In most cases, you must pay your Medicare Part D plan's Initial Deductible before you receive Medicare Part D coverage - just as you would with other types of insurance, such as automobile insurance.

For example, the standard 2024 Medicare Part D deductible is $545 ($590 in 2025) and many people must satisfy this $545 deductible before their Medicare drug plan coverage begins - unless they are enrolled in a Medicare plan that excludes certain drugs from the plan's deductible (see Example 4, below) - or their Medicare drug plan has a $0 deductible.

Reminder:  Your drug plan's Initial Deductible can change every year.

Remember, your Medicare Part D plan's Initial Deductible can change (increase or decrease) every year - or even be eliminated (reduced to $0), so be sure to read your Annual Notice of Change letter (ANOC) that you receive in late-September each year to see how your Medicare plan coverage will change in the next year - or you can see how your 2024 Medicare plan changed from 2023 using our Medicare Part D 2023/2024 Compare tool or Medicare Advantage plan 2023/2024 Compare tool.

Here are a few examples of how your Initial Deductible affects your Medicare Part D prescription drug coverage.

Example 1:  What do I pay when my first purchase of the year is a $390 Tier 4 drug and I have a $545 deductible?

You will pay the $390 retail drug price.  If you are just starting your new Medicare Part D plan coverage and your first purchase is a Tier 4 formulary medication that has a retail costs of $390 - and your Medicare plan has a standard 2024 deductible of $545 – you would pay the full retail drug price of $390 and you would then have a remaining Initial Deductible balance of $155 ($545-$390) - this means you would still need to pay $155 out-of-pocket before your Medicare drug plan begins to share in the cost of formulary drug purchases.


Example 2:  This is your second drug purchase where your Initial Deductible is not fully met and your copay is less than the remaining retail balance (straddle claim).

If you have a $155 balance remaining in your Initial Deductible (from Example #1) and your next purchase is a $460 Tier 3 drug that has a $47 copay, you would first pay the $155 balance to meet your $545 Initial Deductible, and the remaining amount of the retail price or $305 ($460 - $155) would carry-over into (or "straddle" into) your Initial Coverage Phase where you have a $47 copay.

In this example, since your $47 copay is less than the remaining retail balance ($305), you would pay the $47 Tier 3 copay on the $305 balance falling (or "straddling") into the Initial Coverage Phase for a total drug cost to you of $202 ($155 + $47).

Again, you pay off the balance of the Initial Deductible ($155) and then pay the $47 copay on the $305 remaining retail balance of the $460 Tier 3 drug purchase that falls or “straddles” from your Initial Deductible into the Initial Coverage Phase.


Example 3:  This is your second drug purchase where your Initial Deductible is not fully met and your copay is more than the remaining retail balance (straddle claim).

If you have an $155 balance remaining in your Initial Deductible (from Example #1) and your next purchase is a Tier 3 drug with a $160 retail cost and the plan has a copay of $47 for the drug, you would first need to meet the $155 deductible balance (see Example 1 above), then you have $5 of the retail cost that is unpaid ($160 retail drug price - $155 deductible balance) that would “ straddle” into the second phase of your Medicare Part D coverage (Initial Coverage Phase) where you have a $47 copay for this Tier 3 drug.

However . . . since you never pay more than the drug's retail cost ($160), your additional cost-sharing would only be the remaining $5 retail balance - and not the $47 copay.  Your total drug cost would still be $160 for the Tier 3 drug.

Then, if you purchased a third Tier 3 drug after this $160 drug purchase, the third Tier 3 purchase would be completely in your plan's Initial Coverage Phase (or your second phase of coverage) - and you would pay your $47 copay for a Tier 3 drug that has a retail price over $47.

Example 4:  What will I pay when my first purchase of the year is a $22 Tier 2 drug excluded from my deductible?

You will pay your plan’s Tier 2 copay.  Many Medicare Part D plans exclude Tier 1 and Tier 2 drugs from the plan's Initial Deductible and these low-costing drugs are not impacted by your Initial Deductible and have immediate coverage as if you were in your plan's  Initial Coverage Phase.

So, if you have a $545 standard deductible with Tier 1 and Tier 2 drugs excluded from the deductible, and you purchase a Tier 2 generic drug that has a retail price of $22 (with a copay of $3) – you pay only the $3 copay and your $545 deductible is not affected by your purchase.  You can click here to read more about Tier 1 and Tier 2 exclusions.


