Whether Part D makes financial sense depends on your medications and income

Medicare Part D covers prescription drugs, and whether it is worth buying depends almost entirely on what medications you take and what you would pay without it. If you take expensive drugs or multiple medications, Part D usually saves you money. If you rarely fill prescriptions, you might pay less by skipping it and paying out of pocket. The real question is not whether Part D is "worth it" in general—it is whether it is worth it for your specific situation.

Part D is optional, but there is a financial penalty if you wait to join after you first become may be able to access. That penalty stays with you for life, so the decision to join or skip it should be made carefully when you first turn 65 or become may be able to access for Medicare.

Key Takeaways

  • Part D costs you a monthly premium (usually $7 to $100 depending on the plan), a yearly deductible (usually $0 to $505), and copays or coinsurance when you fill prescriptions.
  • If you do not join Part D when first may be able to access and do not have other creditable drug coverage, Medicare charges you a permanent penalty of about 1 percent of the national average premium for each month you were not enrolled.
  • Part D plans vary widely in which drugs they cover and what you pay, so comparing plans based on your actual medications is more useful than comparing premiums alone.
  • If your income is below certain thresholds, you may receive subsidies that lower your premium, deductible, and copays significantly.
  • You can change Part D plans once per year during the Annual Enrollment Period (October 15 to December 7), so you are not locked in if your medications or costs change.

What Part D actually costs you

Part D has four separate costs: the monthly premium, the yearly deductible, copays or coinsurance when you fill a prescription, and potentially a coverage gap penalty. The monthly premium varies by plan and ranges from roughly $7 to $100 per month in most areas, though some plans have no premium. The yearly deductible—the amount you pay out of pocket before the plan starts helping—ranges from $0 to $505 for 2024, depending on which plan you choose.

Once you have met the deductible, you pay a copay (a flat dollar amount like $5 or $15) or coinsurance (a percentage of the drug cost, like 25 percent) each time you fill a prescription. The amount depends on which "tier" the drug is on—generic drugs are usually cheaper than brand-name drugs. If your total drug costs reach a certain threshold (called the coverage gap), you enter what used to be called the "donut hole," where you pay a higher percentage of the cost until you reach catastrophic coverage, at which point the plan pays most of the cost.

To know whether Part D is worth it for you, add up what you would pay in premiums, deductibles, and copays for the medications you actually take. Compare that to what you would pay if you bought those same drugs without insurance. Many pharmacies will quote you a price if you ask them to run your prescription without insurance.

The lifetime penalty for waiting to join

If you do not join a Part D plan when you first become may be able to access for Medicare and you do not have other drug coverage that Medicare considers "creditable," you will owe a permanent penalty. The penalty is roughly 1 percent of the national average Part D premium for each month you were not enrolled. For 2024, that means about $0.80 per month for each month you waited, though the exact amount changes yearly.

The penalty sounds small, but it adds up. If you waited three years to join, you would owe roughly $29 per month for the rest of your life, on top of your regular premium. If you waited ten years, the penalty would be roughly $97 per month forever. The penalty does not go away if you eventually join a plan.

There is one exception: if you have other creditable drug coverage—through a current or former employer, a union, TRICARE, the VA, or certain state programs—you do not owe a penalty when you eventually join Part D. You will need to prove you had that coverage, so keep any documents showing your enrollment dates.

How to compare Part D plans for your medications

Part D plans are offered by private insurance companies, and each plan covers a different set of drugs at different costs. Comparing plans based on premium alone is a mistake—a plan with a low premium might charge high copays for your specific medications, making it more expensive overall.

The best way to compare is to use the Medicare Plan Finder tool on Medicare.gov. You enter the medications you take (including the dose and how often you take them), your pharmacy, and your zip code. The tool shows you which plans cover each drug and what you would pay out of pocket with each plan. You can then sort by total estimated cost for the year, not just by premium.

If you do not have internet access or need help using the tool, you can call 1-800-MEDICARE and speak with someone who can help you compare plans over the phone. Some local Area Agencies on Aging also offer free counseling on Medicare choices, including Part D.

