How Medicare Part D works

The basics

Medicare Part D is the prescription drug benefit within Medicare. It's offered by private insurance companies approved by Medicare — not by the government directly. You choose a plan, pay a monthly premium, and the plan helps cover the cost of your medications.

Part D has been available since 2006 and covers both brand-name and generic prescription drugs. Even if you don't take many medications now, having Part D coverage protects you from high drug costs if your needs change.

The three coverage phases

As you fill prescriptions throughout the year, you move through three phases of coverage. Each phase changes how much you pay.

Phase	How it works	What you pay
1. Deductible phase	You pay the full cost of your drugs until you've met your plan's deductible. Not all plans have a deductible, and some exempt certain drugs (like generics) from the deductible.	100% of drug costs
2. Initial coverage phase	After your deductible is met, you and your plan share the cost. You pay a copay (flat amount) or coinsurance (percentage) for each prescription.	Copay or ~25% coinsurance
3. Catastrophic coverage	Once your total out-of-pocket spending reaches $2,100 in 2026, you pay nothing for covered drugs for the rest of the year.	$0 for covered drugs

Formularies and drug tiers

Every Part D plan has a formulary — a list of covered drugs organized into tiers. Each tier has a different cost level:

• Tier 1 — Preferred generic drugs (lowest cost)
• Tier 2 — Generic drugs
• Tier 3 — Preferred brand-name drugs
• Tier 4 — Non-preferred brand-name drugs
• Tier 5 — Specialty drugs (highest cost)

Not all plans use the same tier structure, and the same drug can be on different tiers across different plans. This is why comparing formularies is so important when choosing a plan.

Learn more about formularies and drug tiers →

How Part D fits with the rest of Medicare

Medicare has four parts, and Part D is the prescription drug component:

• Part A — Hospital insurance
• Part B — Medical insurance (doctor visits, outpatient care)
• Part C — Medicare Advantage (an alternative way to get Parts A, B, and usually D through a private plan)
• Part D — Prescription drug coverage

If you have Original Medicare (Parts A and B), you can add a standalone Part D plan for drug coverage. If you choose Medicare Advantage (Part C), most plans include Part D drug coverage built in.

Compare Part D vs. Medicare Advantage drug coverage →