Plain version: Part D is prescription drug coverage from private plans. Enrollment is optional, but like Part B it rewards signing up on time: going without drug coverage that counts can cost more for as long as you have Part D.
Two ways to get it, and who can join:
A stand-alone prescription drug plan (PDP) works alongside Original Medicare, and a Medigap policy can stay in place.
A Medicare Advantage plan with drug coverage built in (MAPD) replaces the separate pieces; it is not layered on top of Original Medicare.
A person is eligible for Part D if entitled to Part A or enrolled in Part B, and living in the plan's service area. Requiring both Part A and Part B is the Medicare Advantage rule.
Enrollment periods:
Initial Enrollment Period (IEP): for most people the same as the Part B IEP, seven months around the month the person turns 65.
Annual Enrollment Period (AEP), also called the Open Enrollment Period: October 15 through December 7 each year. A change takes effect January 1 of the next year if the plan gets the request by December 7.
Special Enrollment Period (SEP): for events such as involuntary loss of creditable coverage, moving out of the plan's region, a change in Medicaid or Extra Help status, or termination of the plan's contract. Losing coverage for failure to pay a required premium is not involuntary.
Late enrollment penalty: the CDI outline says failure to maintain creditable drug coverage after age 65 may result in a lifetime penalty of 1% per month without coverage. Under 42 CFR §423.46(a), the penalty is counted from the end of the Initial Enrollment Period and applies only after a continuous period of 63 days or more with neither a Part D plan nor creditable coverage. The penalty is 1% of the national base beneficiary premium for each full uncovered month, rounded to the nearest $0.10 and added to the monthly premium, and it generally continues as long as the person has Medicare drug coverage.
Creditable coverage: other drug coverage counts only if its actuarial value equals or exceeds that of standard Part D coverage. The test is the value of the benefit, not the employer's size or the premium. Example: employer drug coverage ends June 30 and a Part D plan starts August 1; the 31-day gap is under 63 days, so no penalty.