Part D (Prescription drug): The Complete Guide to Maryland

Medicare Part D is the federal program designed to help Medicare beneficiaries pay for self-administered prescription drugs. If you are a Maryland resident approaching Medicare eligibility, understanding Part D is not optional—it is a critical piece of your healthcare financial security.

Original Medicare (Part A for hospitals and Part B for medical services) covers almost no retail prescription medications. If you take Original Medicare and do not add a Part D plan, you will be responsible for 100% of the retail cost of your prescriptions at the pharmacy counter. Furthermore, failing to secure prescription drug coverage when you are first eligible will result in a permanent, accumulating financial penalty if you ever decide to enroll later.

This comprehensive guide covers everything you need to know about Medicare Part D in Maryland for the 2026 plan year. We will walk through how coverage is structured, how to interpret a drug formulary, the strict $2,000 out-of-pocket limits introduced by the Inflation Reduction Act, and the precise steps you should take to choose the most cost-effective plan for your specific health needs.

What is Medicare Part D?

Medicare Part D was introduced in 2006 to solve a massive gap in the Medicare system: the lack of outpatient prescription drug coverage. Before Part D, seniors on Medicare either paid for retail drugs entirely out of pocket, relied on employer retiree coverage, or purchased expensive supplemental insurance.

Today, Part D is regulated by the Centers for Medicare & Medicaid Services (CMS) but is sold and administered exclusively by private insurance companies. This means you do not enroll in Part D directly through the government in the same way you enroll in Part A and Part B. Instead, you shop for a private plan that meets CMS standards.

How Part D Works with the Rest of Medicare

To understand Part D, you must understand where it fits into the broader Medicare puzzle.

• Part A (Hospital Insurance): Covers inpatient hospital stays, skilled nursing facilities, hospice care, and some home health care. Part A covers the drugs you are given while admitted to the hospital as an inpatient.
• Part B (Medical Insurance): Covers doctor visits, outpatient care, medical equipment, and preventive services. Part B covers a very narrow scope of drugs—typically those administered directly by a physician in a clinical setting (such as infused chemotherapy drugs, dialysis drugs, or certain injections).
• Part D (Prescription Drug Coverage): Covers the medications you pick up at a retail pharmacy, order through a mail-order pharmacy, or administer yourself at home (like blood pressure pills, cholesterol medication, or self-injected insulin).

If a medication is taken at home and prescribed by a doctor, it falls under the jurisdiction of Medicare Part D.

Two Ways to Get Part D Coverage in Maryland

Because Part D is sold by private insurance companies, you have two primary methods for adding this coverage to your Medicare profile. Your choice depends entirely on how you choose to receive your overall Medicare benefits.

1. Standalone Prescription Drug Plans (PDPs)

If you decide to stay with Original Medicare (Part A and Part B), you will purchase a standalone Prescription Drug Plan (PDP). Most people who take this route also purchase a Medicare Supplement (Medigap) policy to cover the 20% medical coinsurance left behind by Part B.

In this scenario, you carry three cards: your red, white, and blue Medicare card for doctors, your Medigap card for medical bills, and your standalone PDP card for the pharmacy.

2. Medicare Advantage Prescription Drug Plans (MA-PDs)

Alternatively, you can choose to receive your Medicare benefits through a Medicare Advantage plan (Part C). By law, Medicare Advantage plans must cover everything Original Medicare covers. However, the vast majority of Medicare Advantage plans also bundle Part D prescription drug coverage directly into the plan. These are known as MA-PD plans.

In Maryland, carriers like Aetna Medicare, Alterwood Advantage, and CareFirst BlueCross BlueShield Medicare Advantage offer popular MA-PD options. If you enroll in an MA-PD, you use one card for everything: doctor visits, hospital stays, and pharmacy trips.

Important Note: You cannot have both. If you are enrolled in a Medicare Advantage plan that includes drug coverage and you attempt to buy a standalone PDP, CMS will automatically disenroll you from your Medicare Advantage plan and return you to Original Medicare.

Understanding Formularies and Drug Tiers

The single most critical component of any Part D plan is its formulary. A formulary is simply the official list of medications that a specific insurance plan agrees to cover.

Every private insurance company develops its own formulary. CMS requires that every Part D plan cover at least two drugs in the most commonly prescribed categories and classes, and it mandates coverage for “all or substantially all” drugs in six protected classes (such as antidepressants, antipsychotics, anticonvulsants, immunosuppressants, antiretrovirals, and antineoplastics).

