Medicare Part D Explained: Your Complete Guide to Prescription Drug Coverage

Medicare Part D is the prescription drug coverage portion of Medicare, but it works differently than the other parts. Unlike Parts A and B, which are administered directly by the federal government, Part D plans are sold by private insurance companies. This means you have choices to make, and those choices can significantly affect both your costs and your access to medications.

This guide breaks down everything you need to know about Medicare Part D: what it covers, how much it costs, when to enroll, and how to choose the right plan for your specific medications.

What Is Medicare Part D?

Medicare Part D is prescription drug insurance that helps cover the cost of medications you pick up at the pharmacy. It was added to Medicare in 2006 to address a significant gap: Original Medicare (Parts A and B) doesn't cover most outpatient prescription drugs.

Two Ways to Get Part D Coverage

You can get Medicare prescription drug coverage in two ways:

• Standalone Part D Plan (PDP) - Works alongside Original Medicare and Medigap plans. You pay a separate premium for drug coverage.
• Medicare Advantage with Drug Coverage (MA-PD) - Bundles Part D into a Medicare Advantage plan. One plan covers medical and prescription benefits.

If you have Original Medicare with a Medigap supplement, you'll need a standalone Part D plan for prescription coverage. If you choose Medicare Advantage, you'll typically get Part D included in your plan.

What Does Part D Cover?

Part D plans cover a wide range of prescription medications, but not every drug. Each plan has a formulary (list of covered drugs) that varies from plan to plan.

Categories Part D Must Cover

By law, all Part D plans must cover drugs in these protected categories:

• Antidepressants
• Antipsychotics
• Anticonvulsants (seizure medications)
• Immunosuppressants (for transplant patients)
• HIV/AIDS medications
• Cancer medications

What Part D Typically Doesn't Cover

• Drugs for weight loss
• Cosmetic drugs (hair growth, wrinkle treatments)
• Fertility drugs
• Erectile dysfunction medications
• Over-the-counter medications
• Drugs covered under Part A or Part B (like chemotherapy given in a doctor's office)

How Much Does Part D Cost?

Part D costs can be confusing because you pay in multiple ways: premiums, deductibles, copays, and potentially catastrophic coverage costs. Here's how each works.

Monthly Premiums

Part D premiums vary widely by plan and location. In 2025:

• Average premium: Around $55/month
• Range: From $0 to over $100/month depending on the plan
• Lower premiums often mean higher deductibles or copays

Annual Deductible

The Part D deductible is the amount you pay out-of-pocket before your plan starts covering costs.

• Maximum allowed (2025): $590
• Many plans offer: $0 deductible (with higher premiums)
• Some plans waive the deductible for generic drugs

Copays and Coinsurance

After your deductible, you'll pay a share of each prescription:

The Four Coverage Phases

Part D has four distinct phases that determine how much you pay throughout the year. Understanding these phases helps you anticipate your costs.

Phase 1: Deductible Stage

You pay 100% of drug costs until you've spent up to $590 (the maximum deductible). Many plans have $0 deductibles or waive the deductible for certain drug tiers.

Phase 2: Initial Coverage Stage

After meeting your deductible, you pay copays or coinsurance (based on drug tier) while your plan pays the rest. This continues until your total out-of-pocket costs reach $2,000.

Phase 3: Coverage Gap (formerly "Donut Hole")

Starting in 2025, the coverage gap has been eliminated for most beneficiaries thanks to the Inflation Reduction Act. Once you hit $2,000 in out-of-pocket costs, you move directly to catastrophic coverage.

Phase 4: Catastrophic Coverage

After reaching the $2,000 out-of-pocket cap, you pay nothing for covered Part D drugs for the rest of the calendar year.

When to Enroll in Part D

Timing matters with Part D. Enrolling at the wrong time can leave you without coverage or result in permanent penalties.

