Medicare Part D is prescription drug coverage run by private insurance companies

Medicare Part D is a prescription drug benefit you can add to Original Medicare (Parts A and B) or that comes built into many Medicare Advantage plans. It is not run by Medicare directly — instead, private insurers offer Part D plans, and you choose which one to join during your enrollment period. Part D covers both brand-name and generic medications, but the exact drugs covered and what you pay depend on which plan you pick.

Part D does not cover all medications. Each plan maintains a formulary — a list of drugs the plan will pay for — and that list varies from plan to plan. Some drugs require your doctor to get prior approval before the plan will cover them. Others are covered only if you try a cheaper alternative first. Understanding what your specific plan covers before you need a medication can save you hundreds of dollars.

Key Takeaways

  • Part D covers most common prescription drugs, but each plan's formulary is different, so the same medication may be covered under one plan and not another.
  • You pay a monthly premium for Part D, and then you also pay out-of-pocket costs at the pharmacy — the amount depends on which tier your drug is on and where you are in the plan year.
  • If a drug you need is not on your plan's formulary, you can ask your doctor to request a coverage exception, though approval is not may provide.
  • Part D has an annual enrollment period (October 15 to December 7) when you can switch plans, and you should review your coverage every year because formularies change.

What drugs Part D actually covers

Part D plans must cover drugs in six broad categories: anticonvulsants, antidepressants, antiretrovirals (for HIV), immunosuppressants, proton pump inhibitors, and statins. Beyond those, each plan decides which other medications to include. This means a blood pressure medication covered by one plan may not be covered by another, or it may be covered but only after you pay a higher cost-sharing amount.

When you look at a plan's formulary, drugs are sorted into tiers. Tier 1 (preferred generic) costs the least. Tier 2 (preferred brand-name) costs more. Tier 3 (non-preferred generic) and Tier 4 (non-preferred brand-name) cost even more. Tier 5 is for specialty drugs — expensive medications for conditions like cancer or rheumatoid arthritis — and your cost-sharing can be a percentage of the drug's price rather than a flat dollar amount. A single medication can move between tiers from year to year, which is why a drug you paid $10 for last year might cost $35 this year under the same plan.

If your doctor prescribes a drug that is not on your plan's formulary, you have options. You can ask your doctor to prescribe a different drug that is covered. You can request a formulary exception — a formal request to the plan asking them to cover the drug anyway — though the plan can deny this. You can also switch to a different Part D plan during the annual enrollment period if another plan covers the drug you need.

How you pay for Part D drugs throughout the year

Part D has four payment stages, and your out-of-pocket costs change as you move through them. First, you pay a monthly premium to the plan — this varies widely, from roughly $7 to $100 per month depending on the plan and your location. This premium is separate from any premium you pay for Original Medicare Part B.

After you pay your premium, you enter the deductible stage. Most Part D plans have an annual deductible (the amount you must pay out of pocket before the plan starts helping), though some plans have no deductible. In 2024, the maximum deductible is $545, but many plans have lower deductibles or none at all. Once you meet your deductible, you move to the initial coverage stage.

In the initial coverage stage, you and the plan share the cost of your drugs. You pay your copay or coinsurance (a percentage of the drug's cost), and the plan pays the rest. This stage continues until your total drug costs — what you paid plus what the plan paid — reach $5,430 in 2024. Then you enter the coverage gap, sometimes called the "donut hole."

In the coverage gap, you pay a higher percentage of your drug costs. As of 2024, you pay 25 percent of the cost of brand-name drugs and 25 percent of generic drugs. The plan does not help during this stage. You stay in the gap until your out-of-pocket spending reaches $8,850 in 2024. After that, you enter catastrophic coverage, where the plan covers most of the cost and you pay only a small copay or coinsurance for the rest of the year.

Prior authorization and step therapy requirements

Even if a drug is on your plan's formulary, the plan may require prior authorization before it will pay for it. This means your doctor must contact the plan and get approval before you fill the prescription. The plan uses prior authorization to make sure the drug is medically necessary and appropriate for your condition. The process usually takes a few days, but it can delay you getting the medication you need.

