Key Takeaways

• Medicare can help with the cost of prescription drugs, but the amount of coverage and out-of-pocket expenses depend on the specific part of Medicare you’re enrolled in and how much medication you use throughout the year.

• In 2025, new rules have eliminated the coverage gap (donut hole), added a $2,000 cap on out-of-pocket prescription drug costs, and introduced new payment flexibility for Part D enrollees.

How Medicare Handles Prescription Drug Coverage

If you take medications regularly, Medicare might ease some of your financial stress—but it’s not always straightforward. The way your prescriptions are covered depends on the type of Medicare plan you have, how your medications are classified, and how far you’ve progressed through the drug coverage phases. Let’s look at what each part of Medicare offers when it comes to prescriptions.

Original Medicare: Limited Prescription Help

Original Medicare includes Part A (hospital insurance) and Part B (medical insurance). Unfortunately, neither part offers comprehensive prescription drug coverage:

• Part A may cover prescriptions only if you are hospitalized and require drugs as part of your inpatient treatment.

• Part B may cover specific medications administered in a clinical setting, such as chemotherapy drugs or injectable medications given at a doctor’s office.

If you’re relying solely on Original Medicare and you need everyday prescriptions filled at a pharmacy, you won’t have coverage unless you add a separate drug plan.

Medicare Part D: Your Primary Prescription Coverage Option

Part D plans are standalone prescription drug plans that you can add to Original Medicare. These plans are offered by private companies but regulated by Medicare. In 2025, Part D continues to be the main path to prescription drug coverage for Medicare beneficiaries.

Coverage Phases You Need to Know

Part D plans have structured coverage levels that affect how much you pay out of pocket:

1. Deductible Phase – In 2025, you may need to pay up to $590 before your plan starts contributing. Some plans waive the deductible for generic drugs.

2. Initial Coverage Phase – After meeting the deductible, you pay a portion of your medication costs, typically a flat copay or percentage.

3. Catastrophic Coverage Phase – Starting in 2025, once you’ve spent $2,000 out of pocket, your plan covers 100% of your covered drug costs for the rest of the year. This is a significant change from previous years.

This new structure eliminates the previous coverage gap known as the “donut hole.”

Extra Help for Those Who Qualify

If your income and assets fall below certain thresholds, you might qualify for a federal program called Extra Help. This can drastically reduce your:

• Monthly premiums

• Annual deductible

• Copayments and coinsurance

The program adjusts each year, and in 2025, it continues to offer full or partial subsidies for qualifying individuals. This can be an important support system if you have limited financial resources and need multiple prescriptions regularly.

Medicare Advantage Plans and Drug Coverage

Medicare Advantage Plans (also known as Part C) are an alternative to Original Medicare. Many of these plans include prescription drug coverage as part of the package. If you’re enrolled in a Medicare Advantage Plan with drug coverage, you don’t need a separate Part D plan.

While coverage details can vary significantly from plan to plan, most operate similarly to Part D in terms of deductibles, copayments, and coverage phases. In 2025, these plans are required to align with the same out-of-pocket maximum of $2,000 for prescription drugs.

Keep in mind:

• You must be enrolled in both Medicare Part A and Part B to join a Medicare Advantage Plan.

• You can only enroll or switch plans during specific periods, like the Annual Enrollment Period from October 15 to December 7.

Understanding What Drugs Are Covered

Whether you’re in a Part D plan or a Medicare Advantage Plan with drug coverage, it’s critical to review the plan’s formulary—the list of covered drugs. Formularies are divided into tiers:

• Tier 1 – Preferred generic drugs with the lowest cost

• Tier 2 – Non-preferred generics or brand-name drugs

• Tier 3 and above – Higher-cost medications or specialty drugs

Each tier comes with different cost-sharing rules. If your prescription is on a higher tier, you may want to talk to your healthcare provider about alternative options or request an exception.

Your Annual Costs: What to Expect in 2025

While specific costs vary by plan and location, 2025 sets some clear expectations for drug-related spending:

• Deductible limit: No more than $590

• Out-of-pocket cap: $2,000 annually on covered Part D drugs

Once you hit the $2,000 threshold, your plan covers all your remaining drug costs for the calendar year. This cap is a new feature in 2025, replacing the previous system that involved coinsurance during the catastrophic phase.

Monthly Payment Option for Drug Costs

Also new in 2025 is the Medicare Prescription Payment Plan, which allows you to spread your out-of-pocket costs across the calendar year rather than paying large amounts up front when you reach the deductible or higher drug tiers.

This can benefit you if you take expensive medications early in the year or want to manage a consistent monthly budget for your prescriptions.

To enroll:

• You must opt in at the beginning of the plan year or when first enrolling in a Part D plan

• Payments are divided evenly across the months, rather than being due in full when the prescription is filled

What’s Not Covered

It’s important to know what Medicare doesn’t help with when it comes to prescriptions. Even in 2025, Medicare typically does not cover:

• Over-the-counter medications

• Drugs not listed in your plan’s formulary

• Medications prescribed for cosmetic reasons

• Drugs used for weight loss or gain

If you rely on these types of medications, you’ll likely need to pay out of pocket or explore discounts and assistance programs outside of Medicare.

Annual Review Is Essential

Your prescription needs and Medicare plan options can change year to year. That’s why it’s essential to review your coverage during the Annual Enrollment Period (October 15 to December 7) or during a Special Enrollment Period triggered by certain life changes, such as moving or losing other coverage.

When reviewing, ask yourself:

• Are all my medications still covered?

• Have my costs increased?

• Would a different plan offer better coverage for my needs?

Failing to review your plan can lead to unnecessary costs or loss of access to medications.

Special Programs for Chronic Conditions

If you have a chronic health condition—such as diabetes, heart disease, or asthma—some plans offer targeted support. Medicare’s Chronic Care Special Needs Plans (C-SNPs) may include enhanced drug coverage, care coordination, and disease management resources.

These plans require a diagnosis of a qualifying condition and may be available only in specific service areas. In 2025, enrollment in these plans follows the same eligibility and enrollment timelines as other Medicare Advantage options.

What to Ask Before Choosing a Plan

Before committing to any Medicare plan that includes drug coverage, ask these questions:

• Are all my current prescriptions on the plan’s formulary?

• What is the plan’s deductible and monthly premium?

• How much will I pay for each prescription tier?

• Is my pharmacy in the plan’s preferred network?

• Can I enroll in the Medicare Prescription Payment Plan for 2025?

Being proactive helps you avoid high costs and coverage surprises throughout the year.

Medicare Can Help—But Only If You Choose the Right Plan

If you take medications regularly, you can’t afford to overlook how Medicare handles prescription drug coverage. The changes in 2025—especially the out-of-pocket cap and the monthly payment option—are meaningful improvements, but not all plans are created equal. Your personal medication list, budget, and preferences should guide your decisions.

For help comparing options and understanding which plan works best for your situation, speak with a licensed agent listed on the website for professional advice tailored to your needs.