Part D covers prescription drugs through private insurance plans

Part D is prescription drug coverage you add to Original Medicare (Parts A and B). It is run by private insurance companies that Medicare approves, not by Medicare itself. Part D plans cover both brand-name and generic drugs, though which drugs they cover and how much you pay varies by plan and by pharmacy.

Part D is optional, but if you go without it when you first become may be able to access, you will pay a penalty if you join later. The penalty is a percentage added to your monthly premium for as long as you have Part D coverage. The exact amount depends on how long you went without it.

You choose a Part D plan during your initial enrollment period (usually the three months before, the month of, and three months after your 65th birthday) or during the annual open enrollment period each October through December. If you have a gap in coverage, you can join during a special enrollment period if you meet certain conditions.

Key Takeaways

  • Part D covers prescription drugs through private insurance plans you choose and pay a monthly premium for, separate from your Medicare Parts A and B.
  • Each Part D plan has a different list of covered drugs (called a formulary), so the same medication may be covered under one plan but not another.
  • You pay a monthly premium, an annual deductible, copayments or coinsurance at the pharmacy, and potentially more if your drug costs are very high (the coverage gap).
  • Delaying Part D enrollment after you first become may be able to access results in a permanent penalty added to your monthly premium.
  • You can change Part D plans once per year during the October through December open enrollment period, or when ready if you lose other drug coverage.

How Part D plans structure their drug costs

Each Part D plan sets its own monthly premium, annual deductible, and copayment or coinsurance amounts. Copayment means you pay a flat dollar amount (like $10 or $50) for each prescription. Coinsurance means you pay a percentage of the drug's cost (like 20 percent). Most plans use copayments for common drugs and coinsurance for expensive ones.

Plans also organize drugs into tiers. Tier 1 drugs (usually generic) cost the least. Tier 2 drugs (brand-name with generic alternatives) cost more. Tier 3 and higher tiers cost even more and may require your doctor to get prior approval before the pharmacy fills the prescription. Some plans have specialty tiers for very expensive drugs that treat conditions like cancer or HIV.

You can see which drugs a plan covers and what you will pay by looking at its formulary before you join. The formulary is a list of all covered drugs organized by tier. If your current medications are not on a plan's formulary, that plan may not be the right choice for you, or you may need to ask your doctor about switching to a covered alternative.

The coverage gap and catastrophic coverage

Part D has a coverage gap, sometimes called the "donut hole." Once you and your plan have paid a combined total of $5,850 in 2024 (this amount changes each year), you enter the gap. In the gap, you pay a higher percentage of your drug costs until your out-of-pocket spending reaches $7,050 for the year.

After you reach $7,050 in out-of-pocket costs, you enter catastrophic coverage. At this point, you pay only a small copayment or coinsurance (usually 5 percent) for the rest of the year, and your plan pays the rest. This protects you from unlimited costs if you take many expensive medications.

The coverage gap amounts change every January. Some plans offer extra help during the gap, and some drugs (like insulin) have manufacturer discounts that reduce what you pay. Check your plan's details to understand how the gap affects your specific medications.

What Part D does and does not cover

Part D covers most prescription drugs, including brand-name and generic medications. It covers drugs you pick up at a pharmacy and some drugs you receive in a hospital or doctor's office (though those may be covered under Part B instead). Part D also covers some over-the-counter drugs if your doctor prescribes them and your plan includes them on its formulary.

Part D does not cover certain drugs. It excludes most over-the-counter medications unless prescribed, drugs used for weight loss, most drugs for erectile dysfunction, and certain other categories. Your plan's formulary will tell you exactly which drugs are excluded. If a drug is not covered, you can ask your doctor to request a coverage exception, though the plan is not required to grant it.

If your plan denies coverage for a drug your doctor prescribed, you have the right to appeal. You can ask your doctor to provide medical reasons why you need that specific drug, and the plan must review the request. This process usually takes a few days to a few weeks.

