Original Medicare consists of Medicare Part A (hospital coverage) and Part B (outpatient coverage), but it does not provide prescription drug coverage. You will need to buy a Medicare Part D plan from a private insurance company to help pay for your prescription drug costs. (Note: It is also possible to get prescription drug coverage through Medicare Part C.)
Private insurance companies sell Part D plans with different costs. Each plan has three different costs: the premium, yearly deductible and copayments.
- NOTE: There are programs to help with the costs. Learn more on our Help with Part D Costs page.
The premium is the amount you pay each month to the Part D plan for coverage. Each Part D plan has a different monthly premium.
Some people do not have to pay a premium. For example:
- If you are on Medicaid or a Medicare Savings Program, you can choose a plan that does not have a premium. Look for a plan that is labelled “LIS Eligible.” LIS stands for Low Income Subsidy.
- If you are on VPharm, you can choose an LIS Eligible plan that does not have a premium, but you still have to pay your monthly VPharm premium ($15, $20 or $50) to the State of Vermont.
The yearly deductible is the amount you must pay out of your own pocket before your plan helps to pay your drug costs. This amount is in addition to your monthly premium. The deductibles for 2025 plans range from $0 to $590. Your deductible starts fresh on January 1 each year.
Some people do not have to pay a deductible. For example:
- If you are on Medicaid, VPharm or LIS, you will not have to pay a deductible.
A copayment is money you must pay out of your pocket when you fill your prescription at the pharmacy. Some plans do not have copayments. Other plans may have different copays for different types of drugs. Some plans may have copayments of $25 or more for every prescription. The plan will have a drug “formulary.” This will tell you what copayments you will owe for each drug.
Some people will have lower co-payments. For example:
- If you are on Medicare and Medicaid or the Medicare Savings Program, your copayment should not be more than $4.90 for generic or preferred drugs and $12.15 for all other drugs in 2025 for any one covered drug.
- If you are on VPharm, your copayments will be $1 or $2 for each covered drug.
Comparing Part D plans
Medicare.gov has a tool to help you compare Part D plans offered by different companies. Enter your zip code and select Medicare drug plan (Part D). To get more specific information, you can enter the medications you take.
How is the Medicare Part D benefit changing in 2025?
In 2025, all Part D plans have an annual $2,000 out-of-pocket spending limit. There is no more “coverage gap” or “donut hole.”
Medicare Part D coverage is now divided into three stages:
- Deductible stage: During this stage, you will pay for your drugs out of your pocket (insurance will not help). There are programs to help with the costs in this stage — read below. No plan can have a deductible greater than $590 in 2025.
- Initial coverage stage: After you pay out-of-pocket up to your full deductible amount, your plan will help pay for your covered prescription drugs. During this stage, you will pay a copayment or coinsurance for each covered drug and your insurance will cover the rest.
- Catastrophic coverage stage: If your out-of-pocket costs reach $2,000, you won’t have to pay any copayment or coinsurance for covered Part D drugs for the rest of 2025. During this stage, your covered drugs will cost $0.
As you start using your Part D benefits, you will move through these stages.
For example: Phoebe needs an asthma inhaler. The full cost of the inhaler is $160. Her Part D plan has a $590 deductible in 2025. The cost that Pheobe pays for her inhaler will change during the year based on what stage she is in:
- Deductible stage: When Pheobe first begins to use her Part D drug coverage, she will pay the full cost for the inhaler ($160).
- Initial coverage stage: If Pheobe meets her deductible (pays $590 out of pocket for covered Part D drugs), she will move into the initial coverage stage. If she picks up her inhaler from the pharmacy during this stage, she will pay 25% of the full cost ($40).
- Catastrophic coverage stage: If Pheobe pays $2,000 out of pocket for covered Part D drugs during the year, she will move into the catastrophic coverage stage. If she picks up her inhaler from the pharmacy during this stage, she will pay $0.
If Phoebe gets financial help through the VPharm or Low Income Subsidy (LIS) / Extra Help programs, her costs will be different. For example:
- If Pheobe has VPharm, the co-payment for her inhaler will always be $1 to $2 during every stage.
- If Phoebe has only LIS / Extra Help and does not have VPharm, the co-payments will always be between $4.90 and $12.15 at every stage.
Remember if you have LIS or VPharm, your copayments will stay the same during all stages of Part D coverage. This is helpful because it lowers your costs and spreads them out across the year.
Reaching the Part D $2,000 out-of-pocket limit
The out-of-pocket costs that help you reach the $2,000 cap include:
- Your plan’s deductible (between $0 - $590 in 2025)
- What you paid for covered Part D drugs during the initial coverage stage
- Amounts paid by others, including family members, most charities, and other people on your behalf
- Amounts paid by LIS / Extra Help, VPharm, AIDS Drug Assistance Programs, and the Indian Health Service
- Some amounts paid by an enhanced Part D plan
- Costs reimbursed by other insurance, like job-based insurance
Note: The money that you pay out-of-pocket for your Part D plan premium (monthly cost) does not count towards the $2,000 out-of-pocket limit.
