Medicare Part D is the prescription drug coverage you need to know about

Medicare Part D is the part of Medicare that covers prescription medications. It is run by private insurance companies approved by Medicare, not by Medicare itself. 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 Parts A, B, and C. You do not automatically get it — you have to sign up. 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.

Part D covers most prescription drugs, but not all. Medicare maintains a list called the formulary for each plan, and only drugs on that list are covered. Some drugs require your doctor to get prior approval before the pharmacy will fill them. Others are covered only if you try a cheaper drug first.

Key Takeaways

  • Part D is prescription drug coverage sold by private insurance companies, and you must choose and enroll in a specific plan — it does not come automatically with Medicare.
  • Each Part D plan has its own formulary, or list of covered drugs, so the same medication may be covered under one plan but not another.
  • You pay a monthly premium for Part D, plus a deductible, copayments, or coinsurance when you fill prescriptions, depending on which plan you choose.
  • If you do not join a Part D plan when you first become may be able to access and you do not have other creditable drug coverage, you will owe a lifetime penalty.
  • You can change your Part D plan once a year during the annual enrollment period, which runs from October 15 to December 7.

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. After you meet your deductible (the amount you pay out of pocket before the plan starts to help), you enter the coverage phase. During this phase, you pay a copayment or coinsurance for each prescription — the exact amount depends on the plan and the drug.

As you fill prescriptions throughout the year, your out-of-pocket costs add up. Once your total spending reaches a certain amount (called the initial coverage limit), you enter the coverage gap, sometimes called the "donut hole." In the coverage gap, you pay a higher percentage of the drug cost. Once your out-of-pocket spending reaches the catastrophic threshold, the plan covers most of the cost and you pay only a small copayment for the rest of the year.

The exact dollar amounts for deductibles, copayments, and thresholds change every year and vary by plan. You can compare the costs of different plans using the Medicare Plan Finder tool on Medicare.gov, which shows you what you would pay for your specific medications under each available plan in your area.

What drugs Part D does and does not cover

Part D covers most prescription medications, but Medicare has rules about which drugs plans must include. Plans must cover drugs in certain categories, such as cancer medications, heart drugs, and antibiotics. However, each plan decides which specific drugs in those categories it will cover, and at what cost tier.

Part D does not cover certain drugs: drugs used to treat erectile dysfunction, weight loss medications (with limited exceptions), cosmetic drugs, and drugs you can buy over the counter. Drugs used only in a hospital or doctor's office are usually covered under Part B instead. If a drug you take is not on your plan's formulary, you can ask your doctor to request an exception, or you can switch to a different Part D plan during the annual enrollment period.

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

You can enroll in Part D when you first become may be able to access for Medicare — usually when you turn 65. You have a seven-month window called your Initial Enrollment Period that starts three months before the month you turn 65 and ends three months after. If you enroll during this window, your coverage can start as early as the month you turn 65.

If you miss your Initial Enrollment Period and you do not have other creditable drug coverage (coverage that is at least as good as Part D), you will owe a late enrollment penalty. This penalty is added to your Part D premium for as long as you have Medicare. The penalty is calculated based on how many months you went without coverage, so the longer you wait, the more you pay.

If you already have drug coverage through an employer, union, or other source, you may not need to enroll in Part D right away. However, you should check whether your coverage is creditable. If it is not, you should enroll in Part D to avoid the penalty. Your employer or plan administrator can tell you whether your coverage counts as creditable.

How to compare and choose a Part D plan

Every year during the annual enrollment period (October 15 to December 7), you can compare Part D plans and switch to a different one if you want. The best plan for you depends on which drugs you take, which pharmacies are near you, and how much you are willing to spend out of pocket.

Use the Medicare Plan Finder at Medicare.gov to see which plans are available in your area and what you would pay for your medications under each plan. You will need a list of your current drugs, including the dose and how often you take them. The tool shows you the monthly premium, deductible, copayments, and your estimated total cost for the year under each plan.

Pay attention to the pharmacy network. Some plans work with certain pharmacies and not others. If you have a pharmacy you prefer, check whether it is in the plan's network before you enroll. Mail-order pharmacies are also an option — many plans offer lower copayments if you use mail order for maintenance drugs you take regularly.

Part D versus other Medicare drug coverage options

Medicare Advantage plans (Part C) include prescription drug coverage as part of the plan. If you enroll in a Medicare Advantage plan, you do not need a separate Part D plan — the drug coverage is built in. However, Medicare Advantage plans have different formularies and pharmacy networks than standalone Part D plans, so you should compare what your drugs would cost under a Medicare Advantage plan versus Part D before you decide.

If you have coverage through a current or former employer or union, you may be able to keep that coverage instead of enrolling in Part D. However, if your employer coverage ends, you will need to enroll in Part D within 63 days to avoid the late enrollment penalty. Your employer's benefits administrator can tell you what happens to your drug coverage when you turn 65 or retire.

If you have very low income and limited resources, you may be able to get help paying for Part D premiums and out-of-pocket costs through the Low-Income Subsidy program, also called "Extra Help." This program is run by Social Security, and you can find out whether you may have access to by contacting Social Security or visiting their website.

Common mistakes to avoid with Part D

One common mistake is not enrolling in Part D when you first become may be able to access. Even if you do not take many medications now, enrolling protects you from the late enrollment penalty if you need drugs later. The penalty applies for the rest of your life, so it is worth enrolling even if you think you might not use it.

Another mistake is not reviewing your plan every year. Drug prices change, formularies change, and new plans enter the market. A plan that was the cheapest last year might not be the cheapest this year. Spending 15 minutes comparing plans during the annual enrollment period can save you hundreds of dollars.

A third mistake is not checking whether a drug is on your plan's formulary before you enroll. If you take a drug that is not covered, you will either have to pay the full cost out of pocket or switch plans. Always check the formulary for the drugs you actually take, not just the drug category.

Frequently Asked Questions

Does Medicare Part B cover any prescription drugs?

Yes, but only certain ones. Part B covers drugs that are injected or infused in a doctor's office or hospital, such as chemotherapy or biologics for rheumatoid arthritis. Part B also covers some vaccines. Drugs you take at home by mouth are covered by Part D, not Part B.

What happens if my doctor prescribes a drug that is not on my Part D formulary?

You can ask your doctor to request a formulary exception. The insurance company will review the request and may approve it if your doctor explains why you need that specific drug. If the exception is denied, you can pay the full cost out of pocket, ask your doctor about a covered alternative, or switch to a different Part D plan during the annual enrollment period.

Can I enroll in Part D after I turn 65?

Yes, but only during the annual enrollment period (October 15 to December 7) or if you have a may have access to life event, such as losing other drug coverage. If you enroll after your Initial Enrollment Period ends and you do not have a may have access to event, you will owe a late enrollment penalty.

Do all Part D plans cover the same drugs?

No. Each Part D plan has its own formulary, which is the list of drugs it covers. The same drug may be covered under one plan but not another, or it may be in a different cost tier. This is why comparing plans based on your specific medications is important.

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

The coverage gap is a phase of Part D coverage where you pay a higher percentage of the drug cost. The exact amount you pay depends on the drug and the plan. In 2024, once you reach the coverage gap, you pay 25 percent of the cost of brand-name drugs and generics. The gap ends once your out-of-pocket spending reaches the catastrophic threshold, after which the plan covers most of the cost.