Medicare Part D Explained
Medicare Part D helps cover the cost of outpatient prescription medications. The plan you choose matters because drug coverage and costs vary from one plan to another.
Medicare Part D is prescription drug coverage offered through Medicare-approved private insurance companies. You can get Part D through a stand-alone Medicare drug plan or, in many cases, as part of a Medicare Advantage plan that includes prescription drug coverage.
Prescription Drug Coverage
Part D helps pay for covered outpatient prescription medications you get from a pharmacy, mail-order pharmacy, or other participating pharmacy.
Each Plan Has a Drug List
Each Part D plan has its own list of covered medications, called a formulary. Before choosing a plan, check whether your prescriptions are covered.
Your Pharmacy Matters
Your prescription costs may differ depending on the pharmacy you use. Some plans offer lower costs through preferred in-network pharmacies.
Costs Vary by Plan
Premiums, deductibles, copays, coinsurance, formularies, drug tiers, and pharmacy networks vary between Medicare Part D plans.
The Lowest Premium Is Not Always the Lowest-Cost Plan
Your prescriptions and pharmacies matter. A plan with a low monthly premium could cost more overall if your medications are placed on higher-cost tiers, are not covered, or cost more at your preferred pharmacy. Compare your estimated total annual prescription costs before choosing a plan.
How Medicare Part D Works
Your Medicare drug plan helps pay for covered prescriptions. What you pay depends on your plan, your medications, your pharmacy, and where you are in the Part D coverage stages.
You Choose a Part D Plan
Choose a stand-alone Medicare drug plan or receive Part D coverage through a Medicare Advantage plan that includes drug coverage.
You Fill Your Prescriptions
Use your plan at a participating pharmacy or through an available mail-order option. Your costs depend on your plan's formulary, drug tier, and pharmacy.
Your Plan Helps Pay
You and your plan share the cost of covered prescriptions according to the plan's rules and your current Part D coverage stage.
The 3 Medicare Part D Coverage Stages
Your share of prescription costs changes as you move through the coverage stages during the calendar year.
Deductible Stage
If your plan has a deductible, you generally pay the cost of covered prescriptions until you meet the plan's deductible. Some plans have a lower deductible or no deductible.
Initial Coverage Stage
After meeting your deductible, if your plan has one, you pay the applicable copayment or coinsurance for covered prescriptions while your plan pays its share.
For 2026, once your qualifying out-of-pocket spending for covered Part D drugs reaches this annual limit, you move into catastrophic coverage.
Catastrophic Coverage
Once you reach the annual Part D out-of-pocket limit, you pay no out-of-pocket costs for covered Part D drugs for the rest of the calendar year.
Part D Now Has an Annual Out-of-Pocket Limit
In 2026, your annual out-of-pocket spending for covered Part D prescription drugs is capped at $2,100. Once you reach the limit, you pay $0 out of pocket for covered Part D drugs for the remainder of the calendar year.
Your Actual Prescription Costs Still Depend on the Plan
The annual out-of-pocket limit does not mean every Part D plan costs the same. Premiums, deductibles, formularies, drug tiers, copays, coinsurance, pharmacy networks, and preferred pharmacy pricing still vary by plan. Compare the medications you take and the pharmacies you use before choosing coverage.
How Formularies and Drug Tiers Work
Two Part D plans may cover your prescriptions differently. Understanding the plan's drug list, tiers, and coverage rules helps you compare your actual prescription costs.
What Is a Formulary?
A formulary is the plan's list of covered prescription drugs. Each Medicare drug plan has its own formulary. Before choosing a plan, check each medication you take to make sure it is covered and review any coverage rules that apply.
Understanding Drug Tiers
Many plans organize covered drugs into different cost-sharing tiers. Generally, drugs on lower tiers cost less than drugs on higher tiers.
Tier 1
GENERALLY LOWER COSTMany Generic Drugs
A plan may place many commonly used generic medications on a lower tier with lower cost sharing.
Tier 2
PLAN DEPENDENTPreferred Drugs
This tier may include preferred generic or brand-name medications. The drugs and costs depend on the specific plan.
Tier 3
GENERALLY HIGHER COSTNon-Preferred Drugs
Non-preferred medications may have higher copays or coinsurance than drugs placed on the plan's preferred tiers.
Specialty Tier
HIGH-COST MEDICATIONSSpecialty Drugs
Plans may place certain high-cost medications on a specialty tier with different cost-sharing requirements.
Some Prescriptions Have Coverage Rules
Finding your medication on the formulary is only part of the review. You should also check whether the plan places any coverage requirements on the drug.
Prior Authorization
The plan may require approval before it covers certain medications. Your prescriber may need to provide information showing why the medication is medically necessary.
