Medicare Prescription Costs in 2025
Medicare Part D includes both Medicare Advantage Prescription Drug (MAPD) plans and Prescription Drug plans (PDPs). They have a variety of plan options with unique formularies and tier structures that determine what you pay for specific prescriptions. The formulary (list of covered drugs), tier (price level), and copay or coinsurance (your cost) can cause your specific prescription costs to vary from plan to plan. The prescription drug phase you're in can also affect what your out-of-pocket cost is for your drugs. Because of this, it's important to compare premiums, deductibles, and copays for your specific prescriptions when choosing prescription coverage.
In 2025, your yearly out-of-pocket drug costs will be capped at $2,000 if you have Medicare prescription coverage. If your drug costs are high enough to reach this cap, you don’t have to pay a copayment or coinsurance for covered drugs for the rest of the calendar year. Starting in 2025, you’ll also have the option of spreading your drug costs across monthly payments throughout the year. Additionally the coverage gap phase has been eliminated.
You can use Shop & Compare to search for plans and compare drug costs by selecting Cost Estimate for a plan you're considering.
Medicare Prescription Payment Plan
Starting in 2025, you have the option to spread your prescription costs out across the calendar year (January–December). This might help you manage your expenses, but it doesn’t save you money or lower your drug costs. If you select this payment option, each month you’ll continue to pay your plan premium (if you have one), and you’ll get a bill from your health or drug plan to pay for your prescription drugs (instead of paying at the pharmacy). All plans offer this payment option, and participation is voluntary. It doesn’t cost anything to use this option. Contact your plan or visit Medicare.gov/prescription-payment-plan for more information and to find out if this payment option is right for you.
Lowering Medicare Prescription Drug Costs
If you need additional help paying for your drug costs, there are several things we recommend:
Ask your doctor about lower cost options, for example, generics or over-the-counter drugs.
Ask your doctor about sample packs for your medication.
Explore national or community charitable programs, such as BenefitsCheckUp or National Organization for Rare Disorders (NORD).
Look in to pharmaceutical assistance programs.
Look in to state pharmaceutical assistance programs.
Apply for “Extra Help” or call 1-800-772-1213 or 1-800-MEDICARE (1-800-633-4227).
Prescription Drug Plan Phases
Medicare drug plans all have the same basic plan structure. There are three phases that determine how much you pay for your prescription drugs. Your monthly Explanation of Benefits (EOB) includes information on your current phase.
Phase 1 – Deductible
You're responsible for the full retail drug costs until you reach your plan’s deductible amount. Deductibles vary by plan. The maximum deductible in 2025 is $590. Only prescription drug costs go toward the deductible. If you use a discount card, those costs don't count toward the plan phases.
Phase 2 – Initial Coverage
Once you've met your deductible, you move in to the initial coverage phase. You're responsible for your copay or coinsurance when you have your prescriptions filled. Your out-of-pocket cost is capped at $2,000.
Phase 3 - Catastrophic Coverage
Once you spend $2,000 out-of-pocket in 2025, you enter the catastrophic coverage phase. You no longer have to pay a copayment or coinsurance for Part D drugs for the rest of the calendar year.
Formulary, Drug Tiers, and Costs
Formulary
A formulary is a list of prescription drugs covered by an insurance plan. This list can change throughout the year, but if it does, the plan must inform you of the change. The formulary is divided into cost tiers based on the cost to the insurance carrier.
Drug Tiers
Each insurance carrier negotiates the price of each drug with the manufacturer. If a carrier receives a good discount on one drug, but not on a competing drug used to treat the same condition, the carrier charges a lower copay for the discounted (preferred tier) drug and a higher copay for the more expensive (non-preferred tier) drug.
Because different insurance carriers pay different prices for the same drug, they may place the same drug in different tiers depending on its cost or availability. This can result in price differences among carriers.
Copays and Coinsurance
Depending on the tier, carriers can charge a percentage of the drug's cost (coinsurance) or a set dollar amount (copay), which can cause a large difference depending on the retail cost of the drug.
You may also pay a different copay depending on whether you use mail-order or a walk-in pharmacy.
Premium
The premium is a monthly fee that varies by plan. You pay this in addition to the Medicare Part B premium. If your income is above a certain amount, you may pay a Part D Income Related Monthly Adjustment Amount (Part D-IRMAA).
Note: If you don't sign up for prescription coverage when you're first eligible, you may have to pay a Part D late enrollment penalty.