What Medicare Part D Covers

Medicare Part D is prescription drug coverage that helps pay for medications you take at home. It covers brand-name drugs, generic drugs, and some biologics — but not all medications. Part D does not cover drugs used only in a hospital or doctor's office, drugs you get through Part B, or certain other categories like over-the-counter medicines.

Each Part D plan maintains a list called a formulary — the specific drugs the plan will help pay for. Formularies differ between plans and can change each year. A drug your plan covered last year might move to a higher cost tier this year, or a new generic version might become available at a lower price. You can search any plan's formulary on Medicare.gov before you join.

Part D is optional, but there is a financial penalty if you wait to join. If you go without Part D coverage for more than 63 days after you become may be able to access, Medicare adds a permanent surcharge to your premium — roughly 1% per month of delay. That surcharge stays with you for life, even if you join a plan later.

Key Takeaways

  • Part D plans are run by private insurance companies approved by Medicare, and each plan has its own formulary, cost structure, and pharmacy network.
  • You choose a Part D plan during your Initial Enrollment Period when you first turn 65, or during the Annual Enrollment Period each October 15 to December 7.
  • Most Part D plans use a tiered cost system: you pay less for generic drugs and more for brand-name drugs, with costs changing after you reach certain spending thresholds.
  • The "donut hole" (coverage gap) still exists but is smaller than it used to be — once you and your plan spend $5,850 combined in 2024, you enter a gap where you pay more out of pocket until catastrophic coverage kicks in.
  • You can switch Part D plans once per year during the Annual Enrollment Period, so if your medications or costs change, you can find a better fit.

How Part D Plans Are Structured

Part D plans are sold by private insurance companies, not by Medicare directly. Medicare sets the rules and monitors the plans, but each company decides which drugs to cover, what pharmacies to use, and how much you pay. This is why two Part D plans can look very different even though they both follow Medicare rules.

Most plans charge a monthly premium, a deductible (the amount you pay before the plan starts helping), and then copayments or coinsurance (a fixed amount or percentage you pay per prescription). Some plans have no deductible. The deductible, if there is one, usually ranges from zero to around $500, though the exact amount varies by plan and year.

Plans also have a pharmacy network — the specific drugstores and mail-order pharmacies where you can fill prescriptions at the plan's negotiated prices. Using an out-of-network pharmacy costs more. Most plans include major chains like CVS, Walgreens, and Walmart, plus mail-order options, but it is worth checking before you join if you have a pharmacy you prefer.

The Four Cost Tiers

Most Part D plans organize drugs into four tiers, each with a different cost to you. Tier 1 (generics) is cheapest, Tier 2 (preferred brand-name drugs) costs more, Tier 3 (non-preferred brand-name drugs) costs even more, and Tier 4 (specialty drugs) is most expensive. Some plans add a fifth tier for the highest-cost specialty medications.

Your cost for each tier is set by the plan and does not change during the year. If a drug moves from Tier 2 to Tier 3 mid-year, your copay for that drug goes up. If a generic version becomes available and the brand-name drug moves to a higher tier, you can ask your doctor about switching to the generic to save money.

A few drugs may require prior authorization — the plan asks your doctor to confirm the drug is medically necessary before they will pay for it. Some drugs have quantity limits (the plan will only pay for a certain number of pills per month). Your pharmacist or doctor's office can tell you if either applies to your medication.

The Coverage Gap (Donut Hole)

Once you and your plan together spend $5,850 on covered drugs in 2024, you enter the coverage gap — sometimes called the "donut hole." In the gap, you pay a larger share of the drug cost yourself, though the exact percentage depends on the drug type and your plan. This gap continues until your out-of-pocket spending reaches $7,050 (in 2024), at which point catastrophic coverage begins and the plan pays most of the cost.

The coverage gap is smaller than it used to be because of changes to Medicare law. Generic drugs in the gap now cost 25% of the price, and brand-name drugs cost 25% as well (though the calculation is more complex for brand-name). Still, the gap can mean a sudden jump in what you pay each month, so it is worth understanding where you fall in the spending cycle.

Some people may have access to for Extra Help (also called the Low-Income Subsidy), a program that reduces or eliminates the coverage gap and lowers your premiums and deductibles if your income and resources are below certain limits. You can check whether you may have access to on Medicare.gov or by calling 1-800-MEDICARE.

