How does Medicare prescription drug coverage (Part D) work?

Medicare prescription drug coverage is an optional benefit. Medicare offers drug coverage to everyone with Medicare. Even if you don’t take prescriptions now, you should consider joining a Medicare drug plan. If you decide not to join a Medicare drug plan when you’re first eligible, and you don’t have other creditable prescription drug coverage or get Extra Help, you’ll likely pay a late enrollment penalty if you join a plan later. Generally, you’ll pay this penalty for as long as you have Medicare prescription drug coverage. To get Medicare prescription drug coverage, you must join a plan approved by Medicare that offers Medicare drug coverage. Each plan can vary in cost and specific drugs covered. Visit the Medicare Plan Finder at for more information about plans in your area.

There are 2 ways to get Medicare prescription drug coverage:

  1. Medicare Prescription Drug Plans. These plans (sometimes called “PDPs”) add drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) plans, and Medicare Medical Savings Account (MSA) plans. You must have Part A and/or Part B to join a Medicare Prescription Drug Plan.
  2. Medicare Advantage Plans (like HMOs or PPOs) or other Medicare health plans that offer Medicare prescription drug coverage. You get all of your Part A, Part B, and prescription drug coverage (Part D), through these plans. Medicare Advantage Plans with prescription drug coverage are sometimes called “MA-PDs.” Remember, you must have Part A and Part B to join a Medicare Advantage Plan, and not all of these plans offer drug coverage.

In either case, you must live in the service area of the Medicare drug plan you want to join.

How much do I pay?

Below and continued on the next page are descriptions of what you pay in your Medicare drug plan. Your actual drug plan costs will vary depending on:

  • Your prescriptions and whether they’re on your plan’s formulary (list of covered drugs) and depending on what “tier” the drug is in.
  • Which phase of your drug benefit that you’re in (some examples include whether or not you met your deductible, if you’re in the coverage gap, etc.)
  • The plan you choose. Remember, plan costs can change each year.
  • Which pharmacy you use (whether it offers preferred or standard cost sharing, is out-of-network, or is mail order). Your out-of-pocket prescription drug costs may be less at a preferred pharmacy because it has agreed with your plan to charge less.
  • Whether you get Extra Help paying your Part D costs.

Monthly premium

Most drug plans charge a monthly fee that varies by plan. You pay this in addition to the Part B premium. If you’re in a Medicare Advantage Plan (like an HMO or PPO) or a Medicare Cost Plan that includes Medicare prescription drug coverage, the monthly premium may include an amount for prescription drug coverage.

Usually, the extra amount will be deducted from your Social Security check. If you get benefits from the Railroad Retirement Board (RRB), the extra amount will be deducted from your RRB check. If you’re billed the amount by Medicare or the RRB, you must pay the extra amount to Medicare or the RRB and not your plan. If you don’t pay the extra amount, you could lose your Part D coverage. You may not be able to enroll in another plan right away, and you may have to pay a late enrollment penalty for as long as you have Part D.

If you have to pay an extra amount and you disagree (for example, you have a life event that lowers your income), visit or call Social Security at 1-800-772-1213. TTY users can call 1-800-325-0778.

Yearly deductible

This is the amount you must pay before your drug plan begins to pay its share of your covered drugs. Some drug plans don’t have a deductible.

Copayments or coinsurance

These are the amounts you pay for your covered prescriptions after the deductible (if the plan has one). You pay your share and your drug plan pays its share for covered drugs. If you pay a coinsurance, these amounts may vary throughout the year due to changes in the drug’s total cost.

Which drugs are covered?

Information about a plan’s list of covered drugs (called a “formulary”) isn’t included in this handbook because each plan has its own formulary. Many Medicare drug plans place drugs into different “tiers” on their formularies. Drugs in each tier have a different cost. For example, a drug in a lower tier will generally cost you less than a drug in a higher tier. In some cases, if your drug is in a higher tier and your prescriber (your doctor or other health care provider who’s legally allowed to write prescriptions) thinks you need that drug instead of a similar drug in a lower tier, you or your prescriber can ask your plan for an exception to get a lower coinsurance or copayment for the drug in the higher tier.

Formularies are subject to change and can be changed by the plan. Your plan will notify you of any formulary changes that affect drugs you’re taking.

Contact the plan for its current formulary, or visit the plan’s website. You can also visit the Medicare Plan Finder at, or call 1-800-MEDICARE (1-800-633-4227). TTY users can call 1-877-486-2048. Your plan will notify you of any formulary changes.

For more information, please refer to the Medicare and You Handbook or contact us!