The Medicare program pays for prescription drugs using several different-and often complicated-methods. As hospital-based treatment continues to shift from inpatient care to outpatient observation status, and as intravenous infusