TL;DR
Every Part D plan has a formulary (its list of covered drugs), organized into tiers. Your costs depend on which tier each medication lands in. Every plan moves through phases each year — deductible, initial coverage, and a new $2,000 annual out-of-pocket cap that started in 2025.
Formularies and tiers
A formulary is the list of drugs a plan covers. Each drug sits on a tier (usually 1–5). Lower tiers (generics) have small copays; higher tiers (brand, specialty) have much larger cost-sharing. Two plans with the same premium can cost you very different amounts based on where your specific drugs land.
The 2025+ payment phases
- Deductible phase: you pay the plan's deductible before coverage kicks in (some plans have $0 deductible on Tier 1 or 2).
- Initial coverage phase: you pay copays or coinsurance for each drug.
- Catastrophic phase: once you hit the $2,000 annual out-of-pocket cap, you pay $0 for covered drugs the rest of the year.
$2,000 annual cap
Starting in 2025, Part D beneficiaries have a $2,000 annual out-of-pocket cap on covered prescriptions. Once you hit it, you pay nothing more for covered drugs that plan year.
How to pick a Part D plan
Compare plans on your specific medication list — not on premium alone. A $10-a-month plan with your insulin on Tier 4 will cost far more than a $40-a-month plan with the same drug on Tier 2. Scott runs this comparison for you at no charge.