Example 5:  You only use Tier 1 and Tier 2 drugs that are excluded from the Initial Deductible and you now have a Tier 3 drug with a retail cost of $560 and a $47 copay. (straddle claim)

Since you have not met your $545 deductible, your first Tier 3 drug purchase would cost you the full $560 retail cost - and like the Example #2 and Example #3 above - this example straddles the Initial Deductible and Initial Coverage phases.

You would first pay $545 of the $560 retail drug cost to satisfy your $545 Initial Deductible, the remaining $15 portion of the retail cost ($560 - $545) would carry over (straddle) to your Initial Coverage phase where you have a $47 copay.

But once again (as in Example #3), since you never pay more than the drug plan’s retail cost, you are not charged the full $47 copay, but instead, you pay the remaining $15 retail balance, so your total cost-sharing would be $560 ($545 + $15).

When you make your next Tier 3 drug purchase, you would be in the Initial Coverage phase and pay only the $47 Tier 3 copay.


Example 6:  What do I pay for a $15,175 Tier 5 specialty drug when I have a $545 Initial Deductible? (straddle claim)

Around $3,333.  Your coverage cost in this example would be calculated like the straddle claim in Example 3, above.  However, if you are using a Tier 5 specialty brand-name medication with a retail cost over $12,051, having a 25% cost-sharing, you will move through (or straddle) all four phases of your drug coverage with a single purchase: you will satisfy your $545 deductible, enter and exit your Initial Coverage phase, then enter and exit the Donut Hole, and finish in the Catastrophic Coverage phase (where, starting in 2024, you will have $0 cost-sharing).

The total cost of your first $15,175 purchase would be around $3,333 calculated as:
$545 deductible + $1,121 in initial coverage phase + $1,667 in the Coverage Gap + $0 in the Catastrophic Coverage phase.

Again, once reaching the 2024 Catastrophic Coverage phase, you will have no cost-sharing ($0) for formulary drugs through the end of the year.

Tip:  To help you estimate your own out-of-pocket drug costs, you can use our PDP-Planner or out-of-pocket spending calculator – in this $15,175 example, you can enter a $545 deductible and choose 100% brand-name drugs and this will show you the costs in each Part D plan phase throughout the year.

Example 7:  Your Medicare Part D plan has a $545 deductible and your first purchase is a Tier 3 insulin.

You will pay a copay of no more than $35 even though you have not met your plan's $545 initial deductible.  Starting in 2024, the purchase of your insulin product will not affect the deductible - just as the purchase of a Tier 1 or Tier 2 drug excluded from the deductible.

As background, beginning with plan year 2023, all Medicare drug plans offer all insulin on the plan's formulary at a copay of no more than $35 based on the 2022 Inflation Reduction Act (IRA).

The IRA stipulates that Medicare Part D drug plans must offer various types and forms of insulin for a copay of $35 (or less) and will keep this low cost-sharing throughout all phases of coverage including: the plan's Initial Deductible, Initial Coverage phase, and the Coverage Gap (or Donut Hole).

In addition, beginning with plan year 2024, all formulary drug purchases have a $0 copay once reaching Catastrophic Coverage phase for the remainder of the year.


Example 8:  Your Medicare Part D plan has a $0 deductible and you purchase a Tier 3 drug with a retail cost of $500 and a $47 copay.

You pay $47.  Since your Medicare Part D drug plan has a $0 deductible, you have immediate cost-sharing or coverage for your Tier 3 drug purchase and you will pay only the $47 copay.


Example 9:  Your Medicare Part D plan has a $545 deductible and you purchase a non-formulary drug with a retail cost of $535.

You pay the $535 retail price.  You will not have any coverage for a non-formulary drug - and you will pay the full $535 retail drug cost.

If you use a non-formulary drug, you can ask your Medicare Part D plan for a formulary exception whereby your non-formulary drug will be covered by your plan.  However, a Medicare drug plan is not obligated to approve your formulary exception request and you may need to appeal your plan's rejection of your request.  You have the right to appeal a negative decision through a number of layers, ultimately having the review of an independent group.

You also have the option of using a Drug Discount card as provided by companies like GoodRx or WellRx to purchase the non-formulary drug.