What is Medicare Part D? (Prescription drug coverage)

Part D is the Medicare prescription drug benefit. Created by Congress in 2003 and rolled out in 2006, it's delivered by private insurance plans under contract with the federal government — not by Medicare directly.

You enroll in a separate standalone Part D plan if you have Original Medicare, or you get drug coverage built into a Medicare Advantage plan. Either way, the federal rules — formulary protections, the $2,100 out-of-pocket cap, the $35 insulin cap, free ACIP vaccines — apply across every plan.

Yes — sign up at first eligibility even if you take nothing right now.

The Part D late-enrollment penalty is 1% of the national base beneficiary premium per full month you went without creditable drug coverage after your IEP. It's permanent. Wait 5 years, that's 60% added to your premium for life. The cheapest available standalone plan during your IEP is almost always cheaper than the LEP later.

"Creditable coverage" is drug coverage that's at least as good as standard Medicare Part D. If you have it, you can delay Part D without the late-enrollment penalty.

Common sources: VA, Tricare, FEHB, Indian Health Service, and most active-employer drug plans. Every year your plan must mail you a Notice of Creditable Coverage. Save it. If your coverage ends, you have a 63-day window to enroll in Part D before LEP exposure starts.

1% of the national base beneficiary premium for every full month you were without creditable drug coverage after your Initial Enrollment Period — added to your Part D premium permanently.

The national base beneficiary premium is set by CMS each year (currently around $38.99 for 2026). The penalty rounds to the nearest $0.10. Permanent means permanent — it does not reset, year over year. The two ways out: appeal through C2C Innovative Solutions if the gap was miscalculated, or qualify for Extra Help (LIS), which waives the LEP entirely.

The IRA of 2022 is the biggest Part D overhaul since the program began. Five concrete changes:

First — a $2,100 annual out-of-pocket cap for 2026 (Section 11201). Second — insulin capped at $35 a month, since January 2023 (Section 11406). Third — ACIP-recommended adult vaccines (shingles, RSV, Tdap) cost $0 under Part D, since January 2023. Fourth — the Medicare Prescription Payment Plan ("smoothing") starting 2025, lets you spread your drug costs across the year (Section 11202). Fifth — Medicare drug price negotiation, with the first 10 negotiated prices effective in 2026 (Sections 11001–11003).

Every Part D plan has a formulary — the list of drugs it covers. Drugs are sorted into tiers (typically 5 or 6) that determine your copay or coinsurance. Tier 1 is generics with the lowest copay. Higher tiers are brand-name and specialty drugs with higher cost-sharing.

Formularies must cover at least two drugs in every therapeutic class. Six "protected classes" — antidepressants, antipsychotics, anticonvulsants, antiretrovirals, antineoplastics, and immunosuppressants — require nearly all drugs to be covered. If your drug isn't on the formulary, you can request a formulary exception.

It's officially called the Medicare Prescription Payment Plan (IRA Section 11202), but everyone calls it "smoothing." Starting 2025, you can opt in and your Part D plan spreads your drug copays across the year as monthly installments instead of charging the full amount at the pharmacy.

It doesn't lower your costs — the total annual amount is the same. It just smooths out the cash-flow shock if you have an expensive specialty drug. You opt in through your plan. Most useful for people who hit the $2,100 OOP cap early in the year.

Yes — the program is called Extra Help, also known as the Low Income Subsidy (LIS). It drops Part D premium, deductible, and copays to near zero for people under 150% of the federal poverty level. The IRA expanded full Extra Help to everyone under that line as of 2024.

Extra Help also waives the Part D late-enrollment penalty entirely while you're enrolled. Apply through SSA on Form SSA-1020 — online, by phone, or on paper. No fee.

Three free options. First — Medicare.gov Plan Finder is the official tool. Enter your medications, dosages, and pharmacy and it ranks every available plan by your projected annual cost. Second — your state SHIP counselor gives free, unbiased Medicare counseling. Third — Chapter Medicare provides free plan comparison from licensed Medicare advisors and is one of our trusted partners at 24Help.

All three are free and none of them sells you a specific plan. Use them.

Hang up. Cold-call solicitation for Medicare plans — calls, texts, door knocks — is prohibited under CMS Medicare Communications and Marketing Guidelines (MCMG). The legitimate places to find a plan are Medicare.gov Plan Finder, your state SHIP counselor, or a licensed agent you contacted first.

Report unsolicited Medicare calls to 1-800-MEDICARE or to the Senior Medicare Patrol in your state. Scams spike during AEP every year.