Choosing and changing Part D plans

You choose a Part D plan from the plans available in your area. Medicare's Plan Finder tool on Medicare.gov lets you enter your current medications and see which plans cover them and what your costs would be. You can compare premiums, deductibles, copayments, and which pharmacies are in each plan's network.

You can change Part D plans once per year during open enrollment (October 15 through December 7). Your new coverage starts January 1. If you lose other drug coverage (such as coverage through a former employer), you can join a plan outside the open enrollment period without penalty.

If you are in a Medicare Advantage plan (Part C) that includes drug coverage, that plan's drug coverage is your Part D. You cannot have both Original Medicare Part D and Medicare Advantage drug coverage at the same time. If you switch from Medicare Advantage to Original Medicare, you can join a standalone Part D plan during a special enrollment period.

Part D premiums, deductibles, and out-of-pocket costs

Part D premiums vary widely depending on the plan and your location. In 2024, premiums range from roughly $7 to $100 per month, though this varies by year and region. If your income is below certain thresholds, you may receive a subsidy that lowers your premium and deductible. You can check whether you may have access to by contacting Social Security or using Medicare.gov's subsidy calculator.

Annual deductibles also vary by plan. Some plans have no deductible. Others have deductibles up to $545 in 2024 (this amount changes yearly). Once you meet your deductible, your plan begins to pay its share of your drug costs. Some plans waive the deductible for certain drugs, such as preventive medications.

Your total out-of-pocket costs include your monthly premium, deductible, copayments or coinsurance at the pharmacy, and any costs you pay in the coverage gap. Tracking these costs throughout the year helps you understand when you will reach catastrophic coverage and how much you will pay overall.

What to ask your doctor and when to contact your plan

Before you choose a Part D plan, ask your doctor for a complete list of all medications you take, including the dose and how often you take each one. This list helps you check whether your medications are covered. Ask your doctor whether any of your drugs have generic alternatives that cost less, or whether you could switch to a different drug that your preferred plan covers.

If your plan denies coverage for a drug or requires prior approval, ask your doctor to contact the plan on your behalf. Your doctor can explain why you need that specific medication and request an exception. This conversation often resolves the issue faster than handling it yourself.

Contact your Part D plan if your medications change, if you move to a different state, or if you have questions about what you will pay at the pharmacy. Plans can sometimes adjust your copayments or help you find lower-cost alternatives. If you are struggling to afford your medications, ask whether your plan offers patient information programs or whether the drug manufacturer offers discounts.

Frequently Asked Questions

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

Part D is optional, but if you delay joining after you first become may be able to access, you will pay a penalty for as long as you have Part D coverage. The penalty is about 1 percent of the national average Part D premium for each month you went without it. If you have other drug coverage (such as through an employer or union), you may not owe a penalty when you eventually join.

Can I use my Part D coverage at any pharmacy?

Each Part D plan has a network of pharmacies where you pay the plan's copayment or coinsurance. If you use an out-of-network pharmacy, you will pay more or the plan may not cover the drug at all. You can use mail-order pharmacies for some plans, which may offer lower copayments for 90-day supplies. Check your plan's pharmacy network before you join.

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

You can ask your doctor to request a coverage exception, which means asking the plan to cover a drug that is not on its formulary. The plan reviews the request and decides whether to approve it. If the plan denies the exception, you can appeal. You can also switch to a different Part D plan during open enrollment if another plan covers your medication.

How do I know if I may have access to for help paying Part D costs?

If your income and resources are below certain limits, you may may have access to for Extra Help, a federal program that lowers your Part D premiums, deductibles, and copayments. You can explore through Social Security, your state Medicaid office, or online at SSA.gov. The income limits change each year, so check whether you may have access to even if you did not in the past.

Can I change my Part D plan if my medications stop working or my doctor prescribes something new?

You can change plans during the annual open enrollment period (October 15 through December 7) regardless of why. If you need to change plans outside this window because your health has changed significantly, contact your plan to ask about a special enrollment period. Some plans also allow mid-year changes if your circumstances meet specific criteria.