The Background and Basics of Medicare Part D Prescription Drug Plans
What are the basic details of the 2026 Medicare Part D Program?
In general, Medicare Part D prescription drug plans provide insurance coverage for your prescription drugs - just like other types of insurance. Your Medicare prescription drug coverage can be provided by a "stand-alone" Medicare Part D plan (only prescription coverage) or a Medicare Advantage plan that includes prescription coverage (or an MA-PD that includes Medicare health and prescription drug coverage). If you join a Medicare Part D prescription drug plan, you will pay a monthly premium ranging from only a few dollars up to over 100 dollars. If you join a Medicare Advantage plan, you may have a $0 premium. Your monthly premiums will vary depending on the benefits of your selected Medicare Part D plan or Medicare Advantage plan and your resident state.Some Medicare Part D or Medicare Advantage plans have an initial deductible where you pay 100% of your prescription costs before your Part D prescription drug coverage or benefits begin. Other Medicare Part D or Medicare Advantage plans have no initial deductible or a $0 deductible, providing you with coverage as soon as you purchase your first prescriptions. Please note, that you may pay a higher monthly premium for Medicare Part D plans with no initial deductible. Also, the amount of the initial deductible can (and probably will) change each coverage year.
Each Medicare prescription drug plan will have a list of prescription drugs or formulary that are covered by the plan. Drug lists or formularies can vary greatly from one prescription drug plan to the next. So it is key that you ensure that your medications are covered by your chosen Medicare prescription drug plan.
When you use your Medicare Part D plan after the initial deductible (if applicable), you will pay a certain part of your prescription costs and your Medicare prescription drug plan will pay a part of your drug costs. Your plan's cost-sharing (copayments or coinsurance) will vary depending on the particular drug plan you choose.
The Centers for Medicare and Medicaid Services (CMS) notes:
Medicare prescription drug coverage (Part D) helps you pay for both brand-name and generic drugs. Medicare drug plans are offered by insurance companies and other private companies approved by Medicare. You can get coverage 2 ways:
1. Medicare Prescription Drug Plans (sometimes called “PDPs”) add prescription drug coverage to Original Medicare, some Medicare Private Fee-for-Service (PFFS) Plans, some Medicare Cost Plans, and Medicare Medical Savings Account (MSA) Plans.
2. Some Medicare Advantage Plans (like HMOs or PPOs) or other Medicare health plans offer prescription drug coverage. You generally get all of your Medicare Part A (Hospital Insurance), Medicare Part B (Medical Insurance), and Part D through these plans. Medicare Advantage Plans that offer prescription drug coverage are sometimes called “MA-PDs.”
CMS uses the term “Medicare drug plans” to mean all plans that provide Medicare prescription drug coverage.
Here is a quick summary of a Medicare Part D plan:
- Each year, Medicare Part D prescription drug plans (or Medicare Advantage plans will be available in your state for a wide range of monthly premiums. (You can click here to see our Medicare Part D Plan Overview by State and get an overview if the Medicare Part D plan features and premiums in your state.)
- The CMS or Medicare defined standard benefit or model Medicare Part D plan has an annual $615 initial deductible. However, many Medicare Part D plans do not have the initial deductible (or have a $0 deductible) and provide "first dollar" drug coverage.
- In the Medicare model standard plan, after the initial deductible is met by the insured (meaning, you have paid the first $615), the Medicare prescription drug plan will pay 75% of the covered prescription costs.
- The insured person pays the remaining 25% until they have spent a total of $2,100 out-of-pocket. These types of plans (that follow the CMS model plan) are using coinsurance: 25% Insured - 75% Insurer
- Prescription drugs are arranged in "tiers" or logical groups and each tier is assigned a cost-sharing that is paid by the insured. The cost-sharing is either a fixed dollar amount (copayment) or a percentage of the drug cost (coinsurance).
- After the maximum out-of-pocket of $2,100 has been reached, the insured exits the Initial Coverage phase.
- The insured person is now in what is called "Catastrophic Coverage" and pays nothing for their formulary prescription drugs through the end of the year.
- Benefits may vary depending on income levels. Extra-Help programs are available based on financial need.
- Premiums may increase annually. Drug lists or formularies may change throughout the year.
The Centers for Medicare and Medicaid Services (CMS) notes:
Drug coverage is insurance. Doctor samples, drug discount cards, free clinics, or drug discount websites are not drug coverage.
Which governmental agency is responsible for the Medicare Part D program?
The Centers for Medicare and Medicaid Services (CMS) or Medicare is responsible for the administration of the Medicare Part D prescription drug program. Private insurance carriers actually implement the various Medicare Part D plans across the country under the direction of CMS.How many Medicare Part D plans are currently available?
There are approximately 15 to 20 Medicare Part D prescription drug plans (or PDPs) available in each state or CMS region, please see PDPFacts.com for more details.Click here if you would like to see our 2026 Medicare Part D Plan Overview by State to review features and premiums of the nationally available stand-alone prescription drug plans available in your own state.