Part D is Medicare's prescription drug coverage

Part D is the prescription drug insurance piece of Medicare. It covers the cost of medications your doctor prescribes, from blood pressure pills to cancer treatments. You do not have to take it — Medicare does not require Part D — but if you do not sign up when you first become may be able to access and you go without coverage later, you will pay a penalty for as long as you have Medicare.

Part D is run by private insurance companies, not by Medicare directly. That means the drugs covered, the cost you pay, and the pharmacies you can use depend on which plan you choose. Two people on Medicare in the same town might have completely different Part D plans with different out-of-pocket costs for the same medication.

You can only change your Part D plan once a year, during the annual enrollment period from October 15 to December 7. If you miss that window and your plan changes in a way that affects you — your drug is no longer covered, or your pharmacy closes — you may be able to switch outside the enrollment period, but you have to act quickly.

Key Takeaways

  • Part D covers prescription drugs at pharmacies and through mail order, but the specific drugs covered and what you pay depend on your plan choice.
  • You can only change plans once a year during open enrollment (October 15 to December 7), so choosing the right plan the first time matters.
  • If you do not sign up for Part D when first may be able to access and later enroll, you pay a permanent penalty added to your monthly premium for as long as you have Medicare.
  • Part D plans have a coverage gap (the "donut hole") where you pay more out of pocket after spending a certain amount, though the gap shrinks each year.
  • You can use Medicare's online tool to compare plans side by side and see what your actual costs would be for the drugs you take.

How Part D coverage works and what you pay

When you enroll in a Part D plan, you pay a monthly premium to the insurance company. That premium varies by plan and by year — it is not set by Medicare. After you pay your premium, you also pay out of pocket when you fill a prescription. The amount you pay depends on which "tier" your drug is on.

Most Part D plans divide drugs into tiers: generic drugs cost less, brand-name drugs cost more, and specialty drugs (usually for serious conditions like cancer or rheumatoid arthritis) cost the most. Your plan's formulary — the list of covered drugs — tells you which tier each drug is on and what you will pay. If your doctor prescribes a drug that is not on the formulary, you can ask the insurance company to cover it anyway, but they may say no or ask your doctor to try a different drug first.

As you spend money on prescriptions, you move through different cost stages. In the initial coverage stage, you pay a copay or coinsurance (a percentage of the drug's cost) for each prescription. Once your total out-of-pocket spending reaches a certain amount — $7,050 in 2024, though this changes yearly — you enter the coverage gap, sometimes called the "donut hole." In the gap, you pay a higher percentage of the drug's cost. Once your out-of-pocket spending reaches a second threshold (around $10,500 in 2024), you move into catastrophic coverage, where you pay a small copay and the plan covers the rest.

When to enroll and what happens if you miss the important date

You become may be able to access for Part D when you turn 65 and enroll in Medicare Part A or Part B. You have two months after you first become may be able to access to sign up for Part D without penalty. If you do not sign up during that window, you can still enroll during the annual open enrollment period (October 15 to December 7 each year), but you will pay a late enrollment penalty.

The penalty is 1 percent of the national average Part D premium for each month you were may be able to access but not enrolled. In 2024, the national average premium is around $34, so the penalty is roughly 34 cents per month of delay. That penalty is added to your monthly premium and stays with you for as long as you have Part D — it does not go away after a few years. If you go three years without Part D coverage and then enroll, your penalty will be roughly 36 percent higher than someone who enrolled on time.

There is one exception: if you have other drug coverage through an employer, a union, or a veterans program, you may not have to pay the penalty when you eventually enroll in Part D. You will need to show proof that your other coverage was "creditable" — meaning it covered at least as much as Part D does. Ask your previous plan administrator for a letter stating this before you enroll in Part D.

Comparing plans and choosing the right one for your medications

Because each Part D plan covers different drugs at different costs, the plan that is cheapest for your neighbor might be expensive for you. The only way to know which plan costs you the least is to compare plans based on the specific medications you take.

Medicare provides a free online tool at Medicare.gov called the Plan Finder. You enter the drugs you take, the dosages, and the pharmacies you prefer, and the tool shows you every Part D plan available in your area, ranked by your estimated out-of-pocket cost for the year. It also tells you whether each drug is covered, which tier it is on, and whether you need prior authorization (approval from the insurance company before you fill the prescription).

