Part D is Medicare's prescription drug coverage

Part D is the prescription drug benefit that helps pay for medications you take at home. It is run by private insurance companies that contract with Medicare, not by Medicare directly. You choose which Part D plan to join during your enrollment period, and the plan you pick determines which drugs are covered, what you pay, and which pharmacies you can use.

Part D is separate from Part A (hospital), Part B (doctor visits), and Part C (Medicare Advantage). You can add it to Original Medicare, or it may be included in a Medicare Advantage plan. If you do not join a Part D plan when you first become may be able to access and you do not have other drug coverage, you will pay a penalty on top of your premiums for as long as you have Medicare.

Key Takeaways

  • Part D is optional but carries a late-enrollment penalty if you delay joining without other drug coverage.
  • You enroll through a private insurance company, not Medicare, and you can switch plans every year during the open enrollment period in October and November.
  • Part D plans have different drug lists (called formularies), so the same medication may be covered under one plan but not another.
  • You pay a monthly premium, and then you share the cost of drugs through copayments, coinsurance, or deductibles depending on the plan and the drug tier.
  • Once you reach a certain spending threshold, you enter the "donut hole" coverage gap where you pay more out of pocket, though this gap has been shrinking in recent years.

How Part D enrollment works

You can join Part D when you first become may be able to access for Medicare (usually at 65) or during the Annual Enrollment Period, which runs from October 15 through December 7 each year. If you miss this window and do not have other creditable drug coverage, you can still join, but you will owe a penalty.

To enroll, you contact the insurance company offering the Part D plan directly — by phone, online, or in person at a local office. You do not go through Medicare itself. You will need your Medicare number, which appears on your Medicare card. The plan becomes active on the first day of the month after you enroll, or on January 1 if you enroll during the Annual Enrollment Period.

You can change Part D plans once per year during the Annual Enrollment Period. If your plan is no longer available or your circumstances change significantly (such as a move to a new state), you may be able to switch outside this window. Contact your current plan or Medicare to ask whether you may have access to for a Special Enrollment Period.

What Part D plans cover and how they differ

Each Part D plan has a formulary — a list of covered drugs. Plans are not required to cover every medication, and they can change their formularies each year. A drug you took last year under one plan may not be covered this year, or it may move to a higher cost tier.

Plans organize drugs into tiers, usually four or five levels. Tier 1 drugs (generics) typically have the lowest copayment. Tier 2 (preferred brand-name drugs) cost more. Tier 3 and higher tiers include non-preferred drugs and specialty medications, which carry the highest copayments or coinsurance. Some plans require you to try a cheaper drug first before they will cover a more expensive one — this is called step therapy.

Plans also differ in which pharmacies participate in their network. A large chain pharmacy in one town may be in-network for one plan but out-of-network for another. Mail-order pharmacies are included in most plans, often at a lower cost for 90-day supplies of maintenance medications you take regularly.

How you pay for drugs under Part D

Part D has four payment stages. In the first stage, you pay a deductible (if your plan has one) before the plan starts to help. Deductibles vary by plan and can range from zero to several hundred dollars.

After you meet the deductible, you enter the initial coverage stage. You pay a copayment or coinsurance for each drug, and the plan pays its share. This stage continues until your total drug spending (what you paid plus what the plan paid) reaches a certain amount, which changes each year.

Once you hit that threshold, you enter the coverage gap, often called the "donut hole." In this stage, you pay a larger share of the drug cost. However, the gap has narrowed significantly in recent years — you now pay no more than 25 percent coinsurance for most drugs in the gap, and the gap itself closes earlier than it used to.

After you spend enough out of pocket to reach the catastrophic coverage threshold, the plan pays most of the cost and you pay only a small copayment or coinsurance for the rest of the year. The exact amounts change annually.

When Part D does not cover a drug

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 an exception from the plan — a formal request to cover the drug anyway. Your doctor usually submits this request on your behalf, and the plan has 72 hours to respond (or 24 hours if it is urgent).

If the plan denies your exception request, you can appeal. The appeals process takes longer but gives you another chance to make your case. Your doctor's letter explaining why this specific drug is medically necessary strengthens your appeal.

You can also choose to pay out of pocket for the drug yourself. This does not count toward your deductible or out-of-pocket spending limits, so you will not reach catastrophic coverage any faster, but it may be worth it if the drug is inexpensive or if you are already in the catastrophic stage.

Part D and other insurance you may have

If you have drug coverage through a current or former employer, union, or veteran's benefit, you may not need Part D right away. However, you must tell Medicare that you have creditable coverage — coverage that is at least as good as Part D. If you do not report it and you let your other coverage end, you will owe a late-enrollment penalty when you finally join Part D.

If you have Medicaid (state health insurance for low-income people), Medicaid pays for your drugs, not Part D. You should not enroll in Part D if you are on Medicaid, because Medicaid will be the primary payer.

If you are on a Medicare Advantage plan (Part C), you already have drug coverage built in. You do not need a separate Part D plan. Some Medicare Advantage plans have better drug coverage than others, so compare them carefully during enrollment.

Finding and comparing Part D plans

Medicare offers a free tool called the Plan Finder on Medicare.gov. You enter your medications, preferred pharmacies, and doctor information, and the tool shows you plans ranked by cost. You can see the monthly premium, deductible, copayments for each drug, and whether your pharmacy is in-network.

You can also call 1-800-MEDICARE to speak with someone who can walk you through your options. Many local senior centers and Area Agencies on Aging offer free counseling from trained volunteers who help you compare plans. These services are free and do not sell you anything.

When you compare plans, look beyond the lowest premium. A plan with a $5 monthly premium might have high copayments for your specific drugs, making it more expensive overall than a plan with a $35 premium. Use the Plan Finder to calculate your total estimated cost under each plan based on the medications you actually take.

Frequently Asked Questions

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

No, Part D is optional. However, if you do not join when you first become may be able to access and you do not have other creditable drug coverage, you will owe a penalty. The penalty is 1 percent of the national average Part D premium for each month you delay, and it stays on your premiums for as long as you have Medicare.

Can I switch Part D plans if my drug costs go up?

Yes, you can switch plans during the Annual Enrollment Period (October 15 through December 7). If your plan removed a drug from its formulary or moved it to a higher tier, you may also may have access to for a Special Enrollment Period that lets you switch outside the annual window. Contact your plan or Medicare to ask.

What happens if I cannot afford my Part D copayments?

If your income is low, you may may have access to for Extra Help, a federal program that pays Part D premiums and reduces copayments. You can explore through Social Security, your state Medicaid office, or online at SSA.gov. Some pharmaceutical companies also offer patient information programs that provide free or low-cost drugs directly to people who meet income requirements.

Does Part D cover over-the-counter drugs?

No, Part D covers only prescription medications. Over-the-counter drugs are not covered, even if a doctor recommends them. However, some Medicare Advantage plans offer supplemental benefits that may include a small allowance for over-the-counter items.

What if I move to a different state?

Part D plans are state-specific, so your current plan may not be available in your new state. You can switch to a different plan without waiting for the Annual Enrollment Period if you move. Contact your current plan or Medicare before you move to understand your options in your new location.