Medicare Part D: Prescription Drug Coverage

Take any prescriptions? Part D is how Medicare covers them — and it's worth understanding before you sign up. Here's how it actually works.

Prescription drug coverage explained

What Part D actually is

Part D is Medicare's prescription drug coverage. It's not automatic like Parts A and B — you either add it yourself or it comes bundled into a Medicare Advantage plan. If you skip it and decide you need it later, you could end up paying a late penalty on top of your monthly premium. So it's worth figuring out now.

Standalone Part D plan

You add this on top of Original Medicare. Each plan has its own list of covered drugs and its own costs — so the plan you pick matters.

Included in Medicare Advantage

Most Medicare Advantage plans already include drug coverage. If you go that route, you don't need a separate Part D plan.

How Part D works through the year

Part D isn't a flat rate all year. Your costs change as you move through different phases. Here's what that looks like in practice.

Deductible

You pay the full cost of your drugs until you hit the yearly deductible. After that, the plan starts sharing the cost.

Initial coverage

This is the normal phase. You pay a copay or coinsurance on each prescription, and the plan covers the rest. Most people spend the majority of the year here.

Catastrophic coverage

If your drug costs get high enough, you hit the catastrophic phase. At that point Medicare kicks in more heavily and your out-of-pocket costs drop significantly. Starting in 2025, there's also a yearly cap on what you pay out of pocket for drugs.

Why this matters for you

Not every Part D plan covers the same drugs at the same price. The plan you choose can make a real difference in what you actually pay at the pharmacy.

If you take a few common drugs

• Most plans will cover them
• But the copay can vary a lot between plans
• Worth comparing a few options before you pick one

If you take specialty or brand-name drugs

• Not all plans cover expensive drugs the same way
• Some require prior authorization or step therapy
• This is where plan choice really matters

The late penalty — don't skip this

If you don't sign up for Part D when you're first eligible and you don't have other drug coverage, you'll pay a penalty added to your monthly premium for every month you went without it. It's one of the easier Medicare mistakes to avoid.

What to do next

Now that you know how Part D works, the next move is figuring out which coverage path makes sense for your whole situation — not just prescriptions.

Compare your coverage options Get my next steps checklist