What is Medicare Part D?

Introduced in 2006, Medicare Part D prescription drug plans are the most recent addition to the Medicare program.

There are two ways of getting Part D coverage. The first is through purchasing a stand-alone plan to pair with Original Medicare coverage. The second is to enroll in a Medicare Advantage plan with prescription drug benefits, often called an MAPD plan.

Part D plans are sold by private insurers and are available to anyone enrolled in Original Medicare. There is no required physical exam, and you cannot be denied for financial or health reasons.

Though Medicare Part D coverage is optional, you may pay a late-enrollment penalty if you don’t enroll as soon as you’re eligible. This makes it worth at least exploring your options.

What Does Medicare Part D Cover?

Medicare Part D helps beneficiaries afford necessary medications. Because of this, Part D plans are sometimes known as PDPs, or prescription drug plans. How Medicare Part D works is that each plan offers a formulary that breaks out drugs into tiers. Each tier will cost you a different amount out-of-pocket.

You’ll also owe an annual Part D deductible before coverage will start each year. Your out-of-pocket costs are limited by the True Out-of-Pocket threshold, though. Once you’ve paid enough out-of-pocket, almost all of your costs are covered by your plan.

What Does Part D Cost?

The cost of a Part D plan varies from insurer to insurer. Each plan has a monthly premium, an annual deductible, and a share of the prescription costs, called a copay.

Through a combination of Medicare Parts A, B, and D, you can have a comprehensive health care plan.

What is the Coverage Gap?

The coverage gap, sometimes called the donut hole, was the period after reaching your initial coverage limit when beneficiaries were responsible for a larger percentage of prescription costs.

The Inflation Reduction Act of 2022 closed the coverage gap by setting a yearly out-of-pocket limit for covered Part D drugs ($2,100 in 2026). Once you reach that limit, you now enter catastrophic coverage, which means the plan covers most of your out-of-pocket costs for the rest of the year.

The Stages of Medicare Part D

1. Deductible: Before meeting your annual deductible, you pay 100 percent of prescription drug costs.
2. Initial coverage: You owe copays and coinsurance for covered prescriptions. See your plan for specific costs and coverages.
3. Catastrophic coverage: You won’t have out-of-pocket costs for covered Part D drugs for the rest of the year.

Read more: Medicare.gov, Drug Coverage (Part D)

Want help with your situation? Request a plan review or call a licensed insurance agent at (832) 734-6825 (TTY 711). There’s no cost for my help and no obligation.