Prescription drug costs can climb fast in retirement. Even if you’re healthy today, one new medication can add hundreds or even thousands of dollars a year. Medicare Part D prescription drug plans are there to protect you from those surprises. In this guide, we’ll explain what Part D covers, how it works with the rest of Medicare, and why enrolling, even if you don’t currently take any medications, can save you from unexpected costs and penalties down the road.
What Medicare Part D prescription drug plans cover
Medicare Part D is the part of Medicare that helps with your prescription costs and budget. Private insurance companies approved by Medicare administer these plans that cover part of the cost of the medications your doctor prescribes, including both brand-name and generic medications.
You can get a Medicare Part D prescription drug plan in either of two ways:
- Add a stand-alone drug plan to your original Medicare (Parts A and B).
- Choose a Medicare Advantage plan (Part C) that already includes drug coverage.
Most Medicare Advantage plans include prescription drug coverage, but if your plan doesn’t, you may be able to add a separate Part D plan. You should check with your provider to ensure that they allow it.
Each Part D plan has its own list of covered drugs (known as a formulary) and its own costs, such as premiums, copayments, and deductibles. While the details differ in terms of which drugs and how much of those drugs are covered, all plans must meet specific Medicare coverage standards.
Is Medicare Part D optional?
Yes, technically, Medicare Part D is optional, but skipping it can be a financial gamble.
You might not need it today, but going without coverage or without other creditable drug coverage once you’re eligible for Medicare could trigger a permanent late-enrollment penalty if you change your mind later. (You are first eligible for Medicare during the seven months surrounding your 65th birthday.)
That’s why it’s worth understanding what counts as creditable coverage before making a decision.
What counts as creditable coverage?
According to Medicare.gov, “Creditable prescription drug coverage is prescription drug coverage that’s expected to pay, on average, at least as much as Medicare drug coverage.” If you already have this kind of coverage, you don’t need to sign up for a Part D plan right away, and you won’t be penalized for waiting.
Examples of creditable coverage include:
- Employer or retiree health plans that cover prescriptions.
- VA (Veterans Affairs) benefits or TRICARE for military retirees.
- Federal employee health benefits (FEHB).
- Some state or local government plans.
Each fall, your insurance provider should send you a notice confirming whether your coverage is creditable. Keep that letter; it’s your proof if you delay enrolling in Medicare Part D and later decide to enroll.
Do I need Medicare Part D if I don’t take medications?
You might wonder, “Why pay for drug coverage I don’t use?” The truth is, Part D is as much about protection as it is about prescriptions.
Health needs can change quickly, and new prescriptions can be costly. Waiting until you actually need coverage can leave you paying full price for drugs until you have a chance to enroll in a Part D plan in addition to a lifelong late-enrollment penalty.
Many people opt for a low-cost plan as a precaution. Consider it a small monthly investment for peace of mind.
The Part D late-enrollment penalty
If you go without Part D (or other creditable coverage) for 63 days or longer after you’re first eligible, Medicare adds a late enrollment penalty to your monthly Part D premium when you do enroll.
Here’s how it works: The penalty is 1% of the national base premium (which Medicare defines each year) for each month you go without coverage. Here’s an example:
- The national base premium in 2026 is $38.99.
- If you delayed enrolling for 20 months, your monthly add-on penalty will be about 20% of the base premium, which equals $7.80 per month.
This amount will be added to your Part D plan’s monthly premium for as long as you have Part D coverage.
That may not sound like much, but it adds up over the years. The simplest way to avoid the penalty is to enroll in a plan when you’re first eligible or keep other creditable coverage.
Low-cost ways to stay covered
If you don’t currently take prescriptions, it still makes sense to protect yourself with a low-premium Medicare Part D prescription drug plan. Some plans cost less than $15 a month and still meet Medicare’s standards.
You also don’t have to worry about being locked in one Part D plan forever. Each year during Medicare’s open enrollment period (October 15 to December 7), you can:
- Compare plans.
- Enroll for the first time or switch to one that better fits your current needs.
- Drop coverage if your situation changes.
Online tools, such as the Medicare Plan Finder, make it easy to compare premiums and drug costs in your area. A local State Health Insurance Assistance Program (SHIP) can also help you review options for free.
Extra Help for people with limited income
If paying for a Part D plan feels like a stretch, the federal Extra Help program can make it affordable. The program, also called the Low-Income Subsidy, can:
- Lower or even eliminate your monthly premium.
- Reduce prescription copays.
- Remove the late-enrollment penalty in some cases.
Eligibility is based on income and resources. You can apply at any time through the Social Security Administration or by calling 1-800-772-1213. The process is straightforward, and the savings can be significant.
When to enroll in a Part D plan
Timing matters, but it’s not complicated once you know the key dates:
- Initial enrollment period: Your first chance to join is usually a seven-month window around your 65th birthday.
- Open enrollment period: From October 15 to December 7 each year, you can join, drop, or switch plans.
- Special enrollment periods: If you lose other creditable coverage, move, or qualify for Extra Help, you can enroll without penalty.
Medicare Part D isn’t just about prescriptions. It’s about financial protection. Even if you don’t take medications today, a low-cost plan shields you from surprise drug bills and helps avoid permanent penalties. You can start small, switch later, and continually adjust as your needs change. That’s the flexibility and the safety net that Medicare Part D was designed to provide.
