Demystifying Medicare Part D: 15 Key Details You Must Know

INSURANCE
Discover the essential Medicare Part D facts that can save you money and hassle.
Updated Feb. 21, 2024
Fact checked
Older woman with doctor

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Whether you retired at the full retirement age or chose to retire early, you’re eligible to enroll in Medicare three months before your 65th birthday. 

Once you’ve enrolled, you can make changes to your health care plans for three months in the fall.

For 2023, open enrollment occurs between October 15 and December 7, and any changes you make will take effect on the first day of 2024. During this time, seniors who aren’t enrolled in Medicare Part D have the option to sign up.

But what is Medicare Part D, and is it worth the extra cost? We answer this plus 14 other pressing questions so you can make a more informed decision this October.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today”
  • Create your account (important!) by answering a few simple questions
  • Start enjoying your discounts and perks!

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now

What is Medicare Part D?

Vitalii Vodolazskyi/Adobe medicare Part D documents with clipboard

If you weren’t taking any prescription drugs at age 65, you might not have signed up for Medicare Part D, which is Medicare’s optional insurance plan for prescription drug coverage.

Opting out of Medicare Part D might have made sense at the time: As a retiree on a fixed budget, you should keep more money in the bank by avoiding insurance you don’t need.

However, according to National Center for Health Statistics data, seven out of every 10 adults in North America between the ages of 40 and 79 take at least one prescription drug medication. 

As you age, the odds are good that you’ll need at least one prescription drug, which makes Medicare Part D a useful plan to sign up for ahead of time.

What exactly does Medicare Part D cover?

zimmytws/Adobe SS and med

Medicare Part D helps cover the cost of the most commonly prescribed medications. The exact medications your plan covers depends on which Medicare Part D plan you sign up for. 

You’ll want to closely examine each plan’s formulary (its list of covered prescriptions) before you choose the one you want. You can select the drugs you need coverage for on the Medicare website and will be shown plans that fit your needs.

What is the annual premium for Medicare Part D?

fahrwasser/Adobe older couple reviewing documents

Most Medicare Part D plans charge a monthly premium on top of your current monthly Medicare Part B premium. 

Per data from AARP, Medicare Part D premiums cost an average of $31.50 a month ($378 a year) across the United States. However, the amount you'll pay can vary based on the plan you pick.

Resolve $10,000 or more of your debt

Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.

How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.

Try it

What is the annual deductible?

JJ Gouin/Adobe stethoscope and cash money

A deductible is the amount of money you pay out of pocket before your insurance plan kicks in. Not all Medicare Part D plans have deductibles, but if yours does, note that the federally mandated maximum deductible is $505 for the entire year.

What is the annual out-of-pocket maximum?

Starmarpro/Adobe senior woman sit with laptop

Currently, there's no out-of-pocket maximum for Medicare Part D. Luckily, the Inflation Reduction Act of 2022 will cap yearly out-of-pocket costs at $2,000 beginning in 2025.

Does it cover brand-name drugs or only generics?

18percentgrey/Adobe doctor writing prescription at clinic

Medicare Part D plans should cover both brand-name and generic prescription drugs. However, you might pay more out of pocket for certain brand-name drugs, especially when a generic version is available.

What are prescription drug tiers?

JJAVA/Adobe prescription drugs

Most Medicare Part D plans divide prescription drugs into tiers that determine how much each medication will cost with insurance. 

For instance, your Medicare Part D plan might define most generic prescriptions as tier-one drugs, which would come with a lower co-payment. A tier-two drug could include common brand-name drugs with slightly higher co-payments.

Again, which drugs fall under which tier is determined almost entirely by the plan provider. Carefully read through any potential plan’s list of covered medications and tier structure before signing up.

Are any drugs not covered by Medicare Part D?

Zamrznuti tonovi/Adobe pharmacist working at the counter

Medicare Part D plans do not cover most drugs that treat weight loss or gain, erectile dysfunction, cosmetic conditions, infertility, colds, or coughs. Over-the-counter medications aren’t covered either.

