What Is Medicare Part D?

Medicare Part D is optional prescription drug coverage available to people who are eligible for Medicare. Part D plans are offered by private insurance companies that contract with Medicare and help pay for covered prescription medications. You can enroll in a standalone Part D plan if you have Original Medicare or receive prescription drug coverage through many Medicare Advantage plans.

What is Medicare Part D?

Medicare Part D is the portion of Medicare that helps cover the cost of outpatient prescription drugs.

Before Part D was created, many Medicare beneficiaries had limited options for prescription drug coverage. Today, Medicare beneficiaries can choose prescription drug coverage that best fits their medication needs.

Prescription drug plans are offered by private insurance companies approved by Medicare and must follow federal rules regarding covered drugs, appeals, and beneficiary protections.

How does Medicare Part D work?

If you enroll in Original Medicare, you may purchase a standalone Medicare Part D prescription drug plan.

If you enroll in a Medicare Advantage plan, prescription drug coverage is often included, although not every Medicare Advantage plan offers drug coverage.

Part D plans generally include:

• A monthly premium (depending on the plan)
• A formulary (list of covered medications)
• Pharmacy networks
• Cost-sharing such as deductibles, copayments, or coinsurance

Your costs depend on the medications you take, the pharmacy you use, and the specific Part D plan you choose.

Who is eligible for Medicare Part D?

In general, you must:

• Be eligible for Medicare.
• Be enrolled in either Medicare Part A or Medicare Part B.
• Live in the service area of the plan you choose.

Enrollment is optional, but delaying enrollment without other creditable prescription drug coverage may result in a late enrollment penalty if you enroll later.

What medications does Medicare Part D cover?

Every Part D plan has its own formulary, or list of covered prescription drugs.

Although formularies differ, Medicare requires Part D plans to cover medications across a broad range of therapeutic categories and classes.

Plans often organize medications into pricing tiers, with lower-cost generic drugs typically placed in lower tiers and higher-cost brand-name or specialty medications placed in higher tiers.

Plans may require:

• Prior authorization
• Step therapy
• Quantity limits

for certain medications.

What costs should you expect?

Depending on the plan, your costs may include:

• Monthly premium
• Annual deductible
• Copayments
• Coinsurance

Beginning in 2025, Medicare Part D includes significant changes under the Inflation Reduction Act, including a $2,000 annual cap on out-of-pocket prescription drug costs for covered Part D drugs. Beneficiaries may also have the option to spread out-of-pocket prescription drug costs over the plan year through the Medicare Prescription Payment Plan if they choose to participate.

Because plan designs change each year, beneficiaries should review their Annual Notice of Change and compare available plans during Medicare Open Enrollment.

Medicare Part D vs. Medicare Advantage drug coverage

Prescription drug coverage is available in two primary ways.

Standalone Medicare Part D

• Used with Original Medicare.
• Purchased separately from a private insurer.
• Allows beneficiaries to pair Original Medicare with a Medigap policy.

Medicare Advantage Prescription Drug Plan (MA-PD)

• Combines Medicare medical benefits and prescription drug coverage into one plan.
• Offered by private insurers approved by Medicare.
• Often includes additional benefits beyond Original Medicare.

Medicare Part D vs. Original Medicare

Original Medicare includes:

• Medicare Part A
• Medicare Part B

Original Medicare generally does not cover most outpatient prescription drugs.

Beneficiaries who want prescription drug coverage typically enroll in either:

• A standalone Medicare Part D plan, or
• A Medicare Advantage plan that includes drug coverage.

When can you enroll?

You may enroll in Medicare Part D during designated Medicare enrollment periods, including:

• Your Initial Enrollment Period.
• The Annual Open Enrollment Period.
• Certain Special Enrollment Periods if you qualify.

Missing enrollment deadlines without maintaining other creditable prescription drug coverage may result in a permanent late enrollment penalty.

Why this matters

Prescription medications can represent a significant portion of healthcare costs, particularly for older adults and people with chronic conditions. Medicare Part D helps make prescription drugs more affordable while providing protections such as standardized appeals processes and annual limits on out-of-pocket drug spending under current federal law.

Comparing plans each year is important because formularies, pharmacy networks, premiums, and covered medications can change.