What Is Part D?

Medicare Part D is the prescription drug coverage portion of Medicare. It helps pay for outpatient prescription medications that you obtain from a retail pharmacy or through a mail-order pharmacy. Unlike Original Medicare (Part A and Part B), which is administered directly by the federal government, Medicare Part D plans are offered through private insurance companies that contract with Medicare.

While every Part D plan must meet Medicare's minimum coverage requirements, each insurance company has flexibility in designing its own premiums, deductibles, formularies, pharmacy networks, and cost-sharing. As a result, two Part D plans available in the same county may cover the same medication very differently.

Who Can Enroll in Medicare Part D?

A beneficiary is eligible to enroll in a Medicare Part D Prescription Drug Plan (PDP) as long as they are enrolled in Medicare Part A OR Medicare Part B. Contrary to a common misconception, a person does not have to have both Part A and Part B in order to enroll in a standalone Part D plan.

However, in everyday practice, the vast majority of beneficiaries enrolled in a standalone Part D plan have both Medicare Part A and Part B because they are also receiving their medical benefits through Original Medicare.

The Two Ways Beneficiaries Receive Part D Coverage

Option 1: Standalone Medicare Part D (PDP)

A standalone Prescription Drug Plan (PDP) is purchased separately from Original Medicare.

This is most commonly paired with a Medigap plan (also called a Medicare Supplement plan) because Medigap (Medicare Supplement) policies help pay many of Original Medicare's deductibles, copayments, and coinsurance—but they do not include prescription drug coverage.

A common coverage setup looks like this:

• Medicare Part A

• Medicare Part B

• Medigap (Medicare Supplement) Plan

• Standalone Medicare Part D Prescription Drug Plan

This arrangement provides broad medical coverage while allowing beneficiaries to shop separately for the Part D plan that best covers their medications.

Option 2: Medicare Advantage with Prescription Drug Coverage (MAPD)

The second way beneficiaries receive prescription drug coverage is through a Medicare Advantage Prescription Drug (MAPD) plan.

Most Medicare Advantage plans already include Medicare Part D benefits, meaning the prescription drug coverage is built directly into the health plan.

A typical setup includes:

• Medicare Part A

• Medicare Part B

• Medicare Advantage Plan with Part D included

Because drug coverage is already included, beneficiaries generally cannot enroll in a separate standalone Part D plan while enrolled in an MAPD.

What Is a Formulary?

A formulary is a Medicare Part D plan's official list of covered prescription drugs.

Every Part D plan has its own formulary, which means two plans may cover the same medication differently—or one may not cover it at all.

A formulary tells you:

• Which medications are covered

• Which medications are excluded

• Which tier each medication falls into

• Whether prior authorization is required

• Whether step therapy applies

• Whether quantity limits exist

• Whether a generic alternative is preferred

Because formularies change from year to year, reviewing them annually is one of the most important parts of choosing a Part D plan.

What Is a Tier?

A tier is a pricing category assigned to a medication. Generally, the lower the tier, the lower the beneficiary's out-of-pocket cost.

Although each insurance company designs its own tier structure, a common example is:

Tier 1: Preferred Generic

Lowest-cost medications.

Usually have the smallest copay.

Tier 2: Generic

Generic medications that may have slightly higher copays than Tier 1 drugs.

Tier 3: Preferred Brand

Brand-name medications that the insurance company has negotiated favorable pricing for.

Usually have moderate copays.

Tier 4: Non-Preferred Brand

Covered brand-name medications that cost more because they are not preferred by the plan.

Often require higher copays or coinsurance.

Tier 5: Specialty Drugs

Very high-cost medications used to treat complex or chronic conditions.

These often include:

• Cancer medications

• Biologic drugs

• Autoimmune therapies

• Specialty injectables

Rather than paying a flat copay, beneficiaries often pay a percentage of the medication's cost (coinsurance).

Preferred Pharmacy

Pharmacies that have negotiated lower prices with the insurance company.

Using a preferred pharmacy usually results in lower out-of-pocket costs.

Standard Pharmacy

An in-network pharmacy that does not offer the plan's preferred pricing.

Beneficiaries typically pay more here than at preferred pharmacies.

Network Pharmacy

A pharmacy contracted with the Part D plan.

Prescriptions generally must be filled at a network pharmacy for coverage, except in certain emergency situations.

Mail-Order Pharmacy

Many plans offer 90-day supplies of maintenance medications through mail-order pharmacies, often at a lower overall cost.

