Medicare Part D — Prescription Drug Coverage

What it is

Medicare Part D is prescription drug coverage. Original Medicare (Parts A + B) does NOT cover prescriptions you take at home — that's what Part D is for. You can get Part D either as a standalone plan (PDP) that pairs with Original Medicare, or as part of a Medicare Advantage plan that includes drug coverage (MAPD).

How costs work

Part D plans have four phases each calendar year:

1. Annual deductible (up to ~$590 in 2026, less or $0 on many plans) — you pay full price until you hit it.
2. Initial coverage phase — you pay copays/coinsurance, the plan pays the rest.
3. Coverage gap ("donut hole") — used to be a real cliff; the Inflation Reduction Act eliminated the gap as of 2025. Now there's a hard $2,000 annual out-of-pocket cap for drug costs.
4. Catastrophic coverage — once you hit the $2,000 cap, you pay $0 for the rest of the year on covered drugs.

Why the formulary matters more than the price

Each Part D plan has its own formulary — the list of drugs it covers and what tier each drug is on. Two plans can both look cheap, but if your specific medication is on Tier 3 in one plan and Tier 1 in another, your annual cost can swing by hundreds or thousands of dollars.

This is why we always run your specific medications through Medicare's Plan Finder before recommending a plan. The "cheapest" Part D plan on paper is rarely the cheapest one for you.

The late enrollment penalty

If you go without "creditable" prescription drug coverage for more than 63 days after your Initial Enrollment Period, Medicare hits you with a permanent late enrollment penalty: 1% of the national base beneficiary premium for every month you went without coverage. Permanent — for as long as you have Part D.

If you're not currently taking prescriptions and think "I don't need Part D," still enroll in a low-cost plan to avoid the penalty. The cheapest plans cost less than the penalty would.

Switching plans during AEP

Annual Enrollment Period (October 15 - December 7) is your once-a-year chance to switch Part D plans. Best practice: re-shop your plan EVERY year. Drug formularies and prices change, your medications might change, new plans may have entered the market. Most people overpay because they enrolled once and never reconsidered.

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