Medicare Part D covers prescription drugs, but only if you enroll during the right window

Medicare Part D is the prescription drug coverage. It is separate from Parts A, B, and C, and you have to sign up for it yourself — it does not happen automatically. If you miss the enrollment window when you first become may be able to access for Medicare, you will pay a penalty for as long as you have Part D coverage.

Part D is run by private insurance companies that contract with Medicare. This means the drugs covered, the cost you pay, and the pharmacies you can use depend on which plan you choose. Two people on different Part D plans may pay different amounts for the same medication at the same pharmacy.

Part D covers most prescription drugs, but not all. It does not cover over-the-counter medications, and it does not cover certain drugs like most weight-loss medications or erectile dysfunction treatments. Your plan's formulary — the official list of covered drugs — tells you which medications are included.

Key Takeaways

  • Part D is optional but carries a lifetime penalty if you delay enrollment after you first become may be able to access for Medicare.
  • Each Part D plan covers a different set of drugs at different costs, so comparing plans before you enroll matters.
  • You pay a monthly premium, and then you share the cost of drugs with your plan until you reach a spending threshold called the coverage gap.
  • Once your total drug spending reaches a certain amount, your out-of-pocket costs drop significantly, even though your plan's payments continue.

How Part D costs work: premiums, deductibles, and cost-sharing

Part D has four cost layers. First, you pay a monthly premium — the price of the plan itself. This varies by plan and by region. Second, many plans have a deductible, which is the amount you pay out of pocket before the plan starts to help. Not all plans have a deductible, and some plans have a $0 deductible.

Once you meet the deductible (or if there is no deductible), you enter the initial coverage phase. Here, you and your plan split the cost of drugs. You might pay a flat amount per prescription (called a copay) or a percentage of the drug's cost (called coinsurance). Your plan pays the rest.

As you and your plan spend money together, you move toward the coverage gap — sometimes called the "donut hole." When your total drug spending reaches a certain amount (this amount changes each year), you enter the gap. In the gap, you pay a larger share of the drug cost yourself, though you still get a discount. Once your out-of-pocket spending reaches another threshold, you move into catastrophic coverage, where your costs drop again and your plan covers most of the cost.

When to 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 includes the month you turn 65 and the three months before and after. If you enroll during this window, your coverage starts on the first day of the month you turn 65 (or the first day of the following month, depending on your birthday).

If you do not enroll during your Initial Enrollment Period and you do not have other drug coverage, you will pay a late enrollment penalty for as long as you have Part D. The penalty is calculated as a percentage of the national average Part D premium and is added to your monthly premium. This penalty does not go away — it stays with you even if you switch plans later.

There are exceptions. If you have drug coverage through a current or former employer, or through a union, you may not have to enroll in Part D right away. You have a grace period after that coverage ends to enroll in Part D without penalty. You will need to show proof of that coverage when you enroll.

Part D plans: how to compare and choose

Part D plans vary in three main ways: which drugs they cover, how much you pay for each drug, and which pharmacies you can use. Some plans cover brand-name drugs more generously; others focus on generic drugs. Some plans have low premiums but high copays; others have higher premiums but lower costs when you fill prescriptions.

The best way to compare is to use the Medicare Plan Finder tool on Medicare.gov. You enter the medications you take, and the tool shows you which plans cover those drugs and what you would pay under each plan. This is the only way to know your actual costs before you enroll, because the same drug can cost $10 under one plan and $50 under another.

You can change Part D plans once per year during the Annual Enrollment Period, which runs from October 15 to December 7. If you change plans during this window, your new coverage starts on January 1. You can also switch plans if you have a may have access to life event — such as moving to a new state, losing other drug coverage, or a significant change in your income.

What Part D does not cover

Part D does not cover drugs used for cosmetic purposes, such as most hair-loss treatments. It does not cover most weight-loss drugs or erectile dysfunction medications. It does not cover over-the-counter drugs, even if a doctor recommends them. It does not cover drugs that are not approved by the Food and Drug Administration.

Some drugs require prior authorization before your plan will pay for them. This means your doctor has to contact your plan and explain why you need that specific drug. Your plan may also require you to try a cheaper drug first before it will cover a more expensive one — this is called step therapy. If your plan denies coverage for a drug your doctor prescribed, you have the right to appeal.

Part D and other Medicare coverage: how they work together

If you have Original Medicare (Parts A and B) plus Part D, you are covered for hospital stays, doctor visits, and prescriptions. If you have a Medicare Advantage plan (Part C), prescription drug coverage is usually included in that plan — you do not enroll in a separate Part D plan. Some Medicare Advantage plans have drug coverage built in; others require you to add it.

If you have Medicaid (state health insurance for people with low income), your state Medicaid program may cover prescriptions instead of or in addition to Part D. The rules vary by state. If you have both Medicare and Medicaid, contact your state Medicaid office to understand how your drug coverage works.

If you have coverage through a current or former employer, that coverage may work alongside Medicare. Your employer plan pays first, and Medicare pays second. When your employer coverage ends, you should enroll in Part D right away to avoid the late enrollment penalty.

How to appeal if your plan denies a drug or charges too much

If your Part D plan refuses to cover a drug your doctor prescribed, or if it requires prior authorization or step therapy, you can ask your plan to reconsider. This is called an appeal. Your doctor can submit the appeal on your behalf, explaining why you need that specific medication.

If your plan denies the appeal, you can request an independent review by someone outside your plan. You can also contact your state's Health Insurance information Program (SHIP) for free help with appeals. SHIP counselors can review your case and help you understand your options. To find your state's SHIP, visit shiptalk.org or call 1-877-839-2675.

Frequently Asked Questions

Do I have to enroll in Part D if I do not take any prescription drugs?

You are not required to enroll, but if you enroll later when you do need prescriptions, you will pay a late enrollment penalty. If you are certain you will never need prescriptions, you can skip Part D, but most people eventually take at least one prescription medication.

Can I use my Part D plan at any pharmacy?

No. Each Part D plan has a network of pharmacies where you pay the plan's copay or coinsurance. If you use an out-of-network pharmacy, you will pay more or the plan may not cover the drug at all. Check your plan's pharmacy list before you fill a prescription at a new location.

What happens to my Part D coverage if I move to a different state?

Your current plan may not be available in your new state. You can change plans without waiting for the Annual Enrollment Period if you move. Contact your current plan to find out when your coverage ends, and use Medicare Plan Finder to see which plans are available where you are moving.

How do I know if a drug is on my plan's formulary?

Log into your plan's website or call the customer service number on your insurance card. You can also use the Medicare Plan Finder tool and search for your specific medications. If a drug is not on the formulary, ask your doctor if there is a similar drug that is covered.

Can I get Part D coverage for insulin at a lower cost?

Yes. Medicare limits what you pay out of pocket for insulin to $35 per month per insulin product, regardless of which Part D plan you have. This applies to all insulin types covered by your plan. Your plan may also cover other diabetes medications at reduced costs.