Medicare Part D plans: Expert reveals that 95% of beneficiaries are overspending on prescriptions
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Nearly all of the 55 million Medicare beneficiaries enrolled in Part D prescription drug plans are overpaying by thousands of dollars a year, according to an expert, largely because they choose plans based on monthly premiums rather than total annual costs.
“The data shows that 95% of people in Medicare are overspending, and that’s horrifying because people have tight budgets,” Katy Votava, president of Goodcare and author of “Making the Most of Medicare,” said in a recent Decoding Retirement podcast.
Part D plans cover the cost of prescription drugs, including many recommended shots or vaccines. These plans are run by private insurance companies that follow rules set by Medicare and can be offered as standalone plans or bundled with a Medicare Advantage plan.
Data from KFF, as of 2025, shows that 54.8 million beneficiaries were enrolled in Part D plans, with 58% enrolled in Medicare Advantage plans and 42% in standalone prescription drug plans.
Enrollment is highly concentrated, as five firms — UnitedHealth (UNH), Centene (CNC), Humana (HUM), CVS Health (CVS), and Cigna (CI) — cover 73.5% of Part D enrollees. For 2025, the Part D base beneficiary premium was $36.78, and the maximum out-of-pocket deductible was $590.
According to Votava, the most expensive and most common mistake beneficiaries make is picking a plan based solely on its monthly premium.
“With a prescription drug plan, if you pick a plan because it’s the cheapest plan, it may not cover all your medications as best as possible, and then you actually wind up spending more in total out of pocket,” she said.
Read more: How to add or adjust your Medicare coverage
How to save on Part D prescription drug coverage
Given the recent changes to Medicare Part D plans in 2026, Votava recommended taking the time now to get organized, as procrastination can be costly. She outlined some key steps for finding the right Part D plan during Medicare’s open enrollment period, which ends Dec. 7.
First, create an accurate, specific list of all current medications (using generic names, not brand names).
Medications are typically organized into six tiers, with tier one being the least expensive and tier six reserved for the most costly specialty drugs. These tier assignments vary significantly between plans — a medication in tier two with one insurer might be tier four with another.
The next step is to set up a “My Medicare” account at Medicare.gov, which auto-populates current medications for existing beneficiaries.
Many beneficiaries shopping for a Part D plan may be surprised to find that their medications aren’t included on a plan’s formulary.
But rather than immediately dismissing a plan or paying full price for a drug not covered by their plan, Votava recommended requesting a formulary exception, which allows patients and their doctors to seek coverage for non-formulary medications based on medical necessity.
While insurers may initially deny coverage for certain drugs, most requests with proper documentation are approved. Additionally, plans are required to fill the medication for at least 30 days while a formulary exception request is under review.
“Don’t stop when you’re told something isn’t covered,” Votava said. “Typically, they’re the ones that are more expensive, and they really need specific medical necessity documentation. … That is something people will have to pursue more this year than in the past.”
Next, beneficiaries should identify all pharmacies they use, including locations if they travel or spend time in different areas.
Pharmacy selection can significantly impact prescription drug costs. Each Medicare Part D plan designates pharmacies as preferred, standard, or out-of-network, and preferred pharmacies generally offer the lowest prices.
According to Votava, another common misconception is that mail-order prescriptions are always cheaper than retail pickups. “You might think that prescriptions through the mail are more economical,” Votava said. “They’re not always.”
Finally, block out time to complete your research and enrollment. Marcia Mantell, president of Mantell Retirement Consulting, recommends setting aside Nov. 1 as a dedicated day.
For those feeling overwhelmed, Votava strongly recommended beneficiaries contact local SHIP (State Health Insurance Assistance Program) advisers via eldercare.acl.gov.
“But do it soon,” she said, “because most of them are volunteers, and their slots fill up quickly.”
Changes coming to Part D
There are some other changes coming to Medicare Part D plans that beneficiaries should be aware of. For instance, the Inflation Reduction Act’s new $2,100 annual out-of-pocket cap for covered drugs represents a major benefit for 2026.
However, Votava said Medicare’s plan comparison tool hasn’t properly programmed this cap into its cost estimates. Beneficiaries might see projected annual costs of $12,000 or more for their medications, when the actual maximum would be $2,100.
“So you might see that your medications are going to cost you $12,000,” she said. “They will not.”
Her advice is to use Medicare’s Plan Compare tool for an initial screen, then double-check costs on the insurer’s own website before enrolling.
Votava also noted that there’s been an unprecedented number of Part D plan cancellations affecting 2026 coverage.
“It’s a big shift,” Votava said. “Typically, we have some plans close all the time, but this is what I would put in the massive category. Some companies are just getting out of the business, and some are really narrowing their offerings.”
Still, the plan cancellations can present an opportunity, she said.
When Medicare Advantage plans are discontinued, beneficiaries gain special enrollment rights that include guaranteed access to Medigap policies — coverage that’s normally unavailable or extremely difficult to obtain after spending extended time in a Medicare Advantage plan. This creates an unexpected pathway to switch to original Medicare with supplemental coverage and a standalone Part D plan.
“In many states, it’s very difficult, if not impossible, to pick up a Medigap plan once you’ve been in your Medicare Advantage plan for very long,” Votava said. “So for some people who have been actually kind of limited in those options, it’s an opportunity for them to get into that Medigap plus a Part D, or at least if their plan is canceled, get a new Medicare Advantage plan.”
Got questions about retirement? Email Robert Powell at yfpodcast@yahooinc.com, and we’ll do our best to answer it in a future episode of Decoding Retirement.
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
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