What to Know About Medicare Part D Drug Coverage

Find out what’s covered and how to choose a prescription drug plan

Dena Bunis and Kimberly Lankford,

AARP

Comments

En español

Published August 08, 2018

/ Updated September 26, 2024

The Voorhes/Gallery Stock

Key takeaways

Medicare Part D began covering prescriptions in 2006.
Part D plans vary in lists of covered drugs; some types aren’t included.
You may face certain restrictions.
Plans charge premiums, have cost sharing, but financial help is available.
Penalties apply if you miss sign-up deadlines.
Use the Medicare Plan Finder to compare plans.
You can change plans during open enrollment each year.

Medicare Part D prescription drug coverage debuted in 2006, more than 40 years after Congress created Medicare to provide health insurance coverage for Americans 65 and older.

The program allows private insurers that the federal government regulates to sell voluntary, stand-alone drug plans to participants in original Medicare and to incorporate this coverage into most Medicare Advantage plans.

What is Medicare Part D?

The insurance helps pay for prescriptions that you take yourself, whether it’s an antibiotic for a short-term infection or a drug that you’ll need to take for the rest of your life, such as blood pressure pills.

Plans vary based on where you live. In 2024, the average Medicare beneficiary has 21 stand-alone Part D options and 36 Medicare Advantage drug plans to choose from, according to KFF, a nonprofit health policy research group. Each has different premiums, deductibles, copayments, preferred pharmacies and lists of covered drugs, but they all must meet federal requirements.

The Inflation Reduction Act of 2022 continues to roll out changes benefiting consumers, including negotiating prices with drugmakers, capping out-of-pocket costs and making many vaccines free to enrollees.

What does Medicare Part D cover?

Part D pays for outpatient prescription drugs. While Medicare Part B covers chemotherapy, dialysis or medications injected or administered intravenously at a doctor’s office or outpatient center, Part D covers some self-injected medicines, such as insulin for diabetes. Brand-name and generic drugs are included, but you may pay a larger share of the cost for brand-name drugs.

But Part D doesn’t cover all medications, only certain categories. Specific drugs vary by plan. That’s why it’s important to check that your prescriptions are in a plan’s formulary (its list of approved drugs).

What doesn't Part D cover?

Part D doesn’t pay for over-the-counter medications or some types of prescriptions, such as those to help grow hair, prescribed vitamins, or medicines to help you gain or lose weight.

However, Medicare recently announced that it will cover Ozempic and Mounjaro for diabetes or Wegovy for people with cardiovascular disease who also are overweight, because the drugs are being used for FDA-approved purposes other than weight loss.

Do Part D plans have any restrictions on coverage?

Sometimes. Just because your drug is on a plan’s formulary doesn’t mean it will be paid for automatically. Many plans have additional requirements even if your doctor prescribes the medications, including:

Prior authorization. Your doctor must submit paperwork explaining your need for a medicine.
Step therapy. You must first try a lower-cost drug.
Quantity limits. Your doctor must show that extra medication is necessary to treat your condition.

What does Part D cost?

Part D plans have several costs.

Premiums. Each plan’s premiums vary in cost depending on the plan’s type and where you live. In 2024, the average Part D premium is $60 a month for stand-alone Part D plans and $12 a month for Medicare Advantage plans with prescription coverage, KFF reports. People with high incomes pay extra.

Deductible. You typically pay full cost for your medicines until you reach a plan’s deductible each year. The maximum deductible is $545 in 2024, although some plans charge a lower or no deductible.

Now Part D plans must cover recommended vaccines, such as shingles and respiratory syncytial virus (RSV), for free without deductibles or copayments. Meanwhile, Part B pays for COVID-19, flu, hepatitis B and pneumonia vaccines.

Copayments or coinsurance. Your portion of the cost for medications is calculated in two ways. Copayments are a fixed amount. Coinsurance is a percentage of the cost.

Plans may have four or five levels of cost sharing. The lowest copays are for generic drugs and the highest for nonpreferred brand-name drugs. Using a preferred pharmacy also may lessen your costs.

Starting in 2025, all Part D plans, whether stand-alone or through Medicare Advantage, must limit out-of-pocket costs for covered drugs to $2,000 a year. This includes deductibles, copayments and coinsurance, but not premiums.

What if I can’t afford a Part D plan?

Medicare’s Extra Help program for people with limited assets and incomes assists with Part D premiums and out-of-pocket costs. In 2024, the Inflation Reduction Act expanded income levels for eligibility.

You can sign up for Extra Help through the Social Security Administration website.

Do I have to sign up for a Part D plan?

Enrolling in Part D is voluntary, but consider buying a plan even if you don’t take prescriptions now.

You can enroll if you have Medicare Part A or Part B. But if you don’t have other drug coverage considered at least as good as Part D, you may have to pay a late enrollment penalty for signing up later.

This other “creditable coverage” can come from an employer or former employer, Tricare military health care or another source. Your plan should send you a notice each year telling you if it qualifies.

How do I choose a Part D plan?

When choosing a Part D plan, consider:

What you’ll pay in premiums.
If your drugs are covered.
What you’ll pay for your drugs.
Whether the plan offers preferred pricing at the pharmacies you use.

Compare Part D plans in your area step by step using Medicare’s Plan Finder.

If your drug coverage is from a Medicare Advantage plan, also consider how the plan covers your health care needs and providers. You can compare Medicare Advantage plans step by step too.

Sign up for Part D or Medicare Advantage on the Medicare Plan Finder or through the insurer. You can enroll in a Part D or Medicare Advantage plan only at certain times.

When can I change Part D plans?

You can switch Part D or Medicare Advantage plans during open enrollment each year from Oct. 15 to Dec. 7 for coverage starting Jan. 1.

You don’t have to reenroll in your Part D plan every year, but reviewing your options annually is a good idea. Companies can enter or leave the business, costs fluctuate, covered drugs change or your medications may change.

Evaluating your Part D options this year during open enrollment is especially important because so much is changing in 2025.

Will Medicare Part D Pay for All of My Prescription Drugs?

Editor’s note: This story has been updated with new information about the coverage changes that take effect in 2025.

%{postComment}%

Dena Bunis covered Medicare, health care, health policy and Congress. She also wrote the “Medicare Made Easy” column for the AARP Bulletin. An award-winning journalist, Bunis spent decades working for metropolitan daily newspapers, including as Washington bureau chief for the Orange County Register and as a health policy and workplace writer for Newsday.

Kimberly Lankford is a contributing writer who covers Medicare and personal finance. She wrote about insurance, Medicare, retirement and taxes for more than 20 years at Kiplinger’s Personal Finance and has written for The Washington Post and Boston Globe. She received the personal finance Best in Business award from the Society of American Business Editors and Writers and the New York State Society of CPAs’ excellence in financial journalism award for her guide to Medicare.

Unlock Access to AARP Members Edition

Join AARP to Continue

Already a Member? Login

Recommended for You

Benefits Recommended For You

See All