Medicare Part D is the prescription drug coverage that comes with Original Medicare

Medicare Part D is a prescription drug insurance plan you can add to Original Medicare (Parts A and B). It helps pay for medications your doctor prescribes, whether you take them at home, at a pharmacy, or through a mail-order service. Part D is run by private insurance companies approved by Medicare, not by Medicare itself.

You do not have to take Part D, but there is a penalty if you wait to sign up later. If you go without Part D coverage for more than 63 days after you first become may be able to access, your monthly premium will increase by about 1% for each month you were uninsured. That increase stays with you for as long as you have Part D.

Part D works differently from Part A (hospital) and Part B (doctor visits). Instead of one program, there are many Part D plans to choose from, each with its own list of covered drugs, pharmacies, and costs. You pick the plan that matches the medications you actually take.

Key Takeaways

  • Medicare Part D is prescription drug coverage you add to Original Medicare, and it is run by private insurance companies, not by Medicare directly.
  • You choose from multiple Part D plans each year during open enrollment, and each plan covers different drugs at different costs.
  • Part D has a coverage gap (called the "donut hole") where you pay more out of pocket after reaching a certain spending threshold, though this gap shrinks each year.
  • If you delay signing up for Part D when first may be able to access, your monthly premium increases permanently by roughly 1% for each month you were uninsured.
  • You can change Part D plans once a year during the annual enrollment period, which runs from October 15 to December 7.

How Part D premiums, deductibles, and cost-sharing work

Each Part D plan charges a monthly premium (the amount you pay every month just to have the plan). Premiums vary widely depending on which plan you choose and which insurance company runs it. Some plans have no premium, though they usually have higher costs when you fill a prescription.

Most Part D plans have a deductible — an amount you pay out of pocket before the plan starts to help. Not all plans have a deductible, and if they do, it is usually between $0 and $545 per year (the exact limit changes each year). Once you meet your deductible, you move into the initial coverage stage, where the plan and you split the cost of your drugs.

During initial coverage, you typically pay a copay (a flat amount like $5 or $10 per prescription) or coinsurance (a percentage of the drug's cost, like 20%). The plan pays the rest. This continues until your total drug spending — what you paid plus what the plan paid — reaches a certain threshold, usually around $5,500 per year.

Understanding the coverage gap and catastrophic coverage

Once your total drug spending hits the threshold, you enter the coverage gap, sometimes called the "donut hole." In the gap, you pay a larger share of your drug costs — currently 25% of the cost for most brand-name and generic drugs. The plan does not help during this stage, though you still get a discount on brand-name drugs.

The coverage gap ends when your out-of-pocket spending reaches a second threshold, usually around $7,050 per year. After that, you enter catastrophic coverage, where the plan covers most of the cost and you pay only a small copay or coinsurance (usually 5% of the cost). Catastrophic coverage continues for the rest of the year.

The coverage gap shrinks a little each year by law. The government and drug manufacturers are required to help pay down the gap, so your actual costs in the gap are lower than the 25% you would pay without help. Still, the gap remains a place where costs jump, which is why it matters to know which drugs you take regularly and how much they cost under your plan.

Choosing a Part D plan that matches your medications

The best Part D plan for you depends on the specific drugs you take. Each plan has a formulary — a list of covered drugs — and drugs are sorted into tiers. Tier 1 drugs (usually generics) have the lowest copay. Tier 2 drugs (preferred brand-name) cost more. Tier 3, 4, and 5 drugs cost even more, and some plans may not cover certain drugs at all.

Before you pick a plan, write down the names, doses, and quantities of all the medications you take. Then use the Medicare Plan Finder tool on Medicare.gov to see how much each drug costs under different plans. The tool shows you the total you would pay for a year of your medications under each plan — premium, deductible, copays, and everything else. This number is more useful than comparing premiums alone.

Some drugs require prior authorization, meaning your doctor has to get approval from the plan before the pharmacy can fill the prescription. Other drugs may have quantity limits (the plan will only pay for a certain amount per month). Your doctor's office can help you find out whether your medications have these restrictions under the plan you are considering.

