Medicare Part D Drug Coverage: Benefits Overview and Plan Options

Medicare Part D helps you cover the costs of your prescriptions.
Alex Rosenberg
Walecia Konrad
By Walecia Konrad and  Alex Rosenberg 
Edited by Holly Carey Reviewed by Debra Nuckols

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

🤓Nerdy Tip

Big changes are coming to Medicare Part D prescription drug coverage following the passage of the Inflation Reduction Act of 2022, which gives Medicare the power to negotiate for lower prescription drug prices. The act also includes caps on out-of-pocket spending, limits on increases in Medicare Part D premiums and drug prices, and more.

Certain changes took effect at the start of 2023, while others start as late as 2026.

» Read more: What the Inflation Reduction Act means for your Medicare coverage

Medicare Part D covers outpatient prescription drugs for people with Medicare. You don’t automatically get Part D with Medicare — you need to sign up for it. Part D plans are sold by private health insurance companies, but they have to follow rules established by the federal government.

Part D is technically optional, but going without prescription drug coverage is risky. If you don’t sign up when you first become eligible, there are significant, permanent penalties for enrolling later.

Here’s what you need to know about how to buy and use Medicare Part D prescription drug coverage.

Still deciding on the right carrier? Compare Medicare Part D Plans

What is Medicare Part D?

Medicare Part D is prescription drug insurance. There are two ways to get this Medicare prescription drug coverage. How it works depends on your other Medicare coverage.

1. Medicare Part D and Original Medicare

If you have Original Medicare (Part A and/or Part B), you buy a stand-alone Medicare Part D plan from a private health insurance company to get prescription drug coverage.

You can shop for your choice of stand-alone plans, which vary in terms of cost and coverage. You’ll pay a separate premium for the Part D plan.

Video preview image

2. Medicare Part D and Medicare Advantage

Medicare Advantage, sometimes called Medicare Part C, is a bundled alternative to Original Medicare and is sold by private health insurance companies. Medicare Advantage plans cover all of the benefits of Part A and Part B, and most of them also include prescription drug coverage.

If you have Medicare Advantage, you generally can’t buy a separate, stand-alone Medicare Part D plan. However, there are exceptions for certain less common kinds of Medicare Advantage plans that don’t include their own prescription drug coverage.

What does Medicare Part D cover?

Medicare Part D plans don’t cover every drug. Plans have a list of the drugs they cover, called a formulary. The formulary also lays drugs out into tiers with different out-of-pocket costs.

  • Medicare Part D plans’ formularies must meet certain minimum standards set by the federal government.

  • Plans have to cover certain categories of drugs, such as drugs to treat asthma or high blood pressure.

  • Within each category, they have to cover at least two distinct drugs

    Medicare Prescription Drug Benefit Manual, Chapter 6. Section 30.2.1 — Formulary Categories and Classes. Accessed Jul 21, 2023.

  • If you or your health care provider believe that you need a specific drug that your Medicare Part D plan doesn’t cover, you can ask for an exception

    Centers for Medicare & Medicaid Services. Exceptions. Accessed Jul 21, 2023.
    . Your health care provider might need to demonstrate that the specific drug is medically necessary for your plan to cover it.

Medicare Part D cost

Most Medicare Part D plans have premiums and some combination of deductibles, copays and coinsurance. The specifics depend on the plan you choose and the phase of coverage.

Medicare Part D premiums

Medicare Part D plans set their own premiums (approved by the government), so what you’ll pay depends on the plan you choose.

  • Medicare Advantage plans bundle coverage together, so there’s no separate Part D premium for Medicare Advantage plans that include prescription drug coverage.

  • People with particularly high incomes pay an income-related monthly adjustment amount, or IRMAA, on top of their monthly premiums

    Centers for Medicare & Medicaid Services. Monthly Premium for Drug Plans. Accessed Jul 21, 2023.
    . In 2024, beneficiaries whose 2022 income exceeded $103,000 (individual return) or $206,000 (joint return) will pay an added amount on top of plans' premiums ranging from $12.90 to $81 per month, depending on income.

Medicare Part D copays and coinsurance

There are four phases of Medicare Part D coverage. The phase you’re in depends on how much you’ve spent out-of-pocket for covered prescription drugs over the course of the year.

Here are the four phases and their associated costs


Phase 1: Deductible

Your plan won’t start to pay for your covered drugs until you meet the annual deductible. The maximum deductible allowed by law is $545 in 2024. You enter the next phase when you hit the deductible.

Phase 2: Initial coverage

During this phase, you pay copays or coinsurance for covered drugs, depending on where the drug falls in your plan’s formulary. You enter the next phase when you and your plan have spent a combined total of $5,030 in 2024 for covered drugs.

Phase 3: The doughnut hole

During this phase, rather than the copays or coinsurance on the plan’s formulary, you pay up to 25% of the cost of covered drugs. This phase is also called the “coverage gap.” You enter the final phase when you’ve spent $8,000 in 2024 for covered drugs.

