May 9th 2024
By Ari Parker
Learn everything you need to know about Medicare Part D in this guide. Understand costs, coverage, and how to enroll in Medicare prescription drug plans.
Medicare can be a bit confusing because it has multiple parts: Part A, Part B, Part C, and Part D. To add to the complexity, Parts C and D come with a variety of plan options that are each different. Oh, and there are also Medicare Supplement plans. While it can feel confusing, Medicare doesn’t actually have to be that complicated. We break things down simply in our Medicare Explained Decision-Making Guide.
If you’re interested in all the details around Medicare Part D, then you’re in the right place. In this guide we’ll cover:
What Part D is
How it works
How much it costs
Who it’s for
How to enroll
How to compare plans
Rather talk to someone to learn about Medicare? Our licensed Medicare Advisors would be happy to chat with you to help you understand everything you need to know about Medicare. Give us a call at 855-900-2427 or schedule a time to get your Medicare questions answered.
Medicare Part D is Medicare’s prescription drug coverage. Original Medicare (made up of Part A and Part B) doesn’t provide coverage for prescriptions, but you have the option to purchase a separate prescription drug plan to reduce your prescription costs.
If you choose to leave Original Medicare to enroll in a Medicare Advantage plan, then Part D would likely be included with your Medicare Advantage plan. If you choose a Medicare Advantage plan that does not include prescription drug coverage, you have the option to enroll in a stand-alone Part D plan.
Prescriptions can cost a lot! Medicare Part D coverage makes your prescriptions more affordable. Even if you don’t currently have prescriptions, getting coverage when you enroll in Medicare will help you avoid the Part D late enrollment penalty should you need coverage later (we’ll explain the penalty in more detail later on).
As explained above, you can have Medicare Part D coverage through either a stand-alone Medicare prescription drug plan or through a Medicare Advantage plan that includes prescription coverage. Regardless of which option you choose, the coverage will work the same. That said, prescription coverage and costs vary from one Medicare plan to another. To understand how a specific plan works, you’ll need to look at its list of covered drugs (formulary), drug tiers, annual deductible, copays, and coinsurance amounts. Below you’ll find info on how formularies and drug tiers work. We go into deductibles, copays, and coinsurance in the cost section that comes after.
A drug formulary is a list of drugs covered by a Medicare plan. The formulary will include covered generic and brand-name prescriptions divided into drug tiers. Lower-tier drugs are usually generic and cost less. Higher-tier drugs cost more.
Formularies and tier structures vary based on the Medicare prescription drug coverage you choose. Formularies are important because they determine how much you’ll pay for your prescriptions.
In 2025, the average cost of prescription drug coverage is $45. That said, premiums vary based on where you live and which plans are available to you. When weighted by enrollment, the average premium paid varies across states from $26.43 in South Dakota to $57.58 in New York.
Drug plans don’t have to be expensive! Many people are able to get Part D coverage with a $0 premium. When looking at these popular plans and your other options for drug coverage, make sure that your prescriptions are covered and the amount you’ll owe for your prescriptions is low.
Premiums are your monthly cost to receive insurance coverage. You may also owe some money out of pocket when you fill your prescriptions. What you owe when you pick up your prescriptions will vary based on your Part D deductible, copays, and coinsurance. Your costs will also depend on your prescriptions and the tiers they’re on for your specific plan.
Predicting what you’ll owe in one year can be complicated when you’re comparing a number of different plans with different costs and tiers. We can help you compare your annual estimated costs across different Part D plans quickly and painlessly. Give us a call at 855-900-2427 or schedule a time to chat to ensure you’re saving the most on your prescriptions.
Also commonly called the Low Income Subsidy (or LIS), Medicare’s Extra Help program helps people with lower incomes and resources. Extra Help will cover Part D premiums, deductibles, and coinsurance. If you receive Extra Help, Part D penalties won’t apply to you.
Some people get Extra Help automatically and others need to apply. Learn more about Medicare Extra Help, who’s eligible, and how to apply.
About 78% of people on Medicare have Part D coverage. While it’s not required, most people should get Medicare Part D coverage so they can pay less for current and future prescription needs. Enrolling even when you don’t need coverage will also help you avoid a late enrollment penalty.
Most people should enroll in Medicare Part D during their Initial Coverage Election Period, which begins three months before your Medicare Part B coverage begins. You can also choose to enroll in a Medicare Part D plan or a Medicare Advantage plan during the Medicare Open Enrollment Period, which lasts from October 15th to December 7th every year.
If you don’t sign up for Part D coverage during your Initial Coverage Election Period, you could risk paying a late enrollment penalty when you do eventually choose Part D coverage. There are two surefire ways to avoid the Part D late enrollment penalty:
Never go more than 63 days without prescription drug coverage through Medicare or another credible insurer
Choose to never enroll in Medicare Part D
→ Learn more about the Part D penalty and other Medicare late enrollment penalties.
I often tell people to “date their drug plan” rather than feel married to it. Medicare Advantage and prescription drug plans change every year. Sometimes new plans are added too! Your prescription needs may also change from one year to the next. For all of these reasons, I always suggest that people shop around during the Open Enrollment Period to see if there’s a better plan available that could save them money in the upcoming year. Chapter’s Medicare Advisors are happy to help you compare your current drug coverage to the other available options each year.
When it comes to Medicare Part D coverage, you have options. 7 insurance companies offer between 12-16 stand-alone prescription drug plans, depending on your location. You’ll also have access to an average of 34 Medicare Advantage plans that include Part D coverage.
56% of people choose to receive their prescription drug coverage through a Medicare Advantage plan.
57% of people get Part D coverage from three big insurance firms: UnitedHealth, CVS Health, and Humana.
27% of people with Part D receive financial aid from the Part D Low-Income Subsidy (Extra Help) program.
The average monthly premium for Part D coverage is higher for stand-alone prescription drug plans than it is for Medicare Advantage plans with prescription drug coverage.
There are 464 stand-alone Medicare Part D plans available in 2025—down from 709 in 2024! With 16 stand-alone Part D plans, California has the most of any state. Several states have only 12 stand-alone Part D plans available.
People can choose from 42 Medicare Advantage plans on average. Of those 42 plans, 34 include prescription drug coverage. These plans are known as MA-PD plans. Because over 80% of Medicare Advantage plans include prescription drug coverage, most people on Medicare Advantage don’t enroll in a stand-alone Part D plan.
There’s a lot that goes into Medicare Part D coverage, and it’s easy to get lost in the sea of information. To keep yourself afloat, keep these three considerations in mind.
First and foremost, your prescription drug coverage must cover your prescriptions. After all, that’s what it’s for!
Once you’ve narrowed down your options to plans that cover all of your prescriptions, you should compare your estimated costs for the year. Make sure to include the monthly premium and expected out-of-pocket costs. You can calculate your expected out-of-pocket costs by determining which tiers your prescriptions are on and what the copays and coinsurance amounts will be for each.
If you end up with two or more plans that minimize your expected costs, you can use Medicare plan star ratings to make a final choice. Every year, Medicare rates Part D and Medicare Advantage plans from 1-5 stars, with a 5-star rating being the best.
Comparing Part D and Medicare Advantage plan options and calculating the cost differences can get complicated, especially if you have multiple prescriptions to consider. Our licensed Medicare agents can help you compare and calculate quickly, so you can choose the best Medicare Part D coverage in minutes instead of hours. We’re just a phone call away! Give us a call at 855-900-2427 or schedule a time to chat.