However, you might still get coverage for a drug that primarily treats one of the conditions listed above if you’re prescribed that medication for a different issue. 

For example, if a cancer patient is prescribed a drug that promotes weight gain, that drug might be covered by Medicare Part D.

Who should consider Medicare Part D?

pikselstock/Adobe senior man taking prescription medicine

You should consider Medicare Part D if you don’t have prescription drug coverage through another insurance provider. 

Most seniors will eventually need prescriptions, so signing up for Medicare Part D earlier in your retirement is a good investment in your future.

Earn cash back on everyday purchases with this rare account

Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!1

With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!

This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.

Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.

Apply for a Discover Cashback Checking account today

How old do you have to be to get Medicare Part D?

As long as you’re also signing up for Medicare Part A or B, you can sign up for Medicare Part D (and any other Medicare plan) starting three months before your 65th birthday.

Your initial enrollment period ends three months after your 65th birthday. If you enroll late in Medicare Part D and don’t have creditable drug coverage, you may have to pay a late enrollment penalty.

Can you add a Medicare Part D plan anytime during the year?

fizkes/Adobe husband signs insurance document

Unless you experience a life event that opens a one-off enrollment period (for instance, a move to a new state), you can only change or add coverage during the annual open enrollment period from October 15 to December 7.

What is a late enrollment penalty?

fizkes/Adobe older man putting signature

Medicare Part D’s late enrollment penalty is an additional fee you’ll be charged if you don’t sign up for Medicare Part D during your initial enrollment period and decide to add it later. 

The fee also applies if you go without prescription drug coverage through another insurance plan for more than 63 days.

Unfortunately, the late enrollment penalty cannot be waived. If you incur the penalty, you’ll have to pay an extra monthly fee for the entire time you remain on your Medicare Part D plan — which usually means paying the additional monthly fee for the rest of your life.

Do you have to use specific pharmacies?

Tyler Olson/Adobe cosmetics area of a pharmacy with large number of skin and hair care products of different brands

You should always visit a pharmacy within your Medicare Part D plan’s network to minimize the amount of money you spend on prescriptions each year.

If you fill a prescription at an out-of-network pharmacy, you’ll likely pay more out of pocket than you would otherwise.

What is catastrophic coverage?

Beaunitta Van Wyk/peopleimages.com/Adobe nurse walking with senior man

Catastrophic coverage is automatic Medicare insurance coverage that kicks in if you’ve spent more than $7,400 on medical care out of pocket this year. The number will increase to $8,000 in 2024.

With catastrophic coverage, you should make a much more affordable copayment — or more affordable co-insurance payment — on any prescriptions you pick up for the rest of the year.

Is Medicare Part D worth it?

denis_vermenko/Adobe senior woman gesturing victory

Medicare Part D is worth it for most, if not all, seniors and retirees. Although the extra $30-a-month premium might require you to be a little shop smarter at the grocery store, you’ll save a staggering amount on prescriptions compared to their cost without insurance.

Bottom line

brizmaker/Adobe mature family couple check utility bills

Even if you aren’t currently on prescription medications, it’s crucial to consider enrolling in Medicare Part D as soon as possible to avoid wasting money on expensive prescriptions.

If you didn’t sign up for it during your initial Medicare enrollment period, don’t worry. Late enrollment penalties are based on how many months you go without prescription drug coverage, so the sooner you enroll, the less you’ll be charged in late fees.

Choice Home Warranty Benefits

  • First month free
  • Protection for unexpected expense
  • 24/7 claims hotline
  • Network of over 15,000 technicians

Author Details

Michelle Smith Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.

Want to learn how to make an extra $200?

Get proven ways to earn extra cash from your phone, computer, & more with Extra.

You will receive emails from FinanceBuzz.com. Unsubscribe at any time. Privacy Policy

  • Vetted side hustles
  • Exclusive offers to save money daily
  • Expert tips to help manage and escape debt