Medicare Part D offers optional prescription drug coverage. All Medicare beneficiaries are eligible for Part D, and it’s a good idea to enroll during the initial enrollment period.

There are two options for Part D: you can enroll in a separate Part D plan, or you can choose a Medicare Advantage plan that includes drug coverage. If someone chooses the latter, the cost of Part D is included in their monthly Medicare Advantage premium.

When enrolling in a separate Part D plan, premium prices vary and are separate from the premiums for Parts A and B. Individuals with annual incomes of less than $103,000 or couples with annual incomes of less than $206,000 pay only the monthly premium. Those above these income limits pay up to $81 extra per month.

Part D can incur a large late enrollment penalty that is charged monthly as long as the person is enrolled in Medicare, so it is important to enroll during the initial enrollment period.

“When reviewing Part D options, consider your prescriptions and your preferred pharmacy,” Smith says. “Depending on whether a pharmacy is in-network, out-of-network or preferred, there can be annual price differences of over $1,000 in your drug costs.”

If someone ultimately finds the prescription drug premiums and copayments for their chosen stand-alone Part D plan too expensive, they should consider other plan options for the following year, Neff advises. While they are covered by their current plan, they can sometimes switch pharmacies to reduce costs. She adds that local State Health Insurance Assistance Programs (SHIP) can help people compare drug costs at different pharmacies for free.