Medicare Part D: How Prescription Drug Coverage Works

Medicare Part D helps people with Medicare pay for prescription drugs. Part D coverage is offered through Medicare-approved private plans, and the medications covered, pharmacy networks and out-of-pocket costs can differ from one plan to another.

Quick answer: If you have Original Medicare, you can generally add prescription drug coverage by enrolling in a separate Medicare Part D plan. Most Medicare Advantage plans include Part D coverage within the plan. Each Part D plan has its own list of covered medications, called a formulary, as well as its own pharmacy network and cost-sharing rules.

For a broader overview of Medicare coverage, costs, plan options and enrollment, see our complete guide to Medicare in California.

What Is Medicare Part D?

Medicare Part D is Medicare prescription drug coverage.

It helps cover many outpatient prescription medications that Medicare Part A and Part B do not cover.

Part D coverage is provided by private insurance companies that follow Medicare rules.

Medicare drug coverage is optional, but delaying enrollment without other creditable prescription drug coverage can result in a late-enrollment penalty in certain circumstances.

How Do You Get Medicare Part D Coverage?

There are two primary ways to receive Medicare Part D prescription drug coverage.

1. A Separate Medicare Part D Plan

If you have Original Medicare, you can generally enroll in a separate Medicare prescription drug plan.

You must have Medicare Part A and/or Part B to join a separate Medicare drug plan.

2. A Medicare Advantage Plan With Drug Coverage

Most Medicare Advantage plans include Medicare Part D prescription drug coverage.

With these plans, your Part A, Part B and Part D benefits are generally provided through the Medicare Advantage plan.

Learn more about the difference in our guide to Original Medicare vs. Medicare Advantage.

What Does Medicare Part D Cover?

Medicare Part D plans must cover a wide range of prescription drugs used by people with Medicare.

Each plan has its own list of covered medications, called a formulary.

Part D formularies generally include both generic and brand-name medications.

Medicare also requires Part D plans to cover most drugs in certain protected classes, including medications used to treat conditions such as cancer, HIV/AIDS and certain mental health conditions.

However, a particular medication may be covered differently from one plan to another, so it is important to check the formulary of the specific plan.

What Is a Medicare Part D Formulary?

A formulary is the list of prescription drugs covered by a Medicare drug plan.

Two Part D plans available in the same area can have different formularies.

For example, one plan may cover a medication as a preferred drug while another plan may place the same medication on a higher-cost tier or cover a different medication used for the same condition.

Before enrolling in a plan, reviewing whether your medications are included on the formulary can help you understand how the plan may cover your prescriptions.

What Are Medicare Part D Drug Tiers?

Many Medicare Part D plans divide covered medications into different cost-sharing levels called tiers.

A plan might structure its tiers to include:

• Lower-cost generic drugs
• Preferred brand-name drugs
• Non-preferred drugs
• Specialty medications

Generally, medications on lower tiers have lower cost-sharing than medications on higher tiers.

However, tier structures vary by plan, so the exact number of tiers and the amount you pay can differ.

How Much Does Medicare Part D Cost?

Part D costs depend on the specific plan and the medications you use.

Depending on the plan, costs may include:

• A monthly premium
• An annual deductible
• Copayments
• Coinsurance

Your actual prescription costs can also depend on whether your medication is covered by the plan, which tier it is assigned to and which pharmacy you use.

Part D premiums and other costs can change from year to year.

Do All Pharmacies Cost the Same With Part D?

No. Medicare drug plans generally have pharmacy networks, and your costs can depend on which pharmacy you use.

A plan may have:

• In-network pharmacies
• Preferred in-network pharmacies
• Standard in-network pharmacies
• Mail-order pharmacy options

Preferred pharmacies may offer lower cost-sharing for certain medications than other pharmacies in the same plan's network.

Using an out-of-network pharmacy can result in significantly higher costs and may only be covered in limited circumstances.

What Is Prior Authorization for Prescription Drugs?

A Part D plan may require prior authorization before covering certain medications.

Prior authorization means the plan requires specific information or approval before it will cover the drug.

Your prescriber may need to demonstrate that the medication is medically necessary and that you meet the plan's coverage requirements.

If a coverage requirement is not appropriate for your medical situation, you or your prescriber may be able to request an exception from the plan.

What Is Step Therapy?

Some Part D plans use a coverage rule called step therapy.

Step therapy may require you to first try another covered medication that has been shown to work for most people with your condition before the plan covers a more expensive medication.

There are procedures for requesting an exception when a prescriber believes the required alternative is not medically appropriate.

What Are Quantity Limits?

Part D plans may limit the amount of a particular medication they cover during a certain period.

For example, a plan might limit the number of tablets covered during a month.

