Part D — Prescription Drug Coverage
How Part D works, how to choose the right drug plan, and how to avoid the coverage gap.
What Is Medicare Part D?
Medicare Part D is the prescription drug benefit. It's offered through private insurance companies approved by Medicare and can be added to Original Medicare (as a standalone Prescription Drug Plan) or is often built into Medicare Advantage plans.
Part D is optional — but if you don't enroll when you're first eligible and go without creditable drug coverage, you'll face a late enrollment penalty that lasts as long as you have Medicare.
💡 Even if you take no medications right now, enrolling in a low-cost Part D plan when you first become eligible protects you from the late enrollment penalty later.
How Part D Works — The Phases
Part D has a coverage structure with different phases of cost-sharing:
- Deductible Phase: You pay 100% of drug costs until you meet your plan's deductible (up to $615 in 2026). Some plans waive the deductible for certain drug tiers.
- Initial Coverage Phase: You pay your plan's copay or coinsurance after the deductible. The plan pays the rest.
- Catastrophic Coverage: In 2026, after you spend $2,100 out-of-pocket on covered drugs, you pay nothing for the rest of the year. This is a major improvement from prior years.
Formularies — The Drug List
Every Part D plan has a formulary — a list of covered drugs organized into tiers. Lower tiers mean lower copays (generics), higher tiers mean higher costs (brand-name and specialty drugs).
Before enrolling in any Part D plan, always check that your specific medications are on the formulary at an acceptable cost tier. This is the single most important factor in choosing a drug plan.
Jim T. picked his Part D plan the way most people do — lowest premium on the list. What he didn't check: his brand-name blood thinner wasn't on that plan's formulary. He spent months paying over $300 out of pocket before we talked. At the next Annual Enrollment Period, we moved him to a plan with a slightly higher premium where the same drug was a tier-3 copay. His total yearly drug cost dropped by thousands.
Client stories reflect real situations from Matt's practice. Names and identifying details are changed for privacy.
💡 Don't want to do this yourself? Matt runs your exact drug list through every plan in your zip code and hands you the answer. It's free, and it's the single fastest way to stop overpaying for prescriptions.
The Late Enrollment Penalty
If you don't enroll in Part D when first eligible and later decide you want coverage, Medicare charges a late enrollment penalty of 1% of the national base premium ($38.99 in 2026) for every month you went without creditable coverage. Real math: skip coverage for 3 years, and that's roughly $14 added to your premium every single month — permanently. You pay it for life.
⚠️ If you have drug coverage through an employer, union, or other source, make sure it qualifies as "creditable coverage" (as good as Medicare's). Get that in writing every year.
Choosing the Right Part D Plan
Use Medicare's Plan Finder tool at medicare.gov to compare plans based on your specific medications. Don't just pick the lowest premium — a plan with a $5 higher premium might save you $100/month on your specific drugs.
Prefer to watch?
Matt covers everything in this module on video:
Never Overpay for Your Medications
Matt runs your exact medication list through every Part D plan in your area and shows you the true annual cost of each — not just the premium. Free, every year, including at AEP.
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