Medicare Part D is prescription drug coverage for people enrolled in Original Medicare. Part D plans must cover at least two drugs from each of the most commonly prescribed medication categories.
Medicare is a federal health insurance program for people ages 65 and over as well as some younger individuals with specific medical conditions.
Original Medicare comprises Part A, which covers inpatient hospital care, and Part B, which covers outpatient medical treatment. Part C, or Medicare Advantage, combines parts A and B in one plan and provides additional benefits.
Private insurance companies administer parts C and D, and Medicare approves these plans.
Glossary of Medicare terms
- Out-of-pocket cost: This is the amount a person must pay for care when Medicare does not pay the total amount or offer coverage. Costs can include deductibles, coinsurance, copayments, and premiums.
- Premium: This is the amount of money someone pays each month for Medicare coverage.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before Medicare starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, coinsurance is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 introduced Part D, a voluntary plan that covers the costs of take-home prescription drugs. The first Part D plan became available on January 1, 2006.
Private insurance companies administer Part D plans on behalf of Medicare. The monthly premiums can vary, and Medicare sets the maximum out-of-pocket costs that insurers can charge.
Each Part D plan has a formulary, which is a list of medications that it covers. A formulary must include at least two drugs in each of the most commonly prescribed categories of medications, such as those for diabetes and blood pressure.
Additionally, the plans must include coverage for most drugs in protected classes, including:
- cancer medications
- antidepressants
- immunosuppressants for organ transplants
- antipsychotics
- anticonvulsants
- HIV and AIDS medications
Part D plans generally cover brand-name and generic drugs. Generic medications are
Part D plans also have different tiers. Plan providers arrange these tiers in different ways, but an example might be:
- Tier 1: generic drugs, which may have the lowest copayments
- Tier 2: preferred brand-name drugs, which may have medium copayments
- Tier 3: non-preferred brand-name drugs, which may have higher copayments
- A specialty tier: very high cost drugs, which may have the highest copayments
Part D charges include:
- monthly premiums
- the annual deductible
- copayments
- coinsurance costs
The charges vary from plan to plan. However, a plan cannot charge more than $590 for its 2025 annual deductible.
Other factors may affect the overall cost of a Part D plan, such as:
- whether the formulary includes the necessary medications
- the tiers in which these drugs are categorized
- the pharmacy that the person uses
Medicare has strict eligibility and enrollment rules for its plans.
Who is eligible for Medicare Part D?
Anyone enrolled in Original Medicare is eligible for Part D coverage.
If a person has a Medicare Advantage (MA) plan instead, they are ineligible for a stand-alone Part D plan because most MA plans offer Part D coverage.
A person can enroll in a Medicare Part D plan during their Medicare initial enrollment period (IEP), a 7-month window that begins 3 months before the person turns 65, continues through their birth month, and ends 3 months later.
If an individual misses their IEP, they can sign up for a plan during the open enrollment period (OEP), which lasts from October 15 to December 7 each year.
Medicare has an online search tool showing the Part D plans available in a person’s area. After choosing a plan, they can enroll by:
- filling out an application on the plan’s website
- calling the plan provider and giving them the necessary information
- completing a paper application and mailing it to the plan provider
Medicare Part D late enrollment penalty
If a person goes without prescription drug coverage for at least 63 consecutive days after the end of their IEP, they may have to pay a late enrollment penalty, which is added to their monthly premium.
The penalty is generally permanent, which means the individual has to pay it as long as they have the Part D plan.
To avoid the penalty, they must enroll in a plan as soon as possible unless they have other creditable prescription drug coverage.
Extra Help is a Medicare program for people with limited income and resources that helps pay for the costs of their Part D plans.
To be eligible, a person must have enrolled in Medicare parts A, B, or both. Additionally, they need to reside in one of the 50 states or the District of Columbia.
Another eligibility requirement concerns resources. In 2025, the value of savings, real estate holdings, and investments must not exceed $17,600 for an individual or $35,130 for a married couple. When calculating the value of these resources, certain items are excluded, including:
- the person’s home
- their car
- personal possessions
- an intended burial plot
Other specific income and resources are excluded for people within American Indian and Alaska Native communities.
A person can apply for Extra Help:
- on the Social Security Administration (SSA) webpage
- by calling the SSA at 800-772-1213
- by calling 800-325-0778, a dedicated call center for deaf people
A Medicare Part D plan makes prescription drug costs more affordable. Although out-of-pocket expenses are still present, Medicare sets limits on them.
When a person first becomes eligible for Medicare, they can enroll for Part D during their initial enrollment period (IEP).
If they miss the IEP, they can sign up during the open enrollment period every year, though they may have to pay a late enrollment fee going forward.