Medicare Part D: What It Is and What It Covers

Medicare-eligible individuals can get drug coverage through Medicare. They can do so by adding a Medicare Part D prescription drug plan provided by a private insurance company to their federally managed Original Medicare Part A and/or Part B plans. 

Recipients may also join a Medicare Advantage Plan, commonly known as Medicare Part C. Part C plans provide private insurance coverage that bundles Medicare Part A and B (and usually Part D). More than half of the 50.5 million people with Medicare Part D drug coverage in 2023 received coverage as part of their Medicare Advantage plan benefits instead of as a standalone policy added to their Original Medicare coverage. 

Explore Medicare Part D plan costs, coverage options, and enrollment periods in this helpful guide. We provide details about sources of financial assistance and resources that can help you compare and select the best Medicare prescription drug insurance.

 

Medicare Part D is a prescription drug benefit plan that launched in 2006. With this plan, private insurers provide benefits partly reimbursed by the Medicare program, similar to Part C. 

Rates vary by provider, coverage options, and state, but Medicare offers an online plan finder that helps potential beneficiaries work out likely costs before committing.

Part D enrollees have a legally defined standard benefit that gets annual updates for costs and limitations. Private insurers must align their Part D plans with this benefit to continue offering policies. 

The standard benefit outlines coverage limits but does not determine which medications must be included. Under the 2025 standard benefit plan, a beneficiary pays 100% of their prescription drug costs up to $590, which operates as the standard deductible but varies by plan. This phase is known as the deductible stage. 

The next phase, known as the initial coverage stage, begins after reaching the $590 threshold. The plan begins paying benefits during this phase. Enrollees pay just 25% of further costs up to a total out-of-cost limit of $2,000 (which includes the deductible amount from the deductible stage). 

Upon meeting this $2,000 out-of-pocket drug cost limit, enrollees enter a third and final period: the catastrophic coverage stage. Part D recipients pay $0 for covered drugs once the catastrophic coverage stage begins until the next calendar year. 

Part D divides prescription drugs into different classes and categories. All approved Part D plans must include at least two drugs that the Centers for Medicare and Medicaid Services defines as therapeutic categories and classes in its formulary – a list of covered drugs.

The two-drug minimum requirement helps ensure that providers have some options for treating beneficiaries. Formularies must also cover commercially available vaccines deemed medically necessary for illness prevention and include all or substantially all drugs in protected classes, including anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals, and immunosuppressants."

Every Part D plan has its own formulary to consider. Even if your Part D plan doesn't cover a specific drug, any licensed medical provider can request an exception based on medical need. For exception approval, the provider must demonstrate that covered drugs on the formulary are not medically appropriate (e.g., not effective or cause adverse effects) for the person's condition.

Medicare Part D plans divide drugs into different tiers. Part D plans generally charge higher copays as the tier level of prescriptions goes up. If a drug you need is in a higher tier than an equivalent drug in a lower tier, your doctor can request an exception to lower the prescription's out-of-pocket cost. For example, a Medicare drug plan may look like this:

Tier 1 covers generic and other low-cost drugs, which come with the lowest copayments. For many classes of drugs, Part D providers often list more than the required minimum of two in this tier. 

Usually, brand-name medications are included in the provider's preferred prescription list. Copayments in this tier are generally low, though the out-of-pocket cost is higher than Tier 1 drugs.

Brand-name drugs are not on the preferred list. ​​Drugs in this category are typically non-preferred brand-name drugs, which may be newer or lack favorable pricing agreements compared to lower-tier medications. This tier comes with potentially high copayments, leading many practitioners to seek lower-cost alternatives whenever possible.

Drugs in this tier are often very new, with complex medications (e.g. biologics), or tailored to specific conditions rare enough not to be included at lower tiers. Prices for these drugs vary widely but typically carry the highest out-of-pocket costs.

Medicare Part D plans only cover drugs prescribed for home use by a doctor or another health care practitioner who can legally prescribe drugs. Part D does not cover vitamins, nutritional supplements, and over-the-counter medications like pain relievers and antacids. 