Outside of those federal requirements, carriers have wide latitude to decide which specific brand-name or generic drugs they will include. If a medication is not on your plan’s formulary, the plan will not pay for it, and you will be responsible for the full retail cost (unless you successfully file for a formulary exception).

The Tier System

To manage costs, Part D plans place the drugs on their formulary into pricing “tiers.” The lower the tier, the lower your out-of-pocket cost. While carriers can design their own tier structures, a standard 5-tier system looks like this:

• Tier 1 (Preferred Generics): The lowest cost-sharing tier. This includes widely used, inexpensive generic medications (e.g., generic lisinopril or metformin). Copays are often $0 to $5.
• Tier 2 (Generics): Standard generic medications that cost slightly more to produce. Copays typically range from $5 to $15.
• Tier 3 (Preferred Brand Name): Brand-name drugs that do not have a generic equivalent but are preferred by the insurance company because they have negotiated a rebate with the manufacturer. Some higher-cost generics also land here. Copays are generally a fixed dollar amount, such as $35 to $47.
• Tier 4 (Non-Preferred Drugs): Brand-name and generic drugs that the plan covers, but at a higher cost to you because they are more expensive or have preferred alternatives in Tier 3. Instead of a flat copay, you may pay coinsurance (a percentage of the drug’s retail cost, such as 30% to 40%).
• Tier 5 (Specialty Tier): The most expensive drugs, usually used to treat complex, chronic, or rare conditions (e.g., multiple sclerosis or cancer medications). Medicare rules prevent plans from charging more than 33% coinsurance for Tier 5 drugs, but 25% to 33% of a highly expensive drug is still a significant cost.

When shopping for a Part D plan, you must look at the specific tier your drugs are placed on. A plan with a $0 monthly premium might place your necessary brand-name medication on Tier 4 (charging you a 40% coinsurance), while a plan with a $35 premium might place that same medication on Tier 3 (charging you a flat $45 copay). The “cheaper” plan upfront can easily become the more expensive plan at the pharmacy counter.

Utilization Management Restrictions

Even if a drug is on a plan’s formulary, the carrier may place restrictions—called utilization management rules—on how you can access it. CMS allows these rules to ensure safety and control costs.

1. Prior Authorization: Before the pharmacy can fill the prescription, your doctor must submit clinical documentation to the insurance company proving that the medication is medically necessary for your specific diagnosis.
2. Step Therapy: You must first try a lower-cost, clinically effective alternative medication (usually a generic on a lower tier) before the plan will agree to cover the more expensive drug your doctor originally prescribed. If the lower-cost drug fails to work, you can “step up” to the more expensive option.
3. Quantity Limits: The plan will only cover a certain amount of the medication over a specific period (e.g., 30 pills for a 30-day supply). If your doctor prescribes a higher dose or frequency, they must request an exception.

The Pharmacy Network

Just as a medical insurance plan has a network of doctors, a Part D plan has a network of pharmacies. You cannot simply walk into any pharmacy and expect to pay the same price.

Pharmacies are generally categorized in three ways by your plan:

• Preferred In-Network Pharmacies: These pharmacies have contracted with the carrier to offer the lowest negotiated prices. To get the copays listed in the plan’s marketing materials, you must use a preferred pharmacy.
• Standard In-Network Pharmacies: The plan covers prescriptions here, but you will pay higher copays or coinsurance than you would at a preferred pharmacy.
• Out-of-Network Pharmacies: If you use a pharmacy entirely outside the plan’s network, the plan generally pays nothing, and you will pay full retail price.

Most plans also offer a Mail-Order Pharmacy option, which often provides a 90-day supply of maintenance medications (like blood pressure or cholesterol drugs) at a discounted rate compared to purchasing three 30-day supplies at a retail counter.

The Financial Mechanics: What Does Part D Cost?

Understanding what Part D will cost you in Maryland requires looking at several moving parts. Your total cost for prescription drug coverage is the sum of your premiums, your deductibles, your copays at the pharmacy, and—if applicable—income-related surcharges.

1. The Monthly Premium

If you purchase a standalone PDP, you pay a monthly premium regardless of whether you pick up any medications that month. In Maryland, these premiums can range from under $5 a month to over $100 a month, depending on the robustness of the formulary. If you choose an MA-PD, the drug premium is often bundled into the overall Advantage plan premium, which can frequently be $0.