Step Therapy
The plan may require you to try another covered medication first before it covers a different or more expensive drug.
Quantity Limits
A plan may limit how much of a medication it covers during a certain period. Different rules may apply depending on the prescription and plan.
Don't Compare Part D Plans by Premium Alone
Start with your prescriptions. Check whether each medication is covered, what tier it is on, whether coverage rules apply, and what you would pay at the pharmacies you prefer. Then compare the plan premium and your estimated total annual prescription costs.
Why Your Pharmacy Matters
Choosing the right Part D plan is only part of the equation. Where you fill your prescriptions may also affect what you pay.
The Same Plan May Have Different Pharmacy Costs
Medicare drug plans contract with pharmacies to create pharmacy networks. Some plans also have preferred in-network pharmacies that may offer lower copays or coinsurance than other pharmacies in the plan's network.
Preferred In-Network
Often Lower Cost SharingPreferred Pharmacy
If your plan has preferred in-network pharmacies, you may pay lower copays or coinsurance for covered prescriptions at these locations.
Standard In-Network
Covered by the PlanNetwork Pharmacy
These pharmacies participate in your plan's network, but your copays or coinsurance may differ from what you would pay at a preferred pharmacy.
Mail Order
Convenient for Regular MedicationsHome Delivery
Some plans offer mail-order pharmacy programs for covered medications. This may provide a convenient or cost-effective option for medications you take regularly.
Out-of-Network
Check Before FillingHigher Costs May Apply
Out-of-network pharmacies generally cost more. You may need to pay the full cost and then ask your plan whether any reimbursement is available under its rules.
Don't Assume Your Current Pharmacy Is the Lowest-Cost Choice
When comparing Part D plans, check your prescriptions at the pharmacies you are willing to use. Your preferred pharmacy under one plan may not have the same status under another plan.
Plan A
Your current pharmacy might be a preferred in-network pharmacy and offer lower cost sharing.
Plan B
The same pharmacy might still be in-network but have different copays or coinsurance.
Plan C
Another nearby pharmacy or mail-order option might offer a lower cost for your prescriptions.
Compare Your Prescriptions and Your Pharmacies Together
Before choosing a Part D plan, review every medication you take and the pharmacies you prefer. Compare whether your medications are covered, their drug tiers and coverage rules, the pharmacy's network status, and your estimated total annual prescription costs.
What Does Medicare Part D Cost?
Your total prescription costs depend on the plan you choose, the medications you take, and where you fill your prescriptions.
Monthly Plan Premium
Part D plans charge a monthly premium. Premiums vary by plan and may change each year.
VARIES BY PLANAnnual Deductible
Some plans have a deductible and some have a lower deductible or no deductible. No Medicare drug plan may have a deductible above the annual Medicare limit.
2026 MAXIMUM PART D DEDUCTIBLECopays & Coinsurance
What you pay for a covered prescription depends on your plan, medication, drug tier, coverage stage, and pharmacy.
VARIES BY PLAN AND DRUGAnnual Out-of-Pocket Limit
Once your qualifying out-of-pocket spending for covered Part D drugs reaches the annual limit, you pay $0 out of pocket for covered Part D drugs for the rest of the calendar year.
2026 PART D OUT-OF-POCKET LIMITHigher Income? You May Pay an Additional Part D Amount
Some people with higher incomes pay an Income-Related Monthly Adjustment Amount, commonly called IRMAA, in addition to their Part D plan premium. The amount is based on your income and is generally paid to Medicare rather than to your drug plan.
Don't Forget the Part D Late Enrollment Penalty
Going without Medicare drug coverage or other creditable prescription drug coverage may result in a penalty later.
Watch the 63-Day Rule
You may owe a late enrollment penalty if you go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage after your Medicare enrollment period ends.
The Penalty Grows
The penalty is generally calculated as 1% of the national base beneficiary premium for each full month you were eligible for Part D but did not have Part D or other creditable drug coverage.
It May Continue for Years
In most cases, the late enrollment penalty is added to your monthly Part D premium for as long as you have Medicare drug coverage. The dollar amount may change from year to year.
Have Drug Coverage Through an Employer, Union, VA, or Other Source?
Before enrolling in or delaying Part D, find out whether your current prescription coverage is considered creditable coverage. Keep any creditable coverage notices you receive. Do not assume your existing prescription coverage automatically protects you from a Part D late enrollment penalty.
Look at Your Total Prescription Costs, Not the Premium Alone
Compare your plan premium, deductible, medications, drug tiers, copays or coinsurance, pharmacy costs, and estimated annual prescription spending. A plan with a lower premium is not always the plan with the lowest total cost for you.
How Do You Choose the Right Part D Plan?
