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Medicare Part D – Drug Coverage

Part D is coverage offered by private insurance companies to for prescription drugs. Of all the parts of Medicare (A, B, C, and D), this is the part that causes the most headaches. In this article, we breakdown exactly how Medicare Part D works for Medicare beneficiaries.

How Part D Coverage Works

There are 2 different ways to get your Medicare Part D coverage:

#1 ) Stand-alone Prescription Drug Plans (PDP)

A stand-alone drug plan is typically chosen to go along with a Medicare Supplement plan (which aren’t able to cover drugs). Your PDP will have its own card that you show at the pharmacy and you’ll have a monthly premium to be on the plan. Then your prescriptions will each have a co-pay depending on what Tier they are.

#2 ) Medicare Advantage Prescription Drug Plans (MAPD)

Prescription drug coverage can also be built into Medicare Advantage plans. You’ll continue to have co-pays just like you would if you had a stand-alone plan, but often times you can find a MAPD that doesn’t have a premium.

  • Important!

    If you go without creditable prescription drug coverage, you'll have a lifetime penalty added on each month if you ever decide to enroll in Part D in the future.

Part D Coverage Levels

Every Part D plan has 4 levels of coverage. You move from one level to another based on your drug expenses for the year.

  1. Deductible – You pay the full amount of your medications until you reach the plan’s yearly deductible.
    • For 2024, the maximum deductible is set at $545. Depending on the plan, your deductible may be less and may not apply to generic medications.
  2. Initial Coverage – You pay a co-pay or co-insurance for your medication depending on which “tier” it is.
    • Preferred Generics (Tier 1) cost less than Brand Name (Tier 4), which cost less than Specialty Drugs (Tier 5). 
  3. Coverage Gap – You pay 25% of the cost of your medication.
  4. Catastrophic Coverage – Once you’ve paid $8,000 out-of-pocket on your Prescription Drugs for the year, you switch to the Catastophic Coverage phase where you no longer have any cost-sharing for the rest of the year.
    • You’ll remain in this coverage level until January 1st when you reset back into the deductible.

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Costs for Medicare Part D

The national average for a Part D drug plan is $34.70, with some available at much lower costs and others much higher.

Picking the right drug plan is extremely dependent on the list of medications that you take. The highest price plan per month might have very low co-pays for your medications, while the cheapest plan might not cover them at all. 

If you don’t take any medications, you’re likely better off with one of the cheaper plans. Consider your total out-of-pocket costs when selecting a Part D plan, not just the monthly premiums. 

When to Enroll in Part D

When you’re just starting Medicare, you’ll have an initial enrollment window for Part D, just like you do for the other parts of Medicare. Once you’re out of that window, you’ll be able to switch drug plans every year during the Annual Election Period from October 15 – December 7.

You can read more about Part D Enrollment Periods here.


Is Medicare Part D Required?

Technically No.

But if you do not have creditable drug coverage and you decide to get Medicare Part D – Drug Coverage at some point in the future, you’ll be given a monthly penalty based on how long you went without coverage! In our opinion, its best to pickup a cheap drug plan just to avoid the penalty.

Learn more about Medicare Penalties here.

How Do You Calculate the Part D Penalty?

You calculate the Part D penalty by taking 1% of the National Average Part D premium and multiplying it by the number of months gone without Creditable prescription drug coverage. That penalty amount is then added onto your monthly premium for the rest of your life if/when you do sign up for a Part D plan in the future.

What is the Donut Hole?

The Donut Hole, also known as the Coverage Gap, is the 3rd phase of coverage for a Prescription Drug Plan. During this phase you will pay 25% of the cost of your medications.

The most popular Part D drug plan changes each year and is different based on location. We typically see the cheapest plans be very popular each year for those who take little or no prescriptions.

Big brand names like United Healthcare, Humana, Wellcare, and Aetna also consistently have plans with many members.


Medicare Part D is coverage for your prescription medications. Schedule an appointment with The Medicare Family to make sure you get the plan that is right for you.

Sylvia Gordon, aka Medicare Mama®, is an expert on all things Medicare and Social Security. She is the 2nd Generation here at The Medicare Family and has served on the advisory boards of major insurance companies like UnitedHealthcare®, Cigna, and Anthem. In her free time, she can be found taking care of her animals (dogs, goats, peacocks, chickens), and reading a good book. Learn More.
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