2. The Annual Deductible

Many Part D plans feature an annual deductible, which is the amount you must pay entirely out of pocket for your drugs before the plan begins to share the cost. CMS sets a maximum allowable deductible each year (projected to be roughly $590 for 2026). Plans can charge the maximum deductible, a lower deductible, or waive the deductible entirely. Often, plans will apply the deductible only to higher-tier drugs (Tiers 3, 4, and 5) while covering Tier 1 and Tier 2 drugs immediately with a small copay.

3. Copayments and Coinsurance

Once you meet your deductible (if your plan has one), you pay a copayment (a flat dollar amount) or coinsurance (a percentage of the drug’s cost) for each prescription, based on the tier system outlined above.

4. IRMAA (Income-Related Monthly Adjustment Amount)

If you have a high income, you will pay a surcharge on your Part D premium, known as IRMAA. This is a federal requirement, not a fee from the insurance company.

The Social Security Administration determines IRMAA based on your Modified Adjusted Gross Income (MAGI) from your tax return two years prior. (For example, your 2026 IRMAA determination is based on your 2024 tax return).

If your income exceeds the standard threshold (for 2026, these brackets are adjusted for inflation annually but generally start around $103,000 for an individual or $206,000 for a married couple filing jointly), an extra amount is added directly to your monthly Part D bill. This surcharge applies whether you have a standalone PDP or a Medicare Advantage plan with drug coverage.

The Phases of Part D Coverage (The $2,000 Cap)

Historically, Medicare Part D was famous for a convoluted four-phase system that included the dreaded “Donut Hole” (Coverage Gap), where beneficiaries suddenly had to pay a massive percentage of their drug costs mid-year.

This structure has fundamentally changed.

The Inflation Reduction Act (IRA) radically redesigned the Part D benefit. As of 2025 (and carrying forward permanently into 2026 and beyond), the Coverage Gap has been completely eliminated, and a strict out-of-pocket maximum has been implemented.

Here is exactly how the Part D phases work now:

Phase 1: The Deductible Phase

If your plan has a deductible, you pay 100% of the negotiated retail cost of your drugs until you reach the deductible amount (up to the CMS maximum of roughly $590).

Phase 2: The Initial Coverage Phase

After you meet the deductible, you enter Initial Coverage. You now pay your plan’s standard copayments or coinsurance for your medications. For example, you might pay a $5 copay for a generic and a $47 copay for a brand-name drug.

Your insurance company tracks every dollar you spend out of your own pocket. This includes your deductible, your copays, and your coinsurance.

Phase 3: The Catastrophic Phase (The $2,000 Cap)

Once your total, true out-of-pocket (TrOOP) spending reaches exactly $2,000 within the calendar year, you hit the out-of-pocket maximum.

For the remainder of the calendar year, you are in the Catastrophic Phase. In this phase, you pay $0 for all covered Part D drugs. The insurance company and the federal government cover 100% of the cost.

Note: The $2,000 cap only applies to drugs that are covered on your plan’s formulary. If you buy a drug that is not on the formulary, that money does not count toward your $2,000 cap, and you will not get $0 coverage for it once you hit the cap.

The Medicare Prescription Payment Plan (Smoothing)

Because a $2,000 cap can still be a heavy burden if you hit it in January or February, the government introduced the Medicare Prescription Payment Plan. This allows you to opt-in to “smooth” your out-of-pocket costs over the course of the year. Instead of paying $500 at the pharmacy counter in one month, the plan allows you to spread that $500 across smaller, monthly billed payments throughout the calendar year, making high-cost medications easier to budget for.

The Late Enrollment Penalty (LEP)

Medicare strongly incentivizes people to enroll in Part D as soon as they are eligible to ensure the risk pool has enough healthy people to subsidize the sick. They enforce this via the Late Enrollment Penalty (LEP).

If you go 63 consecutive days or more without “creditable” prescription drug coverage after your Initial Enrollment Period ends, you will be penalized when you finally sign up.

Creditable coverage means coverage that is expected to pay, on average, at least as much as standard Medicare prescription drug coverage. Employer-sponsored plans, VA benefits, and TRICARE are generally creditable. Discount cards (like GoodRx) are not creditable coverage.

How the Penalty is Calculated

The penalty is mathematical and permanent. CMS calculates it by taking 1% of the “national base beneficiary premium” (a figure set by CMS each year) and multiplying it by the number of full, uncovered months you were eligible but did not have creditable coverage.

Example: If you delayed enrollment for 24 months, your penalty is 24%. If the national base beneficiary premium is roughly $35, the math is 24% of $35 = $8.40.

