Medicare Part D launched on January 1, 2006

Medicare Part D is the prescription drug coverage program that became available to all Medicare beneficiaries starting January 1, 2006. Before that date, Medicare did not cover outpatient prescription drugs at all — a gap that left many older adults paying full price for medications. Part D was created as a new benefit under the Medicare Modernization Act, which Congress passed in 2003.

The program rolled out in phases. Beneficiaries could first enroll during a special enrollment period that ran from November 15, 2005, through May 15, 2006. Coverage began on January 1, 2006, for those who signed up by December 31, 2005. Anyone who enrolled after that date had coverage start on the first day of the following month.

Part D was structured differently from other Medicare benefits. Rather than Medicare running the program directly, the government contracted with private insurance companies to offer prescription drug plans. This meant beneficiaries had to choose a plan from the options available in their area — there was no single Medicare drug plan.

Key Takeaways

  • Medicare Part D began on January 1, 2006, filling a gap that had left Medicare beneficiaries without any prescription drug coverage.
  • The program was created by the Medicare Modernization Act, passed by Congress in 2003, and launched as a voluntary benefit that beneficiaries had to enroll in.
  • Private insurance companies operate Part D plans under contract with Medicare, so the specific plans, costs, and covered drugs vary by insurer and region.
  • Beneficiaries who were already on Medicare in 2006 had a special enrollment window from November 2005 through May 2006 to sign up without penalty.

Why Part D was created and what problem it solved

Before 2006, Medicare covered hospital stays (Part A) and doctor visits (Part B), but it had no prescription drug benefit. Older adults on fixed incomes often had to choose between buying medications and paying for food or utilities. Some traveled to Canada or Mexico to buy drugs at lower prices. Others skipped doses or stopped taking medications altogether to stretch their supply.

The Medicare Modernization Act was Congress's response to this gap. Lawmakers believed that prescription drug coverage would improve health outcomes and reduce hospitalizations caused by untreated conditions. They also wanted to shift some of the cost burden from beneficiaries to insurance companies and the federal government.

Part D was designed as a voluntary benefit, meaning Medicare beneficiaries could choose whether to enroll. Those who did not sign up during their initial enrollment window faced a permanent penalty if they joined later — a higher monthly premium for as long as they remained in the program. This penalty structure was meant to encourage people to enroll when they first became may be able to access.

How Part D has changed since 2006

The structure of Part D has remained largely the same, but the details have shifted significantly. In the early years, beneficiaries faced a coverage gap known as the "donut hole" — a range of drug costs where they paid the full price with no insurance help. The Affordable Care Act, passed in 2010, began closing this gap, and by 2020 it was eliminated entirely.

The number of available plans has grown and contracted over time depending on the region. In some years, beneficiaries in certain areas had dozens of plans to choose from; in other years and places, only a handful were offered. The drugs covered by each plan change annually, and so do the costs — premiums, deductibles, and copayments are reset every January 1.

In recent years, Congress has made changes to lower drug costs for beneficiaries. Starting in 2024, Medicare began negotiating prices directly with pharmaceutical companies for certain high-cost drugs used by many beneficiaries. The out-of-pocket spending cap — the maximum amount a beneficiary pays in a year before catastrophic coverage kicks in — has also been lowered in recent legislation.

Who could enroll when Part D started

When Part D launched, anyone with Medicare Part A or Part B coverage could enroll. This included people age 65 and older, some younger people with disabilities, and people with end-stage renal disease. Beneficiaries did not have to be enrolled in Medicare Advantage (Part C) to use Part D — they could have original Medicare (Parts A and B) and add Part D on top.

The initial enrollment period was generous by design. From November 15, 2005, through May 15, 2006, anyone with Medicare could sign up without penalty, regardless of when they first became may be able to access for Medicare. This six-month window was meant to give people time to understand the new benefit and choose a plan.

After May 15, 2006, the rules tightened. Beneficiaries who did not enroll during that window could still join a plan, but they would face a late enrollment penalty if they had gone without creditable coverage — coverage at least as good as Part D — for more than 63 days in a row.

How to find information about Part D plans today

Every year, Medicare publishes a guide called the "Medicare & You Handbook" that lists all available Part D plans in your area. You can also visit Medicare.gov and use the Plan Finder tool, which lets you enter your zip code and the medications you take to see which plans cover them and what the costs would be.

The annual enrollment period for Part D runs from October 15 through December 7 each year. During this window, you can switch to a different plan, drop your current plan, or enroll for the first time if you are newly may be able to access. Changes take effect on January 1 of the following year.

If you need help understanding your options, you can contact your State Health Insurance information Program (SHIP), which offers free counseling about Medicare coverage. You can also call Medicare directly at 1-800-MEDICARE (1-800-633-4227).

The difference between Part D and other Medicare drug coverage

Part D is prescription drug coverage for people with original Medicare. If you are enrolled in Medicare Advantage (Part C), your drug coverage comes through your Advantage plan, not through a separate Part D plan. Some Medicare Advantage plans include drug coverage; others do not, so you would need to add a separate Part D plan.

Part D covers outpatient prescription drugs — medications you pick up at a pharmacy or have delivered to your home. It does not cover drugs you receive in a hospital or doctor's office as part of a treatment, which are covered under Part B. It also does not cover over-the-counter medications unless they are specifically approved by Medicare.

The cost structure of Part D is different from Parts A and B. Part D plans have monthly premiums, annual deductibles, and copayments or coinsurance for each drug. The amount you pay depends on which plan you choose and which tier your drug falls into — plans organize drugs into tiers based on cost and whether there are cheaper alternatives available.

Frequently Asked Questions

Did everyone have to enroll in Part D when it started in 2006?

No. Part D was a voluntary benefit, and enrollment was optional. However, if you had Medicare and did not enroll during your initial enrollment window, you would face a permanent late enrollment penalty if you joined later. The penalty is calculated as 1 percent of the national average Part D premium for each month you went without coverage.

What happened to people who were on Medicare before Part D started?

People already on Medicare in 2005 had a special enrollment period from November 15, 2005, through May 15, 2006, to sign up for Part D without penalty. If they did not enroll during that window and later went without creditable drug coverage for more than 63 days in a row, they would face a late enrollment penalty when they eventually joined.

Can I change my Part D plan after January 1?

You can change plans during the annual enrollment period, which runs from October 15 through December 7 each year. Changes take effect on January 1. Outside this window, you can only switch plans if you have a may have access to life event, such as moving to a new state, losing employer coverage, or becoming newly may be able to access for Medicare.

Does Part D cover all prescription drugs?

No. Each Part D plan has a formulary — a list of covered drugs. Plans are required to cover drugs in certain categories, but they can exclude specific medications or require prior authorization before covering them. You can check whether your medications are covered by using the Plan Finder tool on Medicare.gov or by calling the plan directly.

What is the donut hole, and does it still exist?

The donut hole was a coverage gap where beneficiaries paid the full price for drugs after reaching a certain spending threshold. It was gradually eliminated between 2010 and 2020, so it no longer exists. Today, once you reach your out-of-pocket spending cap, catastrophic coverage begins and you pay only a small copayment for the rest of the year.