Part D — Medicare's prescription drug coverage — is optional in the sense that nothing forces you to sign up. But "optional" is misleading. Skip it at the wrong time and you pay a penalty on top of your premiums for the rest of your life. And the penalty clock starts ticking the moment you are eligible, not the moment you actually need a prescription.
Part D is provided through private insurance companies approved by Medicare. Each plan has a formulary — a list of covered drugs — organized into tiers, with generic drugs typically at the lowest cost and specialty drugs at the highest. Different plans cover different drugs at different cost levels, which is why comparing plans based on your specific medications matters enormously.
If you go more than 63 days without creditable prescription drug coverage after becoming eligible for Part D, Medicare adds a late enrollment penalty to your Part D premium — permanently. The penalty is 1% of the national base beneficiary premium for every month you were without coverage. In 2026, the base premium is approximately $36.78, so each uncovered month adds about $0.37 per month to your Part D premium, forever.
It sounds small. But if you went 24 months without coverage, that is a 24% permanent increase. Over 20 years of retirement, those extra dollars add up significantly.
Even if you currently take no prescription drugs, enroll in a Part D plan during your Initial Enrollment Period. The cheapest plans cost less than $15/month — far less than the penalty you would eventually pay.
You can delay Part D without penalty if you have "creditable" prescription drug coverage — meaning coverage from another source that is at least as good as the Medicare standard. Employer plans, union plans, VA drug benefits, and some other sources typically qualify. Your plan should send you an annual notice stating whether your coverage is creditable. Keep those notices — you may need them to prove your creditable coverage period if you enroll in Part D later.
Part D coverage works in phases based on how much you (and your plan) have spent on drugs in a year. The 2026 structure, simplified:
The $2,000 out-of-pocket cap is a major improvement as of 2025 — previously, there was a coverage gap (the "donut hole") that left many people paying full price for drugs mid-year. That gap is now effectively closed.
The Medicare Plan Finder at medicare.gov/plan-compare is the right tool for this. Enter your zip code, add your specific medications with dosages, and it will show you every available plan and what your estimated annual cost would be for your actual prescriptions. Compare both the monthly premium and your estimated drug costs together — the cheapest premium often is not the cheapest total cost.
Plans can change their formularies and pricing each year. During Annual Enrollment (October 15–December 7), revisit your plan to make sure it still covers your medications at a reasonable cost for the coming year.
Reminder: Ready at 65 is not affiliated with Medicare, CMS, the SSA, or any government agency. This article is general educational information, not financial, legal, medical, or insurance advice. Rules, costs, and deadlines change — verify current details at Medicare.gov or by calling 1-800-MEDICARE before making any decision. Full disclaimer →