Income-based subsidies that lower your costs

If your income is below certain thresholds, you may receive a subsidy called the Low-Income Subsidy (LIS) or Extra Help. This program lowers or eliminates your premium, deductible, and copays. The income limits change yearly, but for 2024, you generally may have access to if your income is below about $21,000 per year as an individual or $42,000 as a married couple.

If you receive Supplemental Security Income (SSI), Medicaid, or both, you are automatically considered for Extra Help. Otherwise, you can explore through Social Security by calling 1-800-772-1213, visiting your local Social Security office, or explore online at ssa.gov. The process takes about 15 minutes.

If you may have access to for Extra Help, your copays might be as low as $1 to $3 per prescription, and you may have no premium or deductible at all. This can make Part D very worth it, even if you take only a few medications. Check whether you may have access to—many people who are may be able to access do not know it.

When Part D might not be worth it

Part D is not worth it if you rarely take prescription medications and the cost of paying out of pocket is less than the premium you would pay. For example, if you take one generic medication that costs $15 per month at a discount pharmacy and the cheapest Part D plan in your area costs $25 per month, you would save money by skipping Part D and paying cash.

However, remember the lifetime penalty. If you skip Part D now and later develop a chronic condition that requires expensive medications, you will owe the penalty when you eventually join. That penalty could cost you thousands of dollars over your lifetime. Most people should join Part D when they first become may be able to access, even if they do not take many medications now, straightforward to avoid the penalty.

The exception is if you have creditable coverage through an employer or other source. In that case, you can wait to join Part D without penalty, as long as you enroll within 63 days of losing that coverage.

How to enroll and when you can change plans

You can join a Part D plan when you first become may be able to access for Medicare (usually at age 65) or during the Annual Enrollment Period, which runs from October 15 to December 7 each year. If you miss the enrollment period and do not have a good reason, you will owe the lifetime penalty.

Once you are enrolled, you can change to a different Part D plan once per year during the Annual Enrollment Period. This is important because your medications might change, new drugs might become available, or plan costs might increase. Every year, review your current plan using the Medicare Plan Finder to see whether a different plan would save you money.

If you have a major life event—such as losing employer coverage, moving to a new state, or a significant change in income—you may be able to change plans outside the enrollment period. Call 1-800-MEDICARE to ask whether you may have access to for a Special Enrollment Period.

Frequently Asked Questions

What happens if I do not take any medications right now?

You should still join Part D when you first become may be able to access to avoid the lifetime penalty. The penalty applies even if you never fill a prescription. If you have creditable coverage through an employer or other source, you can wait without penalty, but you must enroll within 63 days of losing that coverage.

Can I switch Part D plans if my medications change?

Yes, you can change plans once per year during the Annual Enrollment Period (October 15 to December 7). If your medications change significantly outside that window, call 1-800-MEDICARE to ask whether you may have access to for a Special Enrollment Period, which allows you to change plans when ready.

How do I know if I may have access to for Extra Help?

You generally may have access to if your income is below about $21,000 per year as an individual or $42,000 as a married couple (these amounts change yearly). If you receive SSI or Medicaid, you are automatically considered. Otherwise, explore through Social Security at 1-800-772-1213, your local Social Security office, or ssa.gov.

What is the coverage gap, and how much will it cost me?

The coverage gap is a range of drug costs where you pay a higher percentage of the cost. For 2024, once your total drug costs reach about $5,850, you enter the gap and pay 25 percent of brand-name drug costs and 25 percent of generic drug costs until your out-of-pocket spending reaches about $7,050. After that, catastrophic coverage kicks in and the plan pays most of the cost.

Do all Part D plans cover the same medications?

No. Each plan has a formulary—a list of covered drugs—and the drugs on one plan's formulary might not be on another's. Even when two plans cover the same drug, they might charge different copays. Always check your specific medications using the Medicare Plan Finder before choosing a plan.