Blog / Part D

What is Medicare Part D?

Prescription coverage sold by private companies under federal rules. Here is how it works, what it costs and why skipping it is expensive.

Updated August 17, 2026 · 2 min read

Part D is Medicare's prescription drug coverage. It is not run by the government directly. Private insurance companies sell the plans under federal rules, and every plan has to meet a minimum standard while competing on price and drug lists.

Two ways to get it

• A standalone Part D plan, added alongside Original Medicare and usually a Medicare Supplement
• Built into a Medicare Advantage plan, which most Advantage plans include

You pick one route. Enrolling in a standalone Part D plan while in a drug inclusive Advantage plan will usually disenroll you from the Advantage plan. See which route fits.

The four stages of a plan year

Part D moves through phases as your spending accumulates, which is why your copay in March can differ from your copay in September for the same medication.

1. Deductible. You pay the full negotiated price until you meet it. Some plans have none, and many exclude lower tiers from it.
2. Initial coverage. You pay a copay or coinsurance and the plan pays the rest.
3. The catastrophic phase, reached once your out of pocket spending hits the annual cap. From there your covered drugs cost you nothing for the rest of the year.

The old coverage gap, which everyone called the donut hole, sat between initial coverage and catastrophic. It has been replaced by a hard annual out of pocket cap. See how the cap works.

The formulary is the whole game

Every plan publishes its own list of covered drugs, sorted into tiers. Two plans with the same monthly premium can price your specific prescription completely differently.

What it costs

• A monthly premium, which varies widely between plans
• An annual deductible, which some plans waive on lower tiers
• Copays or coinsurance by tier
• An IRMAA surcharge if your income is above the threshold, billed separately from the plan premium

See the full cost breakdown.

You are penalized for going without

If you go without creditable drug coverage after becoming eligible, a penalty accrues for every full month and attaches to your premium permanently once you do enroll.

This is why people who take no medications should still usually enroll in something. See whether you need Part D if you take nothing.

Help paying for it

Extra Help, also called the Low Income Subsidy, cuts Part D costs substantially for people under certain income and asset limits. It is significantly underclaimed in this area, and qualifying for a Medicare Savings Program can qualify you automatically.

See how Extra Help works.