Phase 4: Catastrophic coverage

As of 2024, you pay nothing during this phase, which continues until the end of the year.

Previously, you would owe 5% of the cost of your covered prescription drugs or $4.15 for generic drugs or $10.35 for brand-name drugs in 2023, whichever was higher. This coinsurance no longer applies in 2024.

That's a change as a result of the Inflation Reduction Act, which eliminated the previous copay/coinsurance requirements.

Note: If you're part of a Medicare program called Extra Help, your drug costs will be different, and there's no coverage gap

Centers for Medicare & Medicaid Services. Help With Drug Costs. Accessed Jul 21, 2023.

Medicare Part D out-of-pocket cap

As of 2024, there's a new cap on out-of-pocket spending with Medicare Part D. You won’t owe any more out of pocket once you reach the catastrophic coverage phase

Centers for Medicare & Medicaid Services. The Inflation Reduction Act Lowers Health Care Costs for Millions of Americans. Accessed Jul 21, 2023.
. You enter that phase once you've spent $8,000 in 2024. Prior to 2024, Part D had no out-of-pocket cap.

A bigger change is coming next year. In 2025, a $2,000 out-of-pocket spending cap for Medicare Part D takes effect.

Shopping for Medicare Part D plans? We have you covered.

MEDICARE PART D covers outpatient prescription drugs for people on Medicare. Compare options from our Medicare Part D roundup.

Best for low premiums

Best for member satisfaction

Star ratings from CMS and on a 5-★ scale.

Medicare Part D enrollment

Initial enrollment period

You can enroll in a stand-alone prescription drug plan (Medicare Part D) or a Medicare Advantage plan that includes Part D prescription drug coverage during the initial enrollment period. This is the seven-month period starting three months before the month you turn 65, including your birthday month and ending three months after your birthday month

Centers for Medicare & Medicaid Services. When Does Medicare Coverage Start?. Accessed Jul 21, 2023.
. So if you turn 65 in July, you’ll have from April 1 to Oct. 31 to enroll.

Note: If your birthday is the first day of any month, your seven-month initial enrollment period begins earlier, starting four months before you turn 65 and ending two months after your birthday month. So a July 1 birthday has an initial enrollment period of March to September.

Special enrollment period (if you qualify)

A special enrollment period is your chance to sign up for Medicare coverage even though it’s not your initial enrollment period or an open enrollment period. If you lose current coverage, such as creditable prescription drug coverage from an employer, you might qualify for a special enrollment period

Centers for Medicare & Medicaid Services. Special Enrollment Periods. Accessed Jul 21, 2023.

Special enrollment periods generally last for two months. For example, a two-month special enrollment period would start the month after your employment ends or the month after losing your qualifying employer insurance, whichever happens first.

If you sign up during the special enrollment period, you can avoid owing late enrollment penalties.

Medicare Part D late enrollment penalty

If you don’t enroll during the initial enrollment period and you don’t have “creditable prescription drug coverage,” you'll likely pay a late enrollment penalty. Creditable prescription drug coverage is coverage from your or a spouse’s employer or union that pays on average at least the same amount as Medicare standard drug coverage

Centers for Medicare & Medicaid Services. 3 Ways to Avoid the Part D Late Enrollment Penalty. Accessed Jul 21, 2023.

Open enrollment period

You can join or switch to a different Medicare Part D or Medicare Advantage plan during the fall open enrollment period for Medicare and Medicare Advantage, which runs from Oct. 15 through Dec. 7 every year.

If you have a Medicare Advantage plan, there’s another opportunity during Medicare Advantage open enrollment, which runs from Jan. 1 to March 31 each year. During Medicare Advantage open enrollment, you can switch plans or switch to Original Medicare with the option to buy a stand-alone Medicare Part D plan.

Find the right Medicare Part D prescription drug plan

The interactive tool on can help you find a Medicare Part D plan that covers your prescriptions. It also helps you compare costs among Medicare Part D and Medicare Advantage plans available to you.

Here are some things to keep in mind when comparing plans:

  • Check the formulary: You’ll want to make sure the medicines you currently take and, importantly, any you think you might need in the future, are covered under each of the plans you’re considering. Talk to your health care providers about what brand-name and generic medicines to look for and any alternatives that may also work in case you can’t find your current medicines on the plans available in your area.

  • Look for plan changes: Formularies change frequently. Your insurer should send you a Notice of Plan Change when the formulary changes. Read that document carefully.

  • Check the pharmacy network: Most Medicare Part D plans negotiate with a network of pharmacies for the lowest cost. Check to see if your pharmacy or an equally convenient one is in the plan’s network. Also, compare prices for using mail order.

If your plan does change, and the change affects the prescription drugs you need, you can switch plans during Medicare's open enrollment period, Oct. 15 to Dec. 7. Changes go into effect on the following Jan. 1.

If you have additional questions about Medicare, visit or call 800-MEDICARE (800-633-4227, TTY 877-486-2048).

Still deciding on the right carrier? Compare Medicare Part D Plans

Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.