Some plans also use step therapy, which means you must try a cheaper drug first. If that drug does not work or causes side effects, your doctor can then request approval for the more expensive medication. Step therapy is common for drugs like biologics or newer medications. If your doctor believes step therapy is not appropriate for you — for example, because you have already tried the cheaper drug and it failed — they can request a step therapy exception.

If your plan denies a prior authorization or step therapy request, you have the right to appeal. Your doctor can submit additional medical information to support the appeal, and the plan must respond within a set timeframe. Many appeals are successful, especially when your doctor provides detailed clinical reasoning for why the requested drug is necessary.

How to find out what your plan covers

The easiest way to check your Part D coverage is to visit your plan's website and search the formulary by drug name. You will see which tier the drug is on, whether it requires prior authorization, and whether step therapy applies. If you do not have internet access, you can call your plan's customer service number — it is on your insurance card — and a representative can tell you the same information.

Medicare also offers a tool called Medicare.gov's Plan Finder. You can enter your medications and see which Part D plans cover them and what your costs would be under each plan. This tool is especially useful during the annual enrollment period when you are deciding whether to stay with your current plan or switch. Keep in mind that formularies change every January 1, so a drug covered this year may not be covered next year.

If you take multiple medications, comparing plans can be time-consuming. You can also contact your State Health Insurance information Program (SHIP), which offers free counseling about Medicare coverage. SHIP counselors can review your medications and help you find a plan that covers them at the lowest cost.

What Part D does not cover

Part D does not cover certain categories of drugs, even if they are prescription medications. Over-the-counter drugs are not covered, even if your doctor recommends them. Drugs used for cosmetic purposes — like hair loss treatments — are not covered. Medications for erectile dysfunction are not covered. Drugs imported from outside the United States are not covered.

Part D also does not cover compounded medications (drugs mixed by a pharmacist specifically for you) unless they contain an ingredient that is on the formulary. Certain vaccines are covered under Part D, but others fall under Part B coverage instead. If you are unsure whether a specific medication is covered, ask your pharmacist or call your plan.

Changing your Part D plan or coverage

You can change Part D plans during the Annual Enrollment Period, which runs from October 15 to December 7 each year. Changes take effect on January 1. If you miss this window, you generally cannot switch plans until the next enrollment period, unless you have a may have access to life event like moving to a new state, losing other drug coverage, or becoming newly may be able to access for Medicare.

If your plan drops a drug from its formulary mid-year, you may be able to request a special enrollment period to switch plans outside the normal window. If your plan significantly raises the price of a drug you take, you can also request a special enrollment period. Contact your plan or your State Health Insurance information Program to find out whether you may have access to.

Every year, review your Part D plan even if you are happy with it. Formularies change, premiums change, and a plan that was the best choice last year may not be the best choice this year. The Medicare Plan Finder tool makes it straightforward to compare your current plan against other options using your actual medications.

Frequently Asked Questions

Can I use Part D at any pharmacy?

Most Part D plans have a network of preferred pharmacies where your copays are lowest. You can use out-of-network pharmacies, but you will pay more. Some plans cover mail-order pharmacies at a lower cost than retail pharmacies. Check your plan's pharmacy network before you fill a prescription at a new location.

What happens if I cannot afford my Part D copays?

If your income is low, you may be may be able to access for the Low-Income Subsidy program, which reduces your Part D premiums and out-of-pocket costs. You can also ask your doctor or pharmacist about patient information programs run by drug manufacturers, which sometimes provide free or reduced-cost medications to people who meet income requirements.

Do I have to take Part D when I first turn 65?

You do not have to take Part D when you turn 65, but if you delay enrollment without a valid reason, you may face a permanent penalty on your premiums. The penalty is 1 percent of the national average Part D premium for each month you were not covered. If you have other drug coverage through an employer or union, you may be able to delay without penalty.

What if my doctor prescribes a brand-name drug but a generic version is available?

Your plan will likely cover the generic version at a lower cost. If your doctor believes the brand-name drug is medically necessary — for example, because the generic version causes side effects — they can request a brand-name exception. Some plans grant these automatically, while others require prior authorization.

Can my Part D plan change my formulary during the year?

Plans can remove drugs from their formularies or move them to higher tiers mid-year, though they must notify you in advance. If a drug you are taking is removed or moved to a higher tier, you have the right to request a formulary exception or to switch plans during a special enrollment period.