When you can sign up for Part D and when you can switch plans

You can sign up for Part D when you first turn 65 and enroll in Medicare. If you miss that window, you can sign up during the General Enrollment Period (January 1 to March 31 each year), but your premium will be higher because of the late-enrollment penalty.

Once you have Part D, you can change plans once a year during the Annual Enrollment Period, which runs from October 15 to December 7. Your new plan starts on January 1. You can also switch plans if you have a may have access to life event — such as moving to a different state, losing other drug coverage, or a major change in your health or income — but you have to report the event to Medicare within 60 days.

If your current plan stops covering one of your drugs or raises the copay too high, that is considered a may have access to event. Contact your plan to ask whether your situation qualifies you to switch outside the annual enrollment period.

Part D and other types of Medicare coverage

Part D works with Original Medicare (Parts A and B). If you have a Medicare Advantage plan (Part C) instead, drug coverage is usually built in, and you do not buy a separate Part D plan. Medicare Advantage plans vary in what drugs they cover and what you pay, so you still need to check the formulary.

If you have retiree health insurance from a former employer or union, it may cover prescriptions. Before you sign up for Part D, check whether your retiree plan covers drugs and whether adding Part D would help or hurt your costs. Some retiree plans are creditable coverage, meaning they cover drugs as well as or better than Part D. If your retiree coverage is creditable, you can delay Part D without a penalty.

If you have Medicaid (state health insurance for people with low income), Medicaid and Part D work together. Medicaid pays first for drugs on its list, and Part D fills in gaps. Your state Medicaid office can tell you how the two programs coordinate in your state.

What to ask your doctor and pharmacist about Part D

Before you choose a Part D plan, talk to your doctor about the medications you take. Ask whether there are generic versions of your drugs that cost less, or whether any of your prescriptions have quantity limits or need prior authorization under most plans. Your doctor may be able to suggest lower-cost alternatives that work just as well for you.

Call the pharmacy where you fill prescriptions and ask them to run a cost estimate for your medications under the Part D plans you are considering. Many pharmacies can do this quickly and will show you the total you would pay under each plan. This is often faster and more accurate than using the online tool.

If you are already on Part D and your costs feel too high, ask your pharmacist whether a generic drug is available or whether a different dose or quantity might lower your copay. Sometimes asking for a 90-day supply instead of a 30-day supply lowers the per-dose cost. Your pharmacist can also tell you whether you are in the coverage gap and what your costs will be once you reach catastrophic coverage.

Frequently Asked Questions

Do I have to take Part D if I have Original Medicare?

No, Part D is optional. But if you go without it for more than 63 days after you first become may be able to access, you will pay a permanent penalty on top of your premium. The penalty is roughly 1% of the national average Part D premium for each month you were uninsured. If you have creditable coverage from an employer or Medicaid, you may be able to delay without a penalty.

What happens if my Part D plan stops covering one of my drugs?

Contact your plan and ask whether the drug is still on the formulary or whether it moved to a higher tier. If it is no longer covered or the cost is too high, you can ask your doctor to request an exception. You can also switch to a different Part D plan outside the annual enrollment period if your plan stops covering a drug you need.

Can I use any pharmacy with Part D?

Most Part D plans have a network of pharmacies where your copay is lowest. You can use an out-of-network pharmacy, but you will usually pay more. Mail-order pharmacies are often part of the network and may offer lower copays for 90-day supplies. Check your plan's pharmacy list before you switch pharmacies.

How do I know if I am in the coverage gap?

Your pharmacy receipt shows how much you paid and how much your plan paid. Add these amounts together. Once the total reaches your plan's threshold (usually around $5,500), you enter the gap. Your plan will also send you a notice when you enter the gap. During the gap, you pay 25% of the cost instead of your regular copay.

What if I cannot afford my Part D premiums or copays?

You may be able to get help through the Low-Income Subsidy program, which pays part or all of your Part D costs if your income and resources are below certain limits. Contact your local Social Security office or call 1-800-MEDICARE to find out whether you may have access to. You can also ask your plan about patient information programs that drug manufacturers offer.