Medicare Part D

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 05, 2023

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What Is Medicare Part D?

Medicare Part D is a voluntary prescription drug insurance program, designed to cover the costs of prescription medications for Medicare beneficiaries.

Established by the Medicare Modernization Act of 2003, Part D aims to improve healthcare outcomes and reduce financial burdens associated with prescription drugs.

Medicare Part D was introduced in January 2006, addressing the lack of comprehensive prescription drug coverage in the original Medicare program.

Prior to Part D, many beneficiaries struggled with high out-of-pocket costs for medications, leading to poorer health outcomes and increased financial strain.

The primary objective of Medicare Part D is to provide affordable and accessible prescription drug coverage for Medicare beneficiaries.

The program aims to reduce financial barriers, promote medication adherence, and ultimately improve health outcomes for seniors and eligible disabled individuals.

Eligibility for Medicare Part D

Criteria for Eligibility

To be eligible for Medicare Part D, individuals must be enrolled in Medicare Part A and/or Part B, and reside in the plan's service area. There is no age limit for Part D enrollment, but most beneficiaries are 65 or older.

Enrollment Periods and Deadlines

Medicare Part D enrollment typically occurs during the Initial Enrollment Period (IEP), which starts three months before an individual's 65th birthday, includes their birth month, and ends three months after their birth month.

Alternatively, beneficiaries can enroll during the Annual Enrollment Period (AEP), which runs from October 15 to December 7 each year.

Special Circumstances for Eligibility

Special Enrollment Periods (SEPs) may be granted for specific situations, such as losing employer-based drug coverage, moving out of a plan's service area, or qualifying for Extra Help. SEPs allow individuals to enroll in a Part D plan outside of the standard enrollment periods.

Medicare Part D Plans

Types of Part D Plans

There are two types of Part D plans available:

  1. Prescription Drug Plans (PDPs): Stand-alone plans that supplement Original Medicare (Part A and Part B) by providing prescription drug coverage only.

  2. Medicare Advantage Plans with Prescription Drug Coverage (MA-PDs): These plans combine Medicare Part A, Part B, and Part D coverage into a single plan, typically offered by private insurance companies.

Plan Comparison and Selection

When selecting a Part D plan, it is essential to compare coverage, costs, and benefits. Beneficiaries should consider:

  • Formularies: Lists of covered medications, which may vary between plans.

  • Network Pharmacies: Participating pharmacies where beneficiaries can fill their prescriptions.

  • Costs: Premiums, deductibles, copayments, and coinsurance.

How to Enroll in a Part D Plan

Enrollment in a Part D plan can be completed online via the Medicare Plan Finder, by calling 1-800-MEDICARE, or by contacting the plan directly.

Costs Associated With Medicare Part D


Part D plans require monthly premiums, which may vary based on the chosen plan and income level.


Some plans have an annual deductible, which must be paid before the plan begins covering prescription costs.

Copayments and Coinsurance

Copayments are fixed amounts paid for each prescription, while coinsurance is a percentage of the medication's cost. These amounts can vary based on the plan and the drug tier.

Coverage Gap (Donut Hole)

The coverage gap, commonly known as the "donut hole," occurs when a beneficiary's total drug costs exceed a certain threshold, leading to temporarily higher out-of-pocket costs. After reaching a second threshold, catastrophic coverage begins, and out-of-pocket costs decrease.

Catastrophic Coverage

Catastrophic coverage is activated when a beneficiary's out-of-pocket costs surpass a specific limit. At this point, the individual pays significantly lower copayments or coinsurance for the remainder of the year.

Out-Of-Pocket Spending Limits

Medicare Part D includes an out-of-pocket spending limit, which ensures that beneficiaries are protected from excessive drug costs. Once this limit is reached, the catastrophic coverage phase begins.

Costs Associated With Medicare Part D

Financial Assistance for Medicare Part D

Low-Income Subsidy (LIS) / Extra Help Program

The Low-Income Subsidy (LIS), also known as the Extra Help program, assists eligible individuals with limited income and resources in covering Medicare Part D costs, such as premiums, deductibles, and copayments.

