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How Does Medicare Part D Work?


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Medicare Part D is how Medicare beneficiaries can get prescription drug coverage, which may not be covered by Original Medicare (Part A and Part B). All Medicare Part D coverage is offered through private insurance companies regulated by Medicare, not by the federal government. Medicare Part D is optional, but if you don’t sign up when you’re first eligible, you may pay a late-enrollment penalty when you do sign up.

Medicare Part D eligibility and enrollment

To be eligible for Medicare Part D, you must have Medicare Part A and/or Part B and live in the service area of your Medicare Part D plan. You’re first eligible to sign up for Medicare Part D during your Initial Enrollment Period, which lasts for seven months. This is the time frame three months before you 65th birthday, includes your birthday month, and lasts for three months after your 65th birthday. If you qualify because you’re receiving disability benefits, your Initial Enrollment Period starts three months before your 25th month of disability benefits from the Social Security Administration (SSA) or Railroad Retirement Board (RRB) and also lasts seven months.

If you miss your Initial Enrollment Period, you can sign up for Medicare Part D during the Annual Election Period (AEP), sometimes called the Fall Open Enrollment or Open Enrollment Period for Medicare Advantage and Medicare prescription drug coverage. This takes place from October 15 to December 7.

You may pay a late-enrollment penalty if you sign up for Medicare Part D after having gone 63 days or more without “creditable” prescription drug coverage after your Initial Enrollment Period is over. Creditable prescription drug coverage must pay on average at least as much as standard Medicare prescription drug coverage. You may have to pay this penalty as long as you’re enrolled in the Medicare Part D Prescription Drug Plan.

Medicare Part D with Medicare Advantage

One way to get Medicare Part D is through a Medicare Advantage plan which also administers your Medicare Part A and Part B benefits in one convenient plan. Most but not all Medicare Advantage plans cover prescription drugs. A Medicare Advantage plan may charge a premium in addition to the Medicare Part B premium you still have to pay. Some Medicare Advantage plans also charge a separate deductible for prescription drugs.

Medicare Part D with a stand-alone plan

If you have Original Medicare (Part A and Part B) you can get a stand-alone Medicare Part D Prescription Drug Plan to go alongside your Part A and Part B coverage. You may have to pay a separate monthly premium and have a deductible for stand-alone Medicare Part D plan.

Medicare Part D formularies

A formulary is the list of prescription drugs that your Part D plan covers. Formularies may vary from plan to plan but Medicare dictates that all or “substantially” all prescription drugs in certain protected classes are covered. According to the Centers for Medicare and Medicaid Services, these protected classes are:

  • Immunosuppressants (lowers the body’s ability to reject a transplanted organ)
  • Antidepressants
  • Antipsychotic
  • Anticonvulsants
  • Antiretroviral (to suppress the HIV virus)
  • Antineoplastics (chemotherapy)

Medicare Part D tiers

Medicare Part D plans may place covered prescription drugs into tiers. Medications on a higher tier may have a copayment. Common tiers are as follows:

  • Tier 1: preferred generic
  • Tier 2: generic
  • Tier 3: preferred brand
  • Tier 4: non-preferred prescription drugs
  • Tier 5: specialty tier prescription drugs

Going without Medicare Part D

If you don’t have Medicare Part D, you will have prescription drug coverage from Medicare Part A and Part B in limited cases. Medicare Part A may pay for prescription drugs you receive as a hospital inpatient, and Medicare Part B may pay for certain prescription drugs you receive as a patient in a doctor’s office, such as infusion drugs. Medicare Part B may also cover some vaccines. However, most of the prescription drugs you take at home are not covered. Without Medicare Part D, you may have to pay the majority of your prescription drug costs out of pocket.

Do you want Medicare Part D coverage for prescription drugs? To find a plan that meets your needs, just enter you zip code on this page.

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