Prior Authorization (PA)

Certain medications require approval from the insurance company before they will be covered. The prescribing provider must demonstrate that the medication is medically necessary.

Step Therapy

The beneficiary must first try one or more lower-cost medications before the plan will approve a more expensive drug.

Quantity Limits

Some medications have limits on how much can be dispensed within a certain period to help ensure safe and appropriate use.

Exception Request

If a medication is not covered or is placed on a higher-cost tier, the prescribing provider may request an exception asking the plan to cover the medication or reduce the member's cost-sharing.

Late Enrollment Penalty

Medicare encourages beneficiaries to maintain continuous prescription drug coverage after becoming eligible. If someone goes 63 consecutive days or longer without either:

• Medicare Part D coverage, or

• Creditable prescription drug coverage,

Then they may owe a late enrollment penalty if they enroll later!

The penalty is based on:

• The number of full months the individual went without creditable drug coverage after becoming eligible.

• Medicare's national base beneficiary premium.

The penalty is added to the monthly Part D premium and, in most cases, continues for as long as the individual has Medicare Part D coverage. The dollar amount can change over time because it is recalculated using the national base beneficiary premium. (Medicare)

What Is Considered Creditable Coverage?

Creditable prescription drug coverage is prescription drug coverage that Medicare determines is expected to pay, on average, at least as much as the standard Medicare Part D benefit. Beneficiaries with creditable coverage can generally delay enrolling in Part D without facing the late enrollment penalty.

Examples include:

• Employer-sponsored prescription drug plans

• Retiree health plans

• Union health plans

• TRICARE prescription coverage

• Certain Veterans' prescription benefits

• Other plans that Medicare has determined to be creditable

Employers and plan sponsors generally send a Creditable Coverage Notice each year informing members whether their drug coverage is considered creditable. Beneficiaries should keep these notices in case Medicare later requests proof of continuous creditable coverage.

Medicare Is Working to Lower Prescription Drug Costs

One of the biggest changes to Medicare Part D in recent years has been the federal government's effort to make prescription drugs more affordable.

Beginning in 2026, Medicare's negotiated prices for certain high-cost brand-name drugs begin taking effect. Under the Inflation Reduction Act, Medicare now has the authority to negotiate prices directly with manufacturers for select expensive Part B and Part D medications that have little or no generic competition. Additional drugs are expected to be added to the negotiation program each year, with the goal of lowering out-of-pocket costs for beneficiaries over time. (Medicare)

In addition, Medicare continues to encourage the use of generic medications and biosimilars whenever appropriate, since these alternatives often provide the same clinical benefit at a significantly lower cost. (Medicare)

Medicare and GLP-1 Medications

Another major development is Medicare's expanding access to GLP-1 medications, a class of drugs used to treat diabetes and, more recently, obesity.

Historically, Medicare generally covered GLP-1 medications only when prescribed for FDA-approved conditions such as Type 2 diabetes or certain cardiovascular indications. Coverage for weight loss alone was very limited.

Beginning July 1, 2026, Medicare launched the Medicare GLP-1 Bridge, a nationwide demonstration program that gives eligible beneficiaries with Medicare Part D access to certain GLP-1 medications prescribed for weight management. Eligible medications currently include Wegovy®, Zepbound® (KwikPen formulation), and Foundayo®. Under this temporary program, qualifying beneficiaries pay a $50 monthly copayment for a covered medication. (CMS)

It's important to understand that the GLP-1 Bridge operates outside of the standard Medicare Part D benefit. The $50 copayment does not count toward a beneficiary's Part D deductible or annual out-of-pocket maximum, and eligibility requires meeting Medicare's program criteria, including prior authorization from the prescribing provider. The current demonstration is scheduled to run through December 31, 2027, while Medicare evaluates long-term policy options. (CMS)

What Is Part D IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount.

It's an extra monthly charge that some higher-income Medicare beneficiaries pay in addition to their regular Medicare Part D premium.

Think of it as an income-based surcharge—not a penalty.

If your income is above Medicare's limits, you'll pay more for your prescription drug coverage than someone with a lower income.

Your Part D IRMAA surcharge is based on your Modified Adjusted Gross Income from 2 years prior, so for a 2026 IRMAA surcharge, you would be looking at your Modified Adjusted Gross Income from 2024, reference the 2026 IRMAA chart below for more information. If you do have an IRMAA surcharge, all information on IRMAA is sent out annually by the Social Security Administration (initially sent out when you start out Medicare and annually thereafter)