Coverage also does not apply to homeopathic and other alternative remedies without FDA approval. In addition, drugs administered in clinical settings are not typically covered by Part D, though they may be included in Parts A or B. 

Medications in this category include treatments administered at a hospital for pain relief or medicines provided in a nursing home after a qualifying hospital stay. Other examples include IV antibiotics and other necessary treatments received as part of inpatient treatment. While Medicare Part D plans do allow for vaccines deemed necessary, they do not apply to vaccines covered by Medicare Part B.

Medicare Part D does not pay for medications outside of plan formularies. Part D also does not cover costs for prescribed medications in the deductible stage, and coverage is limited to 75% of costs in the initial stage. 

Part D does not cover 100% of the costs for covered drugs until you reach the catastrophic coverage stage. However, coverage has expanded in recent years, and thus, costs for Medicare Part D enrollees have decreased. 

Historically, one of the gaps in Part D coverage was called the "donut hole." This prescription coverage gap used to occur when spending on prescriptions exceeded a certain amount, but before they reached the catastrophic coverage threshold. 

Part D beneficiaries who paid enough out of pocket to reach this limit would pay all or a large percentage of costs until they reached their yearly out-of-pocket threshold and entered the catastrophic phase. 

Then, once in the catastrophic phase, they were still responsible for a percentage of costs. Fortunately, this is no longer the case, and the donut hole has been closed for all covered medications.

A typical path for Part D enrollees sees a beneficiary paying up to $590 in out-of-pocket costs during the deductible phase (if their Medicare Part D plan has a deductible). After paying this deductible, the enrollee typically pays 25% coinsurance on covered drugs in the initial coverage stage (or fixed copays, depending on the plan), until they meet the $2,000 annual out-of-pocket limit.

After this point, they've entered the catastrophic stage and will have no out-of-pocket costs for covered drugs for the remainder of the calendar year.

Your Part D provider tracks your spending and must tally up the out-of-pocket costs you've accrued and your progress toward the next phase. Many of the costs you pay count toward the $2,000 out-of-pocket max, including:

• Deductibles
• Costs paid during the initial coverage phase
• Outside contributions, including gifts from loved ones and fundraisers, provided the money pays for covered plan medications
• Contributions from state and nonprofit organizations that assist seniors, HIV+ beneficiaries, and other covered persons toward out-of-pocket expenses

Not all money paid into prescription drugs counts toward the annual spending count. Non-qualifying expenses include:

• The monthly premium
• Costs for drugs that are not included in plan coverage
• Pharmacy fees and other costs at the point of sale, such as non-medicine items and over-the-counter medicines
• Payments made by group health plans, other government-funded health programs, or patient assistance programs not affiliated with Medicare

Seniors who meet income and asset eligibility guidelines may receive significant discounts on prescription drug costs through Extra Help. Extra Help assists beneficiaries with several medication costs.

Extra Help benefits include partial payment of monthly Part D premiums and a partial discount on the coinsurance for most approved drugs. As of 2025, seniors enrolled in the program also get a special enrollment period once per month. During this period, they can join a standalone Part D plan without incurring a penalty rate. Individuals cannot enroll in Medicare Advantage Plans with drug coverage in this special enrollment period. 

To qualify for Extra Help, a senior must be enrolled in Medicare, carry a Part D plan, and fall below the maximum earnings threshold of the program. In 2025, Extra Help recipients can have an income of up to $1,976 a month or $2,664 for a married couple and assets within set limits.

Seniors who participate in Medicaid, receive Supplemental Income (SSI), or have enrolled in a Medicare Savings Plan automatically qualify. Medicare will usually mail eligible individuals a notice of benefits.

Seniors enrolled in Medicare who qualify for Medicaid can use both programs to cover nearly all of their health care costs, including the cost of drugs. If you are enrolled in both programs, Medicare will typically cover your prescription drugs. However, if Medicare does not cover a drug, Medicaid may pay for it. 

