Wade Lashley | Jul 13 2026 16:00
Medicare Part D has multiple coverage phases: the deductible, initial coverage, and catastrophic coverage. As you move through these phases, what you pay at the pharmacy can change significantly, even if your medications, pharmacy, and Medicare plan all stay the same. Understanding this structure can help you anticipate costs and avoid surprises.
At Wade Lashley Insurance Broker in Tucson, AZ, I often speak with people who are confused when a prescription that cost one amount in January costs something very different later in the year. This is usually not a billing mistake. It is often the result of moving from one Part D coverage phase to another.
Part D Costs Are More Than a Monthly Premium
Medicare Part D helps cover many outpatient prescription drugs. You may receive Part D through a standalone Prescription Drug Plans
policy paired with Original Medicare, or through a Medicare Advantage plan that includes drug coverage.
Your monthly premium is only one part of the total cost. Depending on the plan and the drugs you take, you may also pay a deductible, copayments, or coinsurance. The amount you pay can depend on your drug’s tier, whether the pharmacy is in-network, whether you use a preferred pharmacy, and where you are in the Part D benefit year.
For people in Tucson, AZ, and throughout Arizona, reviewing a plan based only on its premium can lead to unexpected expenses. A lower-premium plan may not always be the better value if it has a high deductible, a costly specialty tier, or does not cover your medications well.
Phase One: The Deductible Stage
The deductible is the amount you may need to pay for covered prescriptions before your Part D plan begins sharing more of the cost. Some plans have no deductible, while others apply a deductible to certain drug tiers.
In 2026, a Medicare Part D plan cannot have a deductible higher than $615. If your plan uses the full deductible, you generally pay the full negotiated pharmacy cost for medications subject to that deductible until you reach it. That can feel especially difficult early in the year, when a medication that had a modest cost in December suddenly costs much more in January.
Not every prescription is necessarily subject to the deductible. Many plans offer lower-cost generic drugs with fixed copays before the deductible is met, while higher-tier brand-name or specialty medications may be subject to it. The plan’s Evidence of Coverage and formulary explain how its deductible applies.
Phase Two: The Initial Coverage Stage
After you meet your plan’s deductible, if it has one, you enter the initial coverage stage. In this phase, you and your plan share the cost of covered prescriptions. In 2026, the standard Part D structure generally has beneficiaries pay 25 percent of the cost of covered drugs until their out-of-pocket spending reaches $2,100.
However, your actual pharmacy cost may not always look like a simple 25 percent calculation. Some plans use fixed copays for lower-tier generic and preferred brand medications. Others use coinsurance, which is a percentage of the drug’s price. Your plan can also use different cost-sharing rules for different tiers.
This is why two prescriptions can affect your budget very differently. A $10 generic copay may remain predictable, while a medication with 25 percent coinsurance can cost hundreds of dollars each time it is filled. Wade Lashley Insurance Broker helps Arizona Medicare beneficiaries compare these details before enrollment and during annual reviews.
Why Specialty Drug Coinsurance Can Be So Expensive
Specialty drugs are often high-cost medications used to manage complex or chronic conditions, including certain autoimmune disorders, cancers, multiple sclerosis, and other serious health concerns. These drugs are commonly placed on a plan’s specialty tier, which is usually the highest cost-sharing tier.
A copay is a fixed dollar amount, such as $35 for a prescription. Coinsurance is a percentage of the medication’s negotiated cost. This distinction matters greatly. If a specialty medication costs $4,000 for a monthly supply and your coinsurance is 25 percent, your share could be $1,000 for that fill before you reach the annual out-of-pocket threshold.
For someone managing a chronic condition, a few specialty-drug fills can move them through the deductible and initial coverage phases quickly. That can make costs feel unpredictable from month to month. The good news is that once covered Part D out-of-pocket spending reaches the annual catastrophic threshold, you enter catastrophic coverage. In 2026, you pay no out-of-pocket cost for covered Part D drugs for the rest of that calendar year.
Phase Three: Catastrophic Coverage
Catastrophic coverage is the final major Part D phase. Once you reach the annual out-of-pocket threshold for covered Part D prescriptions, your cost sharing for covered Part D drugs drops to zero for the rest of the year.
This phase can bring important financial relief for people who take expensive medications. Still, it is important to remember that the benefit resets at the start of each calendar year. In January, you begin again with your plan’s deductible and initial coverage rules. That reset is one reason prescription costs may rise again after the new year, even when you are taking the same medication.
What If Your Drug Is Not on the Formulary?
Every Part D plan has a formulary, which is its list of covered medications. Plans must cover a broad range of drugs, but they do not have to cover every drug in every category. A plan may cover a similar medication instead, place your medication on a higher tier, or require prior authorization, step therapy, or quantity limits.
If your drug is not on the formulary, do not assume you are out of options. First, ask your prescriber whether a covered generic, biosimilar, or therapeutic alternative would be medically appropriate. If a covered alternative is not suitable, you or your prescriber can request a formulary exception. Your prescriber will need to provide a statement explaining why the requested medication is medically necessary and why covered alternatives would be less effective or could cause adverse effects.
You may also be able to request an exception to a prior authorization, step therapy, or quantity-limit rule. If you are changing plans and need a medication that is not immediately covered, ask about a transition fill while you and your prescriber work through the coverage decision process.
How to Stay Ahead of Part D Cost Changes
Review your Explanation of Benefits each month. This notice shows the prescriptions you filled, what your plan paid, what you paid, and which Part D coverage phase you are in. It can help you understand a cost increase before your next refill.
It is also wise to review your medications, dosages, pharmacy preferences, and plan formulary every year. Formularies, tiers, pharmacy networks, premiums, and plan rules can change from one year to the next. The Annual Enrollment Period is an important time to compare options, and understanding Medicare Enrollment Periods
can help you avoid missing an opportunity to make a change.
Medicare drug coverage can be complicated, but you do not have to sort through it alone. If you live in Tucson, AZ, or elsewhere in Arizona, call Wade Lashley Insurance Broker at 520-873-7015 for a free drug plan review. I can help you look beyond the premium, compare your medications against available plans, and better prepare for prescription costs throughout the year.
FAQ
Why did my Part D prescription cost more this month?
You may have moved into a different coverage phase, reached or started paying your deductible, filled a higher-tier medication, or experienced a change in coinsurance. Check your Explanation of Benefits to see your current coverage stage.
Do all Part D plans have a deductible?
No. Some Part D plans have no deductible, while others apply a deductible to certain medications or tiers. Review the plan details carefully before enrolling.
Will I always pay the same amount for a specialty drug?
Not necessarily. Specialty drugs often use coinsurance instead of a fixed copay, so your cost may vary based on the drug’s negotiated price and your current Part D coverage phase.
What happens after I reach catastrophic coverage?
For covered Part D medications, you pay no out-of-pocket cost for the rest of the calendar year. Your Part D benefit phases reset on January 1.
Can I get help if my medication is not covered?
Yes. Ask your prescriber about covered alternatives or request a formulary exception if medically appropriate. A free review with Wade Lashley Insurance Broker can also help you understand your available Medicare options in Arizona.