Choosing and Switching Plans

You can join a Part D plan when you first become may be able to access for Medicare (your Initial Enrollment Period), or during the Annual Enrollment Period from October 15 to December 7 each year. Coverage begins January 1 of the following year. If you miss your Initial Enrollment Period and do not have other creditable drug coverage, the late penalty applies.

To compare plans, use the Medicare Plan Finder tool on Medicare.gov. Enter your medications, preferred pharmacies, and doctors, and the tool shows you plans ranked by estimated cost. You can see the premium, deductible, copays for each of your drugs, and whether your pharmacy is in the network. This takes 10 to 15 minutes and can save you hundreds of dollars per year.

You can switch to a different Part D plan once per year during the Annual Enrollment Period. If your medications change, your costs go up, or a better plan becomes available, you do not have to stay with the same plan. Some people switch every year to keep costs down as formularies and premiums shift.

Special Situations and Extra Help

If you are on Medicaid (state health insurance for low-income people) as well as Medicare, you are "dual may be able to access" and have different rules. Your state Medicaid program may cover some drugs that Part D does not, or may require you to use certain pharmacies. Contact your state Medicaid office to understand your coverage.

If you have employer or union retiree health coverage that includes drug benefits, that coverage may be "creditable" — meaning it is as good as Part D. If it is creditable, you can delay joining Part D without penalty. Your employer or union should tell you in writing whether your coverage is creditable; keep that letter in case you need it later.

If you are in a Medicare Advantage plan (Part C), drug coverage is usually included as part of that plan rather than as a separate Part D plan. You cannot have both a Part D plan and a Medicare Advantage plan at the same time. If you switch from Medicare Advantage to Original Medicare, you can join a Part D plan during the Annual Enrollment Period.

Common Reasons Costs Change Year to Year

Your Part D costs can shift significantly from one year to the next, even if you do not change plans. Drug manufacturers raise prices, new generic versions become available, plans adjust their formularies, and Medicare updates the spending thresholds that trigger the coverage gap. A drug that cost $10 per month last year might cost $25 this year, or a new generic might drop the price to $3.

Premiums also change. A plan that was cheapest for you in 2023 might be more expensive in 2024, while a different plan becomes the better deal. This is why comparing plans each year during the Annual Enrollment Period is worth the time — your best choice today may not be your best choice next year.

If your income drops or you experience a major life change (like losing employer coverage), you may may have access to for Extra Help or a Special Enrollment Period that lets you join or switch plans outside the normal enrollment window. Call 1-800-MEDICARE to ask whether a change in your situation opens new options.

Frequently Asked Questions

Do I have to join a Part D plan when I turn 65?

Part D is optional, but if you go without it for more than 63 days after you become may be able to access and do not have other creditable drug coverage, Medicare charges you a permanent surcharge on your premium. If you do not take many medications or use a patient information program, you may decide the surcharge is worth avoiding, but most people join a plan to avoid the penalty.

What happens if my drug is not on my plan's formulary?

You can ask your doctor to request an exception from the plan, explaining why that specific drug is medically necessary for you. The plan has 72 hours to respond. If they deny the exception, you can appeal. You can also switch to a different Part D plan during the Annual Enrollment Period that does cover the drug.

Can I use any pharmacy with my Part D plan?

No, you must use a pharmacy in your plan's network to get the plan's negotiated prices. Using an out-of-network pharmacy costs much more. Most plans include major chains and mail-order options, but always check the network before you join if you have a preferred pharmacy.

What is the difference between Part D and Part B drug coverage?

Part B covers drugs given to you by a doctor or in a hospital or clinic — like chemotherapy, biologics for rheumatoid arthritis, or vaccines. Part D covers drugs you pick up at a pharmacy and take at home. If a drug can be given either way, your doctor decides which route is best, and that determines which part of Medicare pays.

Can I get my Part D prescription filled by mail?

Most Part D plans offer mail-order pharmacy options, usually for 30-day, 60-day, or 90-day supplies. Mail-order is often cheaper per dose and more convenient for medications you take regularly. Check your plan's website or call the customer service number on your card to set up mail delivery.