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, from common blood pressure pills to cancer treatments. You do not have to take it, but if you wait to sign up after you first become may be able to access, you may pay a penalty for as long as you have Medicare.

Part D is run by private insurance companies, not Medicare directly. Each company offers different plans with different drug lists, copays, and monthly costs. You choose which plan to join during your enrollment period, and you can switch plans every year if a different one better fits your medications and budget.

Key Takeaways

  • Part D covers most prescription drugs, but each plan has its own list of covered medications, so you need to check whether your specific drugs are included before you enroll.
  • You pay a monthly premium, and then you share the cost of each prescription through copays or coinsurance until you reach your plan's out-of-pocket limit.
  • If you do not join a Part D plan when you first become may be able to access, you will owe a penalty added to your premium for every month you go without coverage.
  • You can compare plans and enroll during the annual enrollment period (October 15 to December 7), or you may be able to switch plans if your circumstances change during the year.

How Part D premiums and out-of-pocket costs work

Each Part D plan charges a monthly premium — the amount you pay just to have the plan, whether or not you fill any prescriptions. Premiums vary by plan and by region, and they change every year. Some plans cost $5 a month; others cost $100 or more. You pay this premium to the insurance company, not to Medicare.

Once you have the plan, you also pay a share of the cost when you fill a prescription. This share is usually a copay (a flat amount like $10 per prescription) or coinsurance (a percentage of the drug's cost, like 25 percent). The amount depends on which tier the drug is on — generic drugs usually cost less than brand-name drugs, which cost less than specialty drugs.

You keep paying copays or coinsurance until your total out-of-pocket spending reaches your plan's limit for the year. Once you hit that limit, the plan pays most of the cost of your drugs for the rest of the year. The out-of-pocket limit varies by plan but is set by Medicare each year.

The coverage gap and what happens after you reach your limit

Part D has a stage called the coverage gap (sometimes called the "donut hole") that happens between the time you and your plan have spent a certain amount on drugs and the time you reach your out-of-pocket limit. During this gap, you pay a larger share of the drug cost — though not the full price. The exact percentage you pay depends on the drug and your plan.

Once your total out-of-pocket spending reaches your plan's yearly limit, you move into catastrophic coverage. At this stage, the plan pays most of the cost of your drugs, and you pay only a small copay or coinsurance for the rest of the year. This protects you from extremely high drug costs.

Which drugs Part D covers and how to check your medications

Each Part D plan maintains a formulary — a list of drugs the plan covers. The formulary is organized by tier, with generic drugs usually on lower tiers (cheaper for you) and newer or brand-name drugs on higher tiers (more expensive for you). Some drugs may not be on the formulary at all, meaning the plan does not cover them.

Before you enroll in a Part D plan, you should check whether your current medications are on that plan's formulary. You can do this on the plan's website or by calling the plan directly. If a drug you take is not covered, you have a few options: you can choose a different plan that does cover it, you can ask your doctor whether a similar drug on the formulary would work for you, or you can request an exception from the plan (though this is not always granted).

Part D generally covers drugs prescribed by your doctor, but it does not cover over-the-counter medications, vitamins, or drugs used for cosmetic purposes. It also does not cover some drugs that Medicare Part B covers separately, such as drugs given in a hospital or doctor's office.

When you can enroll in Part D and what happens if you miss the important date

You can enroll in Part D during your initial enrollment period, which is the seven-month window that starts three months before the month you turn 65 and ends three months after. If you miss this window, you can still join during the annual enrollment period, which runs from October 15 to December 7 each year. Coverage begins on January 1 if you enroll by December 7.

If you do not enroll in Part D when you first become may be able to access, and you do not have other drug coverage that is at least as good as Part D (called creditable coverage), you will owe a late enrollment penalty. This penalty is a percentage of the national average Part D premium, and it is added to your monthly premium for as long as you have Part D. The penalty does not go away, even if you enroll later.

If you have creditable coverage through an employer, union, or other source, you can delay enrolling in Part D without penalty. But you will need to show proof of that coverage when you do enroll.

How to compare Part D plans and choose the right one for you

Because each plan covers different drugs at different costs, the cheapest plan is not always the best plan for you. The plan with the lowest premium might have high copays for your specific medications, or it might not cover them at all. You need to compare plans based on your actual prescriptions.

Medicare offers a free tool called the Medicare Plan Finder on Medicare.gov. You enter your medications, and the tool shows you which plans cover them and what your costs would be under each plan. This is the fastest way to see which plans work for your situation. You can also call 1-800-MEDICARE to speak with someone who can help you compare.

When you compare plans, look at the total cost for the year — the monthly premium plus what you would pay out of pocket for your drugs — rather than just the premium alone. A plan with a higher premium might save you money overall if your drugs are cheaper under that plan.

Switching plans and making changes during the year

You can change Part D plans once a year during the annual enrollment period (October 15 to December 7). Your new coverage starts on January 1. You do not need a reason to switch; you can change plans straightforward because you want to.

If your circumstances change during the year — for example, you lose other drug coverage, your income drops, or your doctor prescribes a new medication — you may be able to change plans outside the annual enrollment period. This is called a special enrollment period. You will need to contact Medicare or your plan to find out whether your situation qualifies.

If you are in a Part D plan and you move to a different state, you can switch to a plan available in your new state. You should do this as soon as possible to avoid gaps in coverage.

Frequently Asked Questions

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

No, Part D is optional. But if you do not enroll when you first become may be able to access and you do not have other drug coverage that is at least as good, you will owe a late enrollment penalty added to your premium for as long as you have Medicare.

What if my doctor prescribes a drug that is not on my Part D plan's formulary?

You can ask your doctor whether a similar drug on the formulary would work for you. You can also request an exception from the plan, though approval is not may provide. If the plan denies your request, you can appeal the decision.

Can I use Part D at any pharmacy?

Most Part D plans work at major pharmacy chains and many independent pharmacies, but not all pharmacies participate in all plans. Before you enroll, check whether your preferred pharmacy is in the plan's network. If it is not, you may pay more or have to use a different pharmacy.

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

If your income is low, you may be able to get help through the Low-Income Subsidy program, which reduces your premiums and copays. You can learn more about this program on Medicare.gov or by calling 1-800-MEDICARE.

Can I get Part D if I have Medicaid or other coverage?

If you have both Medicare and Medicaid, Medicaid usually pays for your drugs instead of Part D. If you have coverage through an employer or union, you may not need Part D, but you should check whether that coverage is creditable before you turn it down.