What’s Medicare Part D?

As you prepare to enroll in Medicare for the first time, you might be concerned about how you’re going to afford the medications that you need.

You may be surprised to learn that Original Medicare doesn’t cover prescription drugs. Instead, you need to purchase a Medicare Part D plan for prescription drug coverage. Keep reading for important information you need to know about these plans.

What is Medicare Part D?

Medicare Part D is prescription drug coverage for people on Medicare. Unlike Original Medicare, which is managed by the federal government, Medicare Part D plans are sold by private companies. How you get prescription drug coverage depends on if you’re enrolling in Original Medicare or a Medicare Advantage plan:

• Original Medicare doesn’t include prescription drug coverage and you need to purchase a standalone Medicare Part D plan.
• Most Medicare Advantage plans include Part D benefits. However, in certain types that don’t, you can join a standalone Part D plan. If you sign up for a stand-alone Medicare Part D plan while you’re already in a Medicare Advantage plan that includes drug coverage, you’ll be automatically switched back to Original Medicare (Parts A and B) and keep the new Part D plan for prescriptions.

What is Covered by Medicare Part D?

Because Medicare Part D plans are offered by numerous private companies, covered drugs vary plan to plan.

Each prescription drug plan has a different formulary, or list of drugs that are covered under that particular plan. However, every plan must provide at least a standard level of coverage, as mandated by the Center for Medicare & Medicaid Services. As you shop for Medicare Part D, it’s valuable to ensure any medications you take are covered under the plans you’re considering.

If you’re later prescribed a drug that’s not on the formulary, then you can request an exception, pay out of pocket or file an appeal.

Can I Use Medicare Part D at Any Pharmacy?

Most Part D plans have networks of approved pharmacies in your area. You’ll typically pay less for prescriptions at in-network pharmacies. If you have a preferred pharmacy that you like to use, then look for plans that include your pharmacy in network.

How do Medicare Part D Plans Work?

In general, Medicare Part D plans can have four stages of coverage each year:

1. Deductible: Some plans require you to pay an annual deductible, or 100% of the cost of your prescriptions up to a certain limit before your plan pays.
2. Initial coverage: You pay your share of prescription costs, such as copayments and coinsurance, and your plan pays the rest for your covered drugs.
3. Medicare Part D coverage gap (aka the “donut hole”): Many Part D plans have a built-in coverage gap that opens after initial plan coverage limits are reached and before catastrophic coverage kicks in. In 2023, the donut hole is limited to 25% for brand-name and generic drugs.
4. Catastrophic coverage: Starting in 2024, you pay $0 once your plan enters the catastrophic stage.

What are Medicare Part D Tiers?

Medicare Part D plans use tiers to help determine how much you pay for any particular drug. The higher the tier number, the more expensive the medication.

Tier 1: Low-cost, commonly used generic drugs with the lowest copay.

Tier 2: Higher copay than Tier 1; typically includes more expensive generics.

Tier 3: Mostly brand-name drugs, with some generics included.

Tier 4: Drugs for complex conditions; often non-preferred or those with cheaper generic alternatives.

Tier 5: Highest copay; very expensive, specialty drugs that may require special handling. This tier often includes cancer medications and drugs with restricted availability due to safety or addiction concerns.

How Much Does Medicare Part D Cost?

Medicare Part D costs vary plan to plan. In 2026, the average national premium is projected to be $36.50 a month.

Some people with limited income and resources qualify for the Extra Help plan, which helps them cut or lower Part D costs.

When Can I Join a Medicare Part D Plan?

There are certain times when you can join or switch plans:

• During your initial enrollment period (IEP)
• During the Medicare annual enrollment period (AEP)
• During the Medicare Advantage open enrollment period (OEP)
• During the general enrollment period (GEP)
• During a special enrollment period (SEP)

Medicare Late Enrollment Penalties

Similar to Medicare Parts A & B, there is a penalty associated with not signing up for Medicare Part D during your initial enrollment period (IEP.) The penalty is 1% of the national base beneficiary premium for each full month you’re not covered. In 2025, this amount is $36.78. So, for each ten months you’re not covered, you’ll have to pay an extra $3.68 on top of your Medicare Part D Premium, for as long as you’re enrolled.

You will likely not have to pay a Part D penalty if you have equivalent prescription drug coverage, or qualify for the Extra Help program, which provides assistance for low-income Medicare recipients.

Get more details about when these Medicare enrollment periods happen so you know when to sign up for coverage!

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Colonial Penn is an insurance company and is not affiliated with or endorsed by the U.S. government or Medicare. Colonial Penn does not offer Medicare plans. The information provided relates to general insurance matters. Insurers and their representatives cannot give tax or legal advice. This article is for general educational purposes related to insurance. Seek personalized advice from qualified tax or legal advisors.

This information is for educational purposes only and is not a substitute for professional medical, legal, or financial advice. For specific Medicare questions, visit www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227, TTY 1-877-486-2048).We strive for accuracy but make no guarantees. Policies and regulations can change. Verify information with authoritative sources and consult professionals where necessary.