When you compare plans, look at the total cost for the year, not just the monthly premium. A plan with a low premium might have high copays, while a plan with a higher premium might save you money overall if you take expensive drugs. Also check whether your preferred pharmacy is in the plan's network — some plans work with most pharmacies, while others have a limited list.

What happens if your drug is not covered or your costs change

If your plan does not cover a drug your doctor prescribed, you have options. You can ask the insurance company to make an exception and cover it anyway — this is called a formulary exception or coverage information. You can also ask your doctor to prescribe a different drug that is on the formulary, or a generic version of the same drug.

If the insurance company says no to your exception request, you can file an appeal. You have the right to ask for a review, and if you disagree with the review, you can appeal further. The process takes time, so if you need the drug urgently, ask your doctor whether a covered alternative exists while the appeal is pending.

If your situation changes during the year — you lose your job and can no longer afford the premium, or a drug you take becomes very expensive — you may be able to switch plans outside the annual enrollment period. You have 60 days from the date your circumstances change to request a plan change. Contact your current plan or Medicare directly to find out whether your situation qualifies.

Part D and other Medicare coverage

Part D works alongside Medicare Part A (hospital insurance) and Part B (medical insurance). If you have Original Medicare (Part A and Part B), you choose a separate Part D plan from a private insurance company. If you have a Medicare Advantage plan (Part C), prescription drug coverage is usually included in that plan, and you do not choose a separate Part D plan.

If you have both Medicare and Medicaid (the state program for low-income people), you may be in a special group called dual-may be able to access. Medicaid may cover some of your Part D costs, including premiums and out-of-pocket expenses. The rules vary by state, so contact your state Medicaid office to find out what you are covered for.

If your income is low, you may also may have access to for the Low-Income Subsidy program, which helps pay your Part D premium and out-of-pocket costs. You can explore through Social Security or your state Medicaid office.

Common mistakes to avoid when choosing Part D

The biggest mistake is not comparing plans. Many people choose the plan with the lowest premium and then discover their drugs are expensive or not covered. Spend 15 minutes with the Plan Finder tool — it will show you the real cost difference between plans for your specific medications.

Another mistake is not updating your plan choice when your medications change. If your doctor prescribes a new drug or stops one you were taking, your current plan might no longer be the cheapest option. Review your plan every year during open enrollment, even if you think you will stay with the same plan.

A third mistake is missing the enrollment important date. If you miss the October 15 to December 7 window and you do not have a may have access to life event (like losing employer coverage), you cannot change plans until the next year. If your plan stops covering a drug you need, you are stuck until the next enrollment period unless you can show that your circumstances changed.

Frequently Asked Questions

Do I have to take Part D, or can I skip it?

You do not have to take Part D. But if you do not sign up when you first become may be able to access and you go without coverage, you will pay a penalty when you eventually enroll. The penalty stays with you for as long as you have Medicare. The only exception is if you have other drug coverage through an employer or union that is as good as Part D.

What is the coverage gap, and how much will I pay in it?

The coverage gap is a stage where you pay a higher percentage of your drug costs. In 2024, it starts after you have spent $7,050 out of pocket and ends around $10,500. In the gap, you pay about 25 percent of brand-name drug costs and 25 percent of generic drug costs. The gap shrinks each year by law, so your costs in the gap will go down over time.

Can I change my Part D plan if my drug is no longer covered?

You can only change plans during the annual enrollment period (October 15 to December 7) unless you have a may have access to event. If your plan stops covering a drug you need mid-year, contact Medicare to see whether you may have access to for an exception. You can also ask your doctor to prescribe a covered alternative while you wait for the next enrollment period.

How do I know if a drug is covered before I enroll in a plan?

Use Medicare's Plan Finder tool at Medicare.gov. Enter the drugs you take, and it will show you which plans cover each drug, what tier it is on, and what you will pay. You can also call the insurance company directly and ask whether a specific drug is covered.

What if I cannot afford my Part D premium or my out-of-pocket costs?

If your income is low, you may may have access to for the Low-Income Subsidy program, which helps pay your premium and out-of-pocket costs. You can explore through Social Security or your state Medicaid office. If you have Medicaid, it may also help pay some of your Part D costs.