VIDEO: How Medicare Part D Works (2025)
Medicare Part D prescription drug coverage is going through a big transformation in 2025. Two changes are happening:
There will be a $2,000 cap on prescription costs. *
The Coverage Gap (Donut Hole) has been removed.
Both of these are welcome changes that will no doubt simplify your coverage and plan selection.
Watch our video to the right on how this works, or read below.
* NOTE: Only COVERED medications on your plan’s formulary list of drugs are limited to the $2,000 cap.
2025 Medicare Part D Prescription Drug Coverage
Let’s Review Each Of The 3 Phases. As You Read The Descriptions, Reference The Visual Above...
Deductible
This is the period where you must pay a certain amount of prescription costs before your Part D plan kicks in. The maximum deductible a Part D plan can have is announced each year by Medicare. In 2025, the maximum deductible is $590. That doesn’t mean it’s the maximum you’ll pay all year, rather it’s what you owe initially before your plan begins to help pay a portion of your drug costs. Some Part D plans have the full $590 deductible, some have a lower deductible, some don’t have a deductible at all.
Initial Coverage
Assuming your medications are on your plan’s formulary list of drugs, this is when your Part D plan begins to pay the bulk of a drug’s cost. It’s “Tier-based” pricing. Typically, generic drugs are Tier 1 or Tier 2...and then, brand name drugs are Tier 3, Tier 4, and specialty drugs are Tier 5. You will pay tier-based pricing until you reach the cap of $2,000 (including your deductible)…which means you’ve reached the Catastrophic phase.
Catastrophic
As indicated, once you reach $2,000 in copays (including your deductible), you no longer pay any copays for COVERED drugs on your plan’s formulary list of medications.
Reference Links
www.medicare.gov
Medicare Prescription Drug Law
