Medicare Part D provides prescription drug coverage. It is actually a separate policy you buy from a private insurer.
Each private insurer has its own plan, but the general rules work like this: You pay a monthly premium for Part D coverage and may also have an annual deductible of no more than a few hundred dollars a year, if there is any deductible at all. Once you cover the deductible, your plan will then pay some - or all - of your drug costs, but only for the first $3,310 in total drug costs per year.
Once you hit $3,310 you are officially in donut-hole land. Once you’ve passed that, you’ll pay 45% of costs for covered, brand-name prescription drugs, but 95% of the cost will count toward your out-of-pocket costs. You’ll owe 58% for generic drugs, which will also go toward your out-of-pocket costs. In 2016, once your out-of-pocket costs hits $4,850, you’ll be out of the donut hole and owe a smaller coinsurance or copayment for your drugs for the remainder of the year.