Medicare Part D Drug Coverage: Benefits Overview and Plan Options

Medicare Part D covers outpatient prescription drugs for people with Medicare. Prescription drug coverage is included in most Medicare Advantage plans, but people with Original Medicare (Part A and/or Part B) need to sign up for a stand-alone Part D plan for coverage.

Medicare Part D plans are sold by private health insurance companies. They can differ in terms of premiums, out-of-pocket costs like copays and deductibles, drug coverage, pharmacy networks and more, so it’s important to shop around to find the best fit.

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

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.

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.

» MORE: Medicare Part C vs. Part D: What’s the difference?

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^[0]

  Medicare Prescription Drug Benefit Manual, Chapter 6. Section 30.2.1 — Formulary Categories and Classes. Accessed Dec 13, 2024.

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• 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^[0]

  Centers for Medicare & Medicaid Services. Exceptions. Accessed Dec 13, 2024.

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  . Your health care provider might need to demonstrate that the specific drug is medically necessary for your plan to cover it.

• Medicare Part D plans must also cover all drugs that have gone through Medicare prescription drug price negotiation.

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.

» MORE: How much does Medicare Part D cost?

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.

• For Medicare Part D plans, the average total monthly premium is $46.50 in 2025, according to the Centers for Medicare & Medicaid Services^[0]

  Centers for Medicare & Medicaid Services. Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable as CMS Implements Improvements to the Programs in 2025. Accessed Dec 13, 2024.

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• 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^[0]

  Centers for Medicare & Medicaid Services. Monthly Premium for Drug Plans. Accessed Dec 13, 2024.

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  . In 2025, beneficiaries whose 2023 income exceeded $106,000 (individual return) or $212,000 (joint return) will pay an added amount on top of plans' premiums ranging from $13.70 to $85.80 per month, depending on income.

Medicare Part D copays and coinsurance

There are three phases of Medicare Part D coverage (down from four as of 2025). 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 three phases and their associated costs^[0]

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 $590 in 2025. 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 out-of-pocket costs for covered prescription drugs reach a total of $2,000 in 2025.

Phase 3: Catastrophic coverage

You pay nothing out of pocket during this phase. Once you’ve reached the annual cap on out-of-pocket costs — $2,000 in 2025 — you won’t owe additional copays, coinsurance and/or deductibles for drugs covered by your Part D plan for the rest of the year.

The $2,000 out-of-pocket cap for Medicare Part D is new for 2025. In 2024, there was a higher out-of-pocket cap of $8,000. Prior to 2024, Part D had no out-of-pocket cap at all. The Medicare donut hole, or coverage gap, is also gone as of 2025.

The out-of-pocket cap will go up in future years — it’s indexed to inflation after 2025.

Note: If you're part of a Medicare program called Extra Help, your drug costs will be different.

Medicare Prescription Payment Plan

Starting in 2025, there’s a new way to pay for out-of-pocket costs for Medicare Part D: the Medicare Prescription Payment Plan. With this option, instead of paying out-of-pocket at the pharmacy, you split your out-of-pocket costs up and pay them over time as monthly bills^[0]

All Medicare Part D plans must offer the Medicare Prescription Payment Plan as an option, and there’s no cost to participate. You won’t save money, either — it’s only a change to how you pay, not to what you owe.

If you’re interested, contact your Medicare Part D plan by phone or visit its website to sign up.

Does everyone pay for Medicare Part D?

Medicare Part D is optional. If you have Original Medicare (Part A and/or Part B), you can choose to pay for a stand-alone Part D plan. If you have a Medicare Advantage with prescription drug coverage, that coverage is included in the plan’s premium.

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^[0]

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.

» MORE: Medicare eligibility calculator

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^[0]

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^[0]

» MORE: Medicare late enrollment penalty calculators

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.