What Do I Need to Know About Prescription Drug Coverage?


In this section:

  • Is prescription drug coverage (Part D) included with my plan?
  • What are the 4 stages of drug coverage that make up Part D?
  • What is the donut hole?

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Prescription drug coverage (Part D) has to be added to your plan

Prescription drug coverage (Part D) is offered by private insurance companies. Part D has to be added to your plan—it is not part of Original Medicare (Part A and Part B). There are two ways you can add Part D to your coverage:

Option 1: As part of a Medicare Advantage Plan (Part C) that includes prescription drug coverage (Part D)

Option 2: As a separate standalone plan that is added to Original Medicare

For many people, a Medicare Advantage plan (Part C) that includes (Part D) coverage is the right choice because it provides all of the coverage in one plan. You can only choose one of the options above when adding Part D to your coverage—not both.

There are 4 drug coverage stages to Part D

Within Part D prescription drug coverage there are 4 coverage stages that determine how your prescription drug costs are covered:

  1. Deductible stage
  2. Initial coverage stage
  3. Coverage gap (donut hole)
  4. Catastrophic coverage stage

Deductible stage

If your prescription drug plan has a deductible stage (not all drug plans have a deductible stage) you would need to pay the deductible amount each year for your drugs before your plan begins to pay its share of your covered drugs. Both Medicare Advantage Plans (Medicare Part C) that include drug coverage and Medicare Prescription Drug Plans (Medicare Part D) may have deductibles.

Initial coverage stage

You start in this stage after you have met any deductibles associated with your prescription drug plan. In 2021, you remain in this stage until the total cost of your prescription drugs, which includes your copay and the amount your Medicare Part D insurance provider pays for your drugs, reaches $4,130. Once your total prescription drug costs exceed $4,130 you enter the coverage gap stage, also known as the “donut hole.”

Coverage gap (donut hole)

The "donut hole" is a term used to describe the coverage gap stage of Part D prescription drug coverage. It’s called the donut hole because in this stage there is a “gap” in prescription drug coverage. You reach the donut hole if your drug costs reach a certain amount during the year. In 2021, if the total cost of your prescription drugs (what you pay and what the plan pays) reaches $4,130 you reach the donut hole.

Guide to Understanding the Medicare Donut Hole

Catastrophic coverage stage

In the catastrophic coverage stage, your plan provides coverage for prescription drugs once again. In 2021, while in this stage you are assured to only pay a small coinsurance amount or copay for covered drugs for the rest of the year.

You may qualify for extra help with your prescription drug costs

Extra Help is a Medicare program to help people with limited income and resources pay Medicare prescription drug costs. If you qualify:

  • Medicare could pay up to 75% or more of your drug costs, including monthly prescription drug premiums, annual deductibles, and coinsurance.
  • You will not be subject to the coverage gap or a late enrollment penalty.

Many people are eligible for these savings and don’t even know it.

To see if you qualify for extra help, call:

Next step: What are my Medicare plan options?