State Pharmaceutical Assistance Programs (SPAPs)

Some states offer State Pharmaceutical Assistance Programs (SPAPs) to help eligible residents pay for prescription drugs. These programs may provide additional financial assistance for Medicare Part D beneficiaries.

Pharmaceutical Company Assistance Programs

Many pharmaceutical companies offer Patient Assistance Programs (PAPs) that provide free or low-cost medications to eligible individuals who cannot afford their prescriptions.

Non-profit and Charitable Organizations

Several non-profit and charitable organizations offer financial assistance, resources, and support to help Medicare beneficiaries with prescription drug costs.

Financial Assistance for Medicare Part D

Appeals and Grievances in Medicare Part D

Coverage Determination

A coverage determination is a decision made by a Part D plan about the coverage or payment for a specific drug. Beneficiaries can request coverage determinations if they believe a drug should be covered, or if they disagree with the plan's cost-sharing requirements.

Requesting Exceptions

Beneficiaries can request exceptions to a Part D plan's formulary, such as coverage for a non-formulary drug or a lower cost-sharing tier for a specific medication.

The Appeals Process

If a coverage determination or exception request is denied, beneficiaries can initiate a multi-level appeals process to challenge the decision.

Filing a Grievance

A grievance is a complaint filed with a Medicare Part D plan. Grievances can address issues such as quality of care, customer service, or delays in processing requests.

Coordination of Benefits

Medicaid and Medicare Part D

Individuals who are eligible for both Medicaid and Medicare are known as "dual eligibles." For these individuals, Medicare Part D serves as the primary payer for prescription drugs, while Medicaid may cover additional costs.

Employer or Union Health Coverage

If a beneficiary has employer or union health coverage that includes prescription drug benefits, coordination of benefits may occur between the employer or union plan and Medicare Part D.

TRICARE, Veterans Affairs, and Other Federal Programs

Medicare Part D may coordinate with other federal programs, such as TRICARE and Veterans Affairs (VA) benefits, to ensure beneficiaries receive comprehensive prescription drug coverage.

Medigap and Medicare Supplement Policies

Medigap policies, also known as Medicare Supplement policies, can help cover out-of-pocket costs for Medicare Part A and Part B but do not offer prescription drug coverage. Beneficiaries seeking prescription drug coverage must enroll in a separate Part D plan.

Changes and Updates to Medicare Part D

Annual Plan Changes

Medicare Part D plans may change their formularies, costs, and coverage each year. Beneficiaries should review their plan options annually to ensure they have the most appropriate coverage.

Medicare Open Enrollment Period

The Medicare Open Enrollment Period (OEP) runs from October 15 to December 7 each year. During this time, beneficiaries can review, compare, and switch their Medicare Part D plan or Medicare Advantage plan with prescription drug coverage.

Special Enrollment Periods

Special Enrollment Periods (SEPs) allow beneficiaries to make changes to their Medicare Part D coverage outside of the OEP in specific situations, such as moving out of a plan's service area or losing employer-based drug coverage.

Final Thoughts

Impact of Healthcare Policy Changes

Changes in healthcare policy, legislation, and regulations can affect Medicare Part D's structure, benefits, and costs. Beneficiaries should stay informed about potential policy changes that may impact their prescription drug coverage.

Challenges and Potential Improvements

As the healthcare landscape evolves, Medicare Part D may face challenges such as rising drug prices, limited access to new medications, and increased demand for coverage.

Potential improvements could include expanding access to lower-cost generic drugs, enhancing price transparency, and addressing the high cost of specialty medications.

Importance of Continued Access to Affordable Prescription Drugs

Maintaining and improving access to affordable prescription drugs is essential for Medicare beneficiaries' overall health and well-being.

Medicare Part D plays a crucial role in ensuring that seniors and eligible disabled individuals can obtain the medications they need to manage their health conditions and maintain their quality of life.

Medicare Part D FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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