What Is Medicare Part D? Coverage, Costs and How It Works

Key Takeaways

Medicare Part D is optional prescription drug coverage for anyone enrolled in Medicare Part A or Part B.

Part D plans organize covered medications into cost tiers through each plan's formulary, your cost per prescription depends on which tier your drug falls under.

Your out-of-pocket drug costs cap at $2,100 in 2026; enrolling late without creditable coverage triggers a permanent monthly penalty.

You can enroll through a standalone drug plan or a Medicare Advantage plan that includes drug coverage.

What Is Medicare Part D?

Medicare Part D is the federal prescription drug benefit available to anyone enrolled in Medicare through Original Medicare or a Medicare Advantage plan. Private insurance companies approved by Medicare administer Part D plans, not the federal government directly. Coverage is optional. All Part D plans must cover a wide range of drugs that Medicare enrollees commonly use, per Medicare.gov. Premiums, formularies and covered medications vary by plan.

Part D is administered by private insurers approved by Medicare, not the federal government.
Each plan uses a formulary: a list of covered drugs organized into tiers that determines what you pay per prescription.
Original Medicare (Parts A and B) doesn't cover most drugs you take at home; Part D fills that gap.
Medicare Advantage plans with drug coverage (MA-PD plans) bundle Part D benefits with your medical coverage in a single plan.

HOW TO GET MEDICARE PART D

Medicare Part D is available through two paths. The right one depends on whether you have Original Medicare or a Medicare Advantage plan.

Option 1: Standalone prescription drug plan (PDP): If you have Original Medicare (Parts A and B), you add a standalone Part D plan purchased from a private insurer approved by Medicare. You choose your plan at Medicare.gov/plan-compare by entering your ZIP code and current medications. Premiums, deductibles and formularies vary by plan and location.

Option 2: Medicare Advantage plan with drug coverage (MA-PD): Most Medicare Advantage plans include prescription drug coverage, so Part D is bundled with your hospital and medical benefits in one plan. You don't add a separate drug plan. Joining an MA-PD plan ends a separate PDP enrollment automatically, per Medicare.gov. You can't combine a standalone PDP with most Medicare Advantage plans.

What Does Medicare Part D Cover?

Medicare Part D covers prescription drugs you fill at a retail or mail-order pharmacy. All Part D plans must cover a wide range of medications that Medicare enrollees commonly use, per Medicare.gov. But the specific drugs vary by plan through each plan's formulary, which organizes medications into tiers from generic drugs (lowest cost-sharing) to specialty medications (highest cost-sharing). Before enrolling, confirm your prescriptions appear on the plan's formulary and check which tier they fall under.


Generic	All Part D plans cover generics; usually the lowest-tier cost-sharing
Brand-name	Included per your plan's formulary
Specialty	High-cost complex medications organized by formulary tier
Medicare-eligible vaccines	Shingles vaccine (Shingrix) and other qualifying Part D vaccines
Insulin	Monthly cost capped at $35 per the Inflation Reduction Act, per CMS

What Does Medicare Part D Not Cover?

Medicare Part D doesn't cover every prescription. Knowing these exclusions lets you plan for additional out-of-pocket costs or seek supplemental coverage. For a full picture of what Medicare does and doesn't cover across all parts, including dental, vision and hearing, the gaps go well beyond prescriptions.

Over-the-counter medications, vitamins and dietary supplements
Prescription drugs not listed on your plan's formulary (a formulary exception or appeal may be available through your plan)
Drugs used for cosmetic purposes only
Prescription drugs covered under Medicare Part B, such as certain injections and infusions administered in a clinical setting
Drugs purchased outside the United States

How Much Does Medicare Part D Cost?

Medicare Part D costs vary by plan. CMS sets annual limits on what plans can charge, but individual premiums and deductibles differ across carriers. In 2026, the average standalone Part D premium is $35 per month. Some plans charge no deductible, while others charge up to the $615 annual maximum. Higher earners pay an income-related monthly adjustment amount (IRMAA) on top of their plan premium. The main 2026 cost components are in the table below.


Average monthly premium	$35 (varies by plan)
Maximum annual deductible	$615 (plans may charge less or $0)
Initial coverage cost-sharing	25% co-insurance per covered drug
Annual out-of-pocket cap	$2,100
Catastrophic phase	$0 per covered drug
IRMAA surcharge	Varies by income; applies to higher earners

HOW TO LOWER YOUR PART D COSTS

Part D premiums and cost-sharing vary widely across plans, and your plan's formulary and pricing change every year. Review your coverage each fall during open enrollment to avoid overpaying.