Quantity limits can be used for safety and cost-control purposes. An exception may be available when a prescriber believes a higher quantity is medically necessary.

Does Medicare Part B Cover Prescription Drugs?

Medicare Part B covers a limited number of outpatient drugs under certain circumstances.

Part B commonly covers certain medications that you would not normally administer yourself, such as some drugs given in a doctor's office or hospital outpatient setting.

Part D generally covers many outpatient prescription drugs that Part B does not cover.

Learn more about how Part A and Part B work in our guide to Medicare Part A vs. Part B.

What Is Creditable Prescription Drug Coverage?

Creditable prescription drug coverage is coverage that is expected to pay, on average, at least as much as Medicare's standard prescription drug coverage.

Examples can include certain employer or union prescription drug plans.

If you have prescription drug coverage from another source, the plan should tell you whether the coverage is considered creditable.

Keep the creditable coverage notices you receive because you may need them if you later enroll in Medicare Part D.

What Is the Medicare Part D Late-Enrollment Penalty?

A Part D late-enrollment penalty may apply if you go without Medicare drug coverage or other creditable prescription drug coverage for 63 consecutive days or more after your applicable enrollment period.

The penalty is generally added to your monthly Part D premium and can continue for as long as you have Medicare drug coverage.

The amount depends on how long you went without qualifying drug coverage and Medicare's applicable national base beneficiary premium.

Because that base amount can change, the dollar amount of a late-enrollment penalty can also change over time.

Can You Delay Part D if You're Still Working?

You may be able to delay Medicare Part D without a late-enrollment penalty if you have other creditable prescription drug coverage.

Employer or union coverage may be creditable, but you should confirm this with the plan rather than assuming it qualifies.

Plans with prescription coverage generally provide notices explaining whether their coverage is creditable.

See Working Past 65: Do You Need to Sign Up for Medicare? for more information about Medicare and employer coverage.

Can a Part D Formulary Change?

Yes. Medicare drug plans can make certain changes to their formularies under Medicare rules.

Changes can occur when new drugs become available, drug therapies change or new medical information becomes available.

Plans have notification requirements for certain formulary changes that affect medications members are taking.

Because drug coverage and costs can change, it is useful to review your Part D coverage each year.

Can You Change Medicare Part D Plans?

Medicare beneficiaries can make certain prescription drug coverage changes during applicable Medicare enrollment periods.

One of the primary opportunities is Medicare Open Enrollment, which occurs each year from October 15 through December 7.

During this period, eligible beneficiaries can make certain changes to Medicare Part D and Medicare Advantage coverage for the following year.

Special Enrollment Periods may also be available in certain circumstances.

See our guide to Medicare Open Enrollment 2027 for more information.

What Should You Review When Comparing Part D Coverage?

Prescription drug coverage can vary significantly between plans.

Important items to review include:

• Whether your medications are on the plan's formulary
• The tier assigned to each medication
• The monthly premium
• The deductible
• Copayments and coinsurance
• Preferred and standard pharmacies
• Mail-order options
• Prior authorization requirements
• Step therapy requirements
• Quantity limits

Reviewing the medications you actually take can provide a more complete picture than comparing premiums alone.

Frequently Asked Questions

Is Medicare Part D prescription drug coverage?

Yes. Medicare Part D provides prescription drug coverage through Medicare-approved private plans.

Does Original Medicare include Part D?

No. Original Medicare consists of Part A and Part B. If you have Original Medicare and want Medicare drug coverage, you can generally enroll in a separate Part D plan.

Does Medicare Advantage include Part D?

Most Medicare Advantage plans include Medicare Part D prescription drug coverage, although plan designs vary.

Do all Part D plans cover the same drugs?

No. Each Part D plan has its own formulary, although Medicare establishes certain coverage requirements that plans must follow.

What is a Part D formulary?

A formulary is a plan's list of covered prescription medications.

Can my pharmacy affect how much I pay?

Yes. Your costs can differ depending on whether you use a preferred in-network pharmacy, another in-network pharmacy or an out-of-network pharmacy.

Can I get a Part D penalty if I don't take any medications?

A late-enrollment penalty can potentially apply based on how long you go without Part D or other creditable prescription drug coverage, not on whether you were taking prescription medications during that time.

How long can I go without creditable drug coverage?

A Part D late-enrollment penalty may apply if you go 63 consecutive days or more without Medicare drug coverage or other creditable prescription drug coverage after the applicable enrollment period.

This article is for general educational and informational purposes. Medicare Part D coverage, formularies, premiums, pharmacy networks, prescription costs and enrollment rules can vary by plan, location and individual circumstances and may change over time. For official Medicare information, visit Medicare.gov or call 1-800-MEDICARE.