Part D: Prescription Coverage

Prescription Drug Plans

Original Medicare does not cover the costs of medications so Prescription Drug Plans (PDPs) are offered by private insurance companies approved by Medicare. Your choices will vary depending on where you live. In order to enroll into a Part D plan, Medicare beneficiaries must be enrolled in Part B.

Two Ways To Get Part D

Option 1: You can get Medicare Part D coverage through a stand-alone Medicare Prescription Drug Plan if you’re enrolled in Original Medicare.

Option 2: Most Medicare Advantage plans have prescription drug benefits which is why they are sometimes referred to as Medicare Advantage Prescription Drug Plans (MAPD).

Formularies & Drug Coverage

Every Medicare Prescription Drug Plan has a formulary — that is, a list of covered drugs. Formularies vary from plan to plan but most companies cover similar medications. In fact, they are required to include at least two drugs for each category and some categories require coverage for all drugs.

Late Enrollment Penalty

Medicare Part D coverage is technically optional, but if you don’t enroll in Part D as soon as you’re eligible, you are likely to pay a late-enrollment penalty if you enroll later. You can use this calculator to estimate your Late Enrollment Penalty. There are few exceptions to this rule so it is important to consult with an advisor before deciding to forego Part D coverage.

The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.

Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($38.99 in 2026) times the number of full, uncovered months you didn’t have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.

The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.

Phases of Part D

Deductible phase: Depending on the plan you select; you may have to reach a yearly deductible before the plan begins to share in the cost of prescriptions with you. The standard deductible for 2026 is $615, but plans can set lower deductibles if they choose to.

Many Medicare Advantage plans have a $0 deductible for prescriptions. This can vary and, ultimately, depends on the plans available in your area.

Initial Coverage Phase: After you reach the deductible (if your plan has one), you will enter the initial coverage phase where you will pay the co-pay amount set by the plan for covered medications. As an example, the plan may set a $0 co-pay for Tier 1 drugs but a 33% coinsurance for Tier 5 drugs. Assuming the plan has no deductible, if the Tier 5 drug costs $300 for a month’s supply, your out-of-pocket expense would be about $100 per month. You will remain in this stage until your total prescription costs reach $2,100.

Catastrophic Coverage Phase: Once you reach the $2,100 cap on prescription costs, you will exit the initial coverage phase and enter the catastrophic coverage phase. The $2,100 cap includes your cost and what the insurance company is paying; this means you will likely spend less than $2,100 out of your pocket before you reach catastrophic coverage. Once you reach this phase, you will pay nothing for your covered medications for the remainder of the year.