Compare Part D plans annually at Medicare.gov/plan-compare during the Annual Enrollment Period (Oct. 15 to Dec. 7), since formularies and premiums change each year.
Apply for Extra Help, Medicare's low-income subsidy program, at ssa.gov. If you qualify, you can reduce or eliminate your premium, deductible and copays.
Ask your doctor about lower-tier or generic alternatives to your current medications as moving to a lower formulary tier reduces your cost-sharing directly.
Use a preferred network pharmacy. Cost-sharing is usually lower at in-network pharmacies than at out-of-network locations under the same plan.

How Does Medicare Part D Work?

Medicare Part D prescription drug coverage works in three phases. Each year, your out-of-pocket spending on covered drugs moves you through these phases toward the annual cap. Once you hit $2,100 out of pocket, you pay $0 for covered drugs for the rest of the year.

Phase 1: Deductible

You pay 100% of covered drug costs until you meet your annual deductible. No Part D plan may charge a deductible above $615 in 2026. Some plans set a lower deductible, or waive it entirely, so your Phase 1 costs vary by the plan you choose.

Phase 2: Initial Coverage

After meeting your deductible, you pay 25% co-insurance on covered drug costs. You stay in this phase until your total out-of-pocket spending on covered Part D drugs reaches $2,100 in 2026. Both what you pay and what Medicare pays count toward this threshold.

Phase 3: Catastrophic Coverage

Once your out-of-pocket costs reach $2,100, you pay $0 for all covered Part D drugs for the rest of the calendar year. This phase used to require 5% co-insurance, but the Inflation Reduction Act eliminated that cost entirely starting in 2024.

How to Enroll in Part D?

You can enroll in Medicare Part D during four specific windows. Missing your first chance to sign up without other creditable drug coverage triggers a late enrollment penalty: 1% of the $39 national base beneficiary premium for every month you went without coverage, added permanently to your monthly premium. The windows below outline when you can join, switch or drop Part D coverage.

Initial Enrollment Period (IEP):

Your first window to sign up for Part D. It opens three months before your 65th birthday, includes the month you turn 65 and closes three months after. Missing this period without creditable drug coverage starts the late enrollment penalty clock.

Annual Enrollment Period (Oct. 15 to Dec. 7):

Each fall, you can join, switch or drop a Part D plan. Changes take effect Jan. 1 of the following year. This is your most reliable window to review your plan annually.

Medicare Advantage Open Enrollment (Jan. 1 to March 31):

Enrollees in a Medicare Advantage plan can switch to another Medicare Advantage plan or return to Original Medicare and add a standalone Part D plan during this window.

Special Enrollment Periods:

Qualifying events, including losing creditable drug coverage, moving or gaining Medicaid eligibility, let you join or change Part D outside standard windows, per Medicare.gov.

MONEYGEEK EXPERT TIP

Approaching 65 and still covered through an employer or the individual marketplace? Health insurance options for retirees under 65 can help you plan your transition before Medicare coverage begins.

Bottom Line

Medicare Part D covers brand-name and generic prescription drugs through private plans approved by Medicare. In 2026, out-of-pocket costs cap at $2,100 and after that, you pay $0 for covered drugs for the rest of the year. Enroll on time to avoid a permanent late enrollment penalty and compare plans each fall, since formularies and premiums change annually.

Medicare Part D: FAQ

We've answered the most frequently asked questions about Medicare Part D:

Who is eligible for Medicare Part D?

Anyone enrolled in Medicare Part A and/or Part B is eligible for Part D. This includes people 65 and older, adults under 65 who've received Social Security Disability Insurance benefits for 24 months and people with End-Stage Renal Disease or ALS.

What is the Medicare Part D late enrollment penalty?

The Part D late enrollment penalty equals 1% of the $39 national base beneficiary premium for every full month you were eligible but went without Part D or other creditable drug coverage. That percentage adds permanently to your monthly premium.

Does Medicare Part D cover insulin?

Yes. Part D covers insulin, and the Inflation Reduction Act caps your monthly cost for covered insulin at $35 regardless of which formulary tier your plan uses. This cap applies to all Part D plans and Medicare Advantage plans with drug coverage.

When can you enroll in Part D?

Your four enrollment windows are the Initial Enrollment Period (seven months around your 65th birthday), the Annual Enrollment Period (Oct. 15 to Dec. 7), the Medicare Advantage Open Enrollment (Jan. 1 to March 31) and a Special Enrollment Period triggered by a qualifying life event.

About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. He has analyzed the insurance market for over five years, conducting original research for insurance shoppers. His insights have been featured in CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

He writes about economics and insurance, breaking down complex topics so people know what they're buying.

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