This $8.40 is added to your monthly Part D premium every single month. And because the national base premium can change every year, your penalty amount can go up over time. It never expires; you pay it for as long as you have Medicare drug coverage.

Enrollment Periods: When Can You Sign Up?

You cannot buy or change a Part D plan whenever you want. You must wait for specific enrollment windows designated by CMS.

Initial Enrollment Period (IEP)

Your first opportunity is your IEP, a 7-month window tied to your 65th birthday. It includes the 3 months before your birthday month, your birthday month, and the 3 months after. If you enroll during the 3 months prior, your coverage begins on the first day of your birthday month.

Annual Enrollment Period (AEP)

The most important window for all Medicare beneficiaries is AEP, which runs from October 15 through December 7 every year. During AEP, you can:

• Join a Part D plan for the first time (though the late penalty may apply).
• Switch from one standalone PDP to another.
• Drop your standalone PDP.
• Switch from Original Medicare to an MA-PD.

Any changes made during AEP take effect on January 1 of the following year. Because plan formularies, networks, and premiums change every single year, you must review your Part D coverage every AEP. A plan that covered your drugs perfectly this year may drop your medication from its formulary next year.

Special Enrollment Periods (SEPs)

Life happens outside of the standard enrollment windows. CMS grants Special Enrollment Periods for specific qualifying events. You may qualify for a 2-month SEP to change your Part D plan if:

• You move out of your plan’s service area.
• You involuntarily lose creditable employer or union coverage.
• You move into, live in, or move out of a qualifying institution (like a nursing home).
• You qualify for Extra Help (the Low-Income Subsidy).

Maryland Part D Carriers and Plan Options

Maryland has a robust and competitive Medicare market. Across the state, there are generally around 60 different Medicare Advantage and Medicare Advantage Prescription Drug (MA-PD) plan options, alongside dozens of standalone PDPs.

The availability of specific plans depends entirely on your zip code and county, but major carriers operating in the Maryland Part D space include:

• Aetna Medicare (offering plans like the Aetna Medicare Eagle Giveback PPO and Aetna Medicare Elite PPO)
• Alterwood Advantage (a prominent regional carrier offering plans like the Alterwood Advantage Choice HMO and various Dual-SNP plans)
• CareFirst BlueCross BlueShield Medicare Advantage
• HealthSpring (Cigna)
• Humana
• Johns Hopkins Advantage MD
• Kaiser Permanente
• UnitedHealthcare

Because Part D is highly regulated, a plan from Alterwood Advantage and a plan from UnitedHealthcare must both meet the same federal minimum standards. The difference lies in their specific formularies, premium costs, and preferred pharmacy networks.

Step-by-Step Guide to Choosing a Part D Plan in Maryland

Do not choose a Part D plan based solely on the lowest monthly premium or because a friend recommended their carrier. The “best” plan is entirely subjective and depends exclusively on the medications you take.

Follow this decision map to choose correctly:

Step 1: Inventory your medications. Write down the exact name of every prescription you take, the dosage (e.g., 20mg), and the frequency (e.g., once daily). Note whether it is a brand name or a generic.

Step 2: Check the Notice of Creditable Coverage. If you are turning 65 and still working, ask your HR department for a “Notice of Creditable Coverage.” If your employer plan is creditable, you can safely delay Part D enrollment without penalty. If it is not, you need to enroll in Part D to avoid the LEP.

Step 3: Decide your coverage path. Decide whether you want Original Medicare with a Medigap policy (requiring a standalone PDP) or a bundled Medicare Advantage plan (MA-PD).

Step 4: Run your list through the formularies. Do not guess. Using your list of medications, verify that every single drug is on a prospective plan’s formulary.

Step 5: Compare the Total Estimated Annual Cost. Look past the premium. Calculate the total cost of the plan for the year: (Monthly Premium x 12) + Deductible + (Estimated Monthly Copays x 12). A plan with a $50 premium and $5 copays is cheaper over a year than a plan with a $0 premium and $60 copays.

Step 6: Verify your pharmacy. Ensure the pharmacy you prefer to use is in the plan’s “Preferred” network. If it is only “Standard,” your copays will be unnecessarily high.

Step 7: Reassess every October. In September, your carrier will send you an Annual Notice of Change (ANOC) detailing how your plan will change for the upcoming year. Read it. If your medications are moving to a higher tier, or if the premium is spiking, use the AEP (Oct 15 - Dec 7) to shop for a new plan.

Frequently Asked Questions