The Medicare Part D program provides prescription drug coverage for 55 million Medicare beneficiaries. Part D coverage is available through both Medicare Advantage plans that include Part D and through standalone prescription drug plans (PDPs) for Medicare beneficiaries who have medical coverage through Medicare fee-for-service. The discontinuation of two demonstration programs, the Medicare Advantage Value-Based Insurance Design (VBID) and the Medicare-Medicaid Financial Alignment Initiative (FAI), affects the ways in which health plans and states may reduce Part D cost sharing for dual-eligible Medicare beneficiaries who qualify for Extra Help. The Low-Income Subsidy program federally subsidizes premium and cost-sharing support for eligible beneficiaries through the broader Part D Extra Help program. Individuals are automatically enrolled in Extra Help if they are enrolled in Medicaid or a Medicare Savings Program, or if they receive supplemental income from Social Security. With the sunset of VBID and FAI, states and Part D plans need to evaluate other strategies to lower cost sharing for affected individuals. This paper covers background on Medicare Part D, historical approaches to reducing low-income Part D copays, and current available opportunities to lower them.

Key takeaways

• Extra Help significantly reduces Part D out-of-pocket costs for Medicare beneficiaries with low incomes relative to the Part D defined standard benefit design, but it does not eliminate cost sharing for many low-income beneficiaries.
• The Medicare Advantage VBID program and FAI Medicare-Medicaid plans each provided a pathway for Part D plans to offer prescription drug copays as low as $0 for Medicare beneficiaries with low income.
• Approximately 5.1 million out of 6.3 million total dual-eligible beneficiaries who were enrolled in Dual-Eligible Special Needs Plans were in plans that participated in VBID in 2025.
• States and plans are eager for alternative methods to continue covering Part D cost sharing for Medicare beneficiaries with low incomes.
• Recent Medicare guidance clarified four potential options to keep Part D out-of-pocket costs low for beneficiaries with low incomes: alternative Part D benefit designs, Medicaid value-added services, state pharmacy assistance programs, and state-only funds.