Medicare Part D Definition | OnlineHealthIns.com Glossary

Medicare Part D

Also known as: Medicare Prescription Drug Coverage

The part of Medicare that covers outpatient prescription drugs through private plans that contract with Medicare.

Medicare Part D provides outpatient prescription drug coverage. It's offered through private insurance companies that contract with Medicare, either as a standalone Prescription Drug Plan alongside Original Medicare, or bundled into a Medicare Advantage plan.

Each Part D plan has its own list of covered drugs, called a formulary, organized into cost tiers.
Plans carry their own premiums, deductibles, and copay or coinsurance structures, which vary by plan.
Coverage includes phases, sometimes described informally as the deductible phase, initial coverage, and catastrophic coverage.

Because formularies and costs vary significantly between Part D plans, the same medication can cost very differently depending on which plan you're enrolled in. Comparing plans based on your specific prescription list, not just the premium, is one of the most important parts of choosing Medicare drug coverage.

A common mistake is assuming any Part D plan will cover a given prescription at a similar cost. Formularies differ significantly, and a drug that's cheap on one plan can be expensive or excluded on another.

Example

A beneficiary compares several Part D plans using their specific list of prescriptions and finds that the plan with the lowest premium actually costs more overall because their medications sit in a higher-cost tier.

Good to Know

Enrolling in Medicare without creditable drug coverage and later signing up for Part D late can trigger a permanent late enrollment penalty on the premium.

Related Terms

Medicare Part A — The part of Medicare that covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health care.

Medicare Part B — The part of Medicare that covers outpatient care, doctor visits, preventive services, and medical equipment, and typically requires a monthly premium.

Medicare Part C (Medicare Advantage) — An alternative way to get Medicare benefits through a private insurance company, often bundling Part A, Part B, and usually Part D, plus extra benefits.