Choosing the right plan or switching from your current coverage is not an easy choice. By following a few steps you can take to make this process as smooth as possible:

• Learn about Medicare Part D prescription drug plans with Medicare's Prescription Drug Plan Finder. This resource provides a list and contact information for all Part D drug plans sold where you live. 
• Take the time to sort through plan options by looking for the drugs you take regularly on the plans' lists of covered drugs.
• Find and compare plans' monthly premiums and yearly deductibles.
• Reach out to plan representatives with any plan-specific questions.

If you still need additional help, contact the State Health Insurance Assistance Program (SHIP) in your state. SHIP counselors can provide free expert advice on the Medicare Part D plan that would deliver the best benefits for your needs. 

The coverage offered by Medicare Part D plans is optional, and seniors don't have to sign up for plans. 

If you decide to enroll, you can look up a Medicare drug plan online using the Medicare Plan Finder tool. The system asks questions to connect you with available plans in your area. After comparing plans, you can apply online. Seniors who have recently become eligible for Medicare drug benefits can apply during their Initial Enrollment Period or during other designated enrollment periods directly with Part D providers.

Part D plans only accept new enrollments only during the initial, open, and special enrollment periods. If you enroll in a Part D plan outside these windows or go more than 63 consecutive days without creditable prescription drug coverage, you may have to pay a higher penalty rate for your monthly premium.

The initial enrollment period for Medicare Part D plans begins on the first day of the month, three months before your 65th birthday. It closes on the last day of the third month after your birth month. If your birthday is May 15, your enrollment period opens on Feb. 1 of the year you turn 65 and closes on Aug. 31 of the same year. Try to enroll as early as you can — late enrollment may result in a gap in coverage.

After initial enrollment, you can enroll in or switch Part D plans each year. The annual open enrollment window opens on Oct. 15 of each year and closes on Dec. 7.

You may qualify for a Medicare Part D plan outside of the usual open enrollment period if you meet special enrollment period requirements. During a special enrollment period, you may be able to leave, join, or switch Part D plans. 

The changes you can make and the length of the period depend on the qualifying life event. Events that qualify you for a special enrollment period usually involve circumstances outside of your control that cause you to lose your regular prescription drug coverage. 

Possible events may include:

• Losing Medicaid eligibility or dropping PACE plan coverage
• Losing regular coverage from an employer or pension plan
• Cancelation of a previous prescription drug policy because the company no longer offers it or has declared bankruptcy
• Moving to another area affected plan availability or options
• Release from a residential facility, including prison, drug and alcohol rehab facility, or mental health center

With so many options for coverage, people commonly wonder, "What is Medicare Part D?" and "What does Medicare Part D cover?" This type of coverage, provided by private insurers but subsidized by Medicare, pays for prescription drug costs. 

Many qualified Medicare recipients add Part D coverage to their existing original Medicare Plans, though there are restrictions based on their coverage. Part D also uses specific enrollment periods, however, making it important for all eligible individuals to research availability. You can add Part D to Original Medicare. However, if someone is in a Medicare Advantage (or Medicare Part C) plan that already includes drug coverage, they cannot add a separate Part D plan.

• Cubanski, Juliette, et al. (2023). Key facts about Medicare Part D enrollment costs in 2023. KFF.org 
• Extra Help basics. (2025). Medicare Interactive
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• Frothingham, Scott. (2024). Do all Medicare plans cover preexisting conditions? Healthline
• Ghoshal, Malini. (2024). Understanding Medicare Part D eligibility. Healthline 
• How do drug plans work? (n.d.) Medicare.gov 
• How much does Medicare drug coverage cost? (n.d.) Medicare.gov 
• Joining a plan. (n.d.) Medicare.gov
• Medicaid. (n.d.) Medicare.gov 
• Medicare Part D cost-sharing. (2024). National Council on Aging 
• The Medicare Part D donut hole: What you need to know. (2025) National Council on Aging
• The Part D donut hole. (2025). Medicare Interactive
• What to know about Medicare's true out-of-pocket (TrOOP) costs. (2025). Medical News Today