a cost that used to be open-ended for people on expensive medications.

Because the exact dollar figures change yearly, always confirm the current numbers on Medicare.gov rather than trusting an old chart.

How to compare drug coverage between plans

1. List every prescription you take — name, dose, and how often.
2. Check each drug’s tier on every plan’s formulary.
3. Total the yearly cost, not the copay on a single fill.
4. Watch for restrictions like prior authorization or “step therapy,” which can require you to try a cheaper drug first.

Do this and two plans that both “cover” your medications will often reveal a few hundred dollars a year in difference. Our plan-selection checklist folds this into the wider decision.

Don’t skip it just because you’re healthy

The Part D late-enrollment penalty can be added to your premium for as long as you have coverage if you go without creditable drug coverage when first eligible. Even if you take few medications today, signing up on time protects you from a penalty later. The enrollment-periods guide covers the timing.

Bottom line

Drug coverage rewards homework. Match your actual prescriptions against each plan’s formulary and tiers, total the year, and let the numbers decide. Our scored reviews note how the major carriers handle drug coverage so you can shortlist before you do the detailed comparison on Medicare.gov.

This guide is educational and independent. Part D figures change every year and vary by plan. Confirm current numbers and your specific drugs at Medicare.gov, by calling 1-800-MEDICARE, or with your free State Health Insurance Assistance Program (SHIP).