Medicare Part D Explained: Coverage, Costs & Enrollment

Medicare Part D helps pay for prescription medications you get from a pharmacy or through mail order.

It's offered by private insurance companies approved by Medicare.

Each plan has its own monthly premium, list of covered drugs, pharmacy network, and out-of-pocket costs.

How Does Medicare Part D Work?

Medicare Part D works differently depending on how you receive your Medicare benefits.

Joining a standalone Part D plan while enrolled in most Medicare Advantage plans will cause you to be disenrolled from Medicare Advantage and returned to Original Medicare.

Part D is optional, but delaying enrollment without other qualifying drug coverage can result in a late enrollment penalty.

What Does Medicare Part D Cover?

Part D covers many prescription medications, including common generic and brand-name drugs.

Every plan maintains a formulary, which is its list of covered medications.

Because formularies differ, a prescription covered by one plan might not be covered by another.

Some medications also have coverage requirements:

• Prior authorization: Your doctor must obtain approval before the plan covers the medication.
• Step therapy: You may need to try a lower-cost medication before the plan covers a more expensive alternative.
• Quantity limits: The plan restricts the amount of medication covered within a specified period.

If your medication isn't covered, you or your prescriber may request a coverage exception.

Part D also covers many recommended adult vaccines, including shingles vaccines, without cost-sharing.

How Medicare Part D Drug Tiers Affect Your Costs

Most Part D plans organize medications into tiers based on their cost and whether they're generic or brand-name drugs.

Here's an example of a common five-tier structure:

Lower tiers generally have smaller copays, while higher tiers may require larger copays or percentage-based coinsurance.

How Much Does Medicare Part D Cost in 2027?

Your Part D expenses may include a monthly premium, an annual deductible, and copays or coinsurance for prescriptions.

The following amounts apply to the 2027 Medicare Part D program.

Sources: Medicare.gov — Part D drug coverage and CMS — 2027 Part D premium information.

The $700 deductible is the standard deductible amount.

Plans may offer a lower deductible or no deductible.

The $2,400 out-of-pocket cap means that once you reach the applicable threshold, you pay nothing more for covered Part D drugs for the remainder of the calendar year.

The cap applies to covered Part D prescription costs, not monthly premiums or medications purchased outside your plan's coverage.

Higher-income beneficiaries may also pay an additional income-related surcharge.

The $41.33 national base beneficiary premium is used in Medicare's calculations.

It is not necessarily what you'll pay for your Part D plan.

Can You Spread Out Your Prescription Costs?

Yes, the Medicare Prescription Payment Plan allows you to spread eligible out-of-pocket prescription expenses into monthly payments throughout the calendar year.

This program doesn't reduce your total prescription costs, but it may make larger expenses easier to manage.

Why the Cheapest Part D Premium Isn't Always the Best Deal

When comparing Part D plans, the monthly premium is only one part of the total cost.

For example, suppose you're comparing two plans that cover your three regular prescriptions.

These are hypothetical costs for illustration, not actual plan quotes.

Even though Plan B has a higher monthly premium, it saves $370 over the year because your prescriptions cost less.

When Can You Enroll in Medicare Part D?

There are several opportunities to enroll in or change your Part D coverage.

Initial Enrollment Period

Most people can first enroll during the seven-month period surrounding their 65th birthday.

This includes the three months before their birthday month, their birthday month, and the three months afterward.

Medicare Open Enrollment Period

From October 15 through December 7 each year, you can join, switch, or drop a Part D plan.

Changes generally take effect January 1.

Special Enrollment Periods

Certain circumstances, such as moving outside your plan's service area or losing qualifying employer prescription coverage, may allow you to make changes outside the regular enrollment period.

What Happens if You Don't Enroll in Part D?

You may face a late enrollment penalty if you go 63 consecutive days or more without Part D or other creditable prescription coverage after your enrollment period.

The penalty is generally calculated as 1% of the national base beneficiary premium for each full uncovered month.

This amount is added to your Part D premium and generally continues for as long as you have Part D.

The penalty may change annually because the national base beneficiary premium changes.

People who qualify for Medicare's Extra Help program don't pay the Part D late enrollment penalty.

Learn more about Medicare's late enrollment penalty.

What if You Have Employer Prescription Coverage?

You may not need to enroll in Part D immediately if you have employer, union, or retiree prescription drug coverage.

The important question is whether your existing coverage is considered creditable, meaning it's expected to pay at least as much as standard Medicare prescription drug coverage.

If it is creditable, you can generally delay Part D without a penalty, provided you enroll within 63 days after that coverage ends.

Your employer or plan administrator should provide a notice explaining whether your prescription coverage is creditable.

Keep this notice for your records.

Joining Part D can sometimes affect your employer or retiree health benefits, for you and for any family members covered under your plan.

Check with your benefits administrator before enrolling so you don't lose coverage you want to keep.

Does Medicare Supplement Insurance Include Part D?

No, Medicare Supplement Insurance, also called Medigap, doesn't include outpatient prescription drug coverage in policies sold today.

If you have Original Medicare and a Medicare Supplement plan, you can purchase a standalone Part D plan to cover your prescriptions.

These policies serve different purposes:

• Medigap: Helps pay certain out-of-pocket expenses left by Original Medicare.
• Part D: Helps pay for covered prescription medications.

You can have both policies at the same time.

How to Choose a Medicare Part D Plan

Before enrolling, compare plans based on the medications you actually take.

1. Make a list of your prescriptions, including dosages and frequency.
2. Identify the pharmacies you prefer to use.
3. Use the Medicare Plan Finder to compare available plans in your ZIP code.
4. Compare estimated total annual costs, including premiums and prescription expenses.
5. Check for prior authorization, quantity limits, and other coverage restrictions.

It's also worth reviewing your coverage every fall.

Plans can change their premiums, covered medications, drug tiers, and pharmacy networks from one year to the next.

Your plan's Annual Notice of Change explains important changes for the upcoming year.

Can You Get Help Paying for Part D?

Medicare offers a program called Extra Help for people with limited income and resources.

Depending on eligibility, Extra Help can reduce prescription drug premiums, deductibles, and copays.

You can learn more or apply through Medicare's Extra Help program.

Related Reading

• Medicare Part A: Costs, Coverage & Eligibility
• Medicare Part B: Costs, Coverage & What You Pay
• What Is Medicare Supplement Insurance?
• Medicare Supplement Plan G: Coverage & Costs