Initial Enrollment Period (IEP)

When you first become eligible for Medicare at 65, your Initial Enrollment Period spans 7 months:

• Starts 3 months before your 65th birthday month
• Includes your birthday month
• Ends 3 months after your birthday month

Annual Enrollment Period (AEP)

October 15 - December 7 each year. During this window, you can:

• Join a Part D plan for the first time
• Switch from one Part D plan to another
• Drop Part D (not recommended unless you have creditable coverage)

Special Enrollment Periods (SEP)

You may qualify for a Special Enrollment Period if you:

• Lose employer or union drug coverage
• Move to a new service area
• Qualify for Extra Help (Low Income Subsidy)
• Leave a Medicare Advantage plan

The Late Enrollment Penalty

If you don't enroll in Part D when first eligible and don't have other creditable drug coverage, you'll pay a penalty when you do eventually enroll.

Example Penalty Calculation

If you waited 24 months to enroll:

• 24 months x 1% = 24% penalty
• 24% x $34.70 = $8.33 per month
• You'd pay $8.33 extra every month, forever

What Counts as Creditable Coverage?

You can avoid the penalty if you had "creditable" drug coverage - meaning coverage that's at least as good as standard Part D. Common examples:

• Employer or union health coverage with drug benefits
• TRICARE
• VA health benefits
• Indian Health Service coverage
• COBRA (if the original coverage was creditable)

How to Choose a Part D Plan

With dozens of Part D plans available in most areas, choosing the right one requires comparing costs for your specific medications. Here's how to approach it:

Step 1: List Your Medications

Make a complete list of your prescription drugs, including:

• Drug name (brand and generic)
• Dosage (e.g., 10mg, 20mg)
• Quantity per month

Step 2: Use the Medicare Plan Finder

Go to Medicare.gov/plan-compare and enter your medications. The tool will show you:

• Which plans cover your drugs
• Your estimated annual costs for each plan
• Which pharmacies are in each plan's network
• Any coverage restrictions (prior authorization, quantity limits)

Step 3: Compare Total Costs, Not Just Premiums

A plan with a low premium might have higher copays for your specific drugs. Always compare:

• Annual premium ($0-$100+/month)
• Annual deductible ($0-$590)
• Copays/coinsurance for your medications
• Pharmacy network (preferred vs. standard)

Step 4: Check for Restrictions

Some drugs have coverage rules that can affect your access:

• Prior Authorization: Doctor must get approval before the plan covers the drug
• Step Therapy: You must try a cheaper drug first
• Quantity Limits: Plan limits how much you can get per month

Extra Help (Low Income Subsidy)

If you have limited income and resources, you may qualify for Extra Help, a federal program that pays most of your Part D costs.

What Extra Help Covers

• Part D premium (up to benchmark amount)
• Annual deductible (reduced or eliminated)
• Copays (reduced to $0-$11 per prescription)
• No coverage gap (coverage continues all year)

Who Qualifies?

You may qualify if your annual income is below approximately:

• Single: $22,590
• Married: $30,660

And your resources (savings, investments - not your home or car) are below:

• Single: $17,220
• Married: $34,360

Apply through Social Security at SSA.gov or your state Medicaid office.

Common Part D Questions

Do I need Part D if I'm healthy and don't take medications?

It's still recommended. Without creditable coverage, you'll face the late enrollment penalty if you need Part D later. Many people choose a low-premium plan ($0-$15/month) to avoid the penalty while minimizing costs.

Can I change my Part D plan if it stops covering my medication?

During the Annual Enrollment Period (October 15 - December 7), you can switch to any plan. If your plan drops a drug mid-year, you may qualify for a Special Enrollment Period.

What if I have VA or TRICARE coverage?

VA health benefits and TRICARE are both considered creditable coverage. You don't need Part D unless you want it. You can delay enrollment without penalty.

Can I use a mail-order pharmacy with Part D?

Yes. Most Part D plans offer mail-order options, often with lower costs for 90-day supplies. Check your plan's preferred mail-order pharmacy for the best prices.

Your Next Steps

Understanding Part D is the first step. Here's what to do next:

1. Make a medication list - Include all prescriptions with dosages and quantities
2. Check for creditable coverage - If you have employer/union drug coverage, verify it's creditable
3. Use the Medicare Plan Finder - Compare plans based on your specific medications
4. Consider total costs - Factor in premium, deductible, and copays for your drugs
5. Review annually - Plans change each year, so compare options every fall during AEP