The best plan for you depends on the prescriptions you take, where you fill them, and how each plan covers your medications.
Start With Your Prescriptions, Not the Plan Premium
A low monthly premium does not necessarily mean lower prescription costs. Compare how each plan covers the medications you actually take and what your estimated costs may be throughout the year.
List Every Prescription You Take
Include the exact medication name, dosage, quantity, and how often you refill it. Accurate prescription information helps produce a more useful plan comparison.
Check the Plan's Formulary
Make sure each medication is covered. Then review its drug tier and whether prior authorization, step therapy, or quantity limits apply.
Compare Your Pharmacies
Check whether your preferred pharmacy participates in the plan's network and whether another preferred in-network pharmacy or mail-order option offers lower costs.
Review the Deductible
Determine whether the plan has a deductible, which medications it applies to, and how it affects what you pay early in the year.
Compare Copays & Coinsurance
Review what you may pay for each medication. Your costs may differ based on the drug tier, pharmacy, and where you are in the Part D coverage stages.
Compare Estimated Annual Costs
Look beyond the monthly premium. Compare the estimated combination of premiums and prescription costs for the entire year.
Compare the Whole Prescription Picture
Four parts of a Part D plan work together to determine what the plan may cost you.
Premium
What you pay each month to have the drug plan.
Deductible
What you may pay before the plan begins sharing certain prescription costs.
Drug Costs
Your copays or coinsurance for the medications you take.
Pharmacy
Where you fill your prescriptions may affect your cost sharing.
Review Your Part D Coverage Every Year
Your current plan may still be available next year, but premiums, deductibles, formularies, drug tiers, pharmacy networks, and other plan rules may change. Your prescriptions may change too. Review your coverage for the upcoming year before deciding whether to keep your current plan.
The Lowest Premium Is Not Always the Lowest-Cost Plan
The right Part D plan depends on your prescriptions and your situation. Compare medication coverage, drug tiers, coverage rules, pharmacy costs, premiums, deductibles, and estimated annual prescription costs before making your decision.
Medicare Part D FAQs
Here are answers to some of the most common questions people have about Medicare prescription drug coverage.
Medicare Part D is optional prescription drug coverage. Whether you should enroll depends in part on whether you already have other creditable prescription drug coverage.
Even if you take few or no prescriptions today, going 63 days or more without Medicare drug coverage or other creditable prescription drug coverage after your applicable enrollment period may result in a Part D late enrollment penalty if you enroll later.
If you go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage after your Initial Enrollment Period ends, you may owe a Part D late enrollment penalty when you enroll later.
The penalty is generally added to your monthly Part D premium for as long as you have Medicare drug coverage. The amount depends on how long you went without creditable coverage.
Creditable prescription drug coverage is coverage expected to pay, on average, at least as much as Medicare drug coverage. Examples may include coverage from a current or former employer or union, TRICARE, Indian Health Service, or the Department of Veterans Affairs.
Your current plan must tell you whether your prescription drug coverage is creditable. Keep the creditable coverage notices you receive because you may need them later.
No. Each Medicare drug plan has its own list of covered medications, called a formulary. Plans may also place covered medications on different drug tiers and apply different copays, coinsurance, or coverage requirements.
Before choosing a plan, check each prescription you take against the specific plan's formulary.
Yes, during certain Medicare enrollment periods. Medicare's annual Open Enrollment Period runs from October 15 through December 7. Changes made during this period generally take effect January 1.
Certain circumstances may also qualify you for a Special Enrollment Period that allows you to change coverage at another time.
Talk with your prescriber and your plan. Your prescriber may determine that another medication on the plan's formulary is appropriate.
If you or your prescriber believes the drugs on the formulary will not work for your condition, you may request a formulary exception. Your prescriber generally needs to provide medical information supporting the request.
Yes. Your prescription costs may vary depending on the pharmacy you use. Some plans have preferred in-network pharmacies where covered prescriptions may have lower cost sharing.
When comparing plans, check your prescriptions at the pharmacies you are willing to use rather than comparing the monthly plan premium alone.
Having no prescriptions today does not eliminate the possibility of needing prescription drug coverage later.
Medicare advises people to consider drug coverage even if they currently take few or no medications. If you don't have other creditable prescription drug coverage and go 63 days or more without qualifying coverage after becoming eligible, you may face a late enrollment penalty when you enroll later.
Still Have Questions?
Part D plans are not all the same. Formularies, premiums, deductibles, drug tiers, pharmacy networks, coverage rules, and prescription costs vary by plan. Your Medicare Blueprint review looks at your prescriptions and preferred pharmacies to help you understand the options available to you.
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We’ll review the Medicare options available to you, answer your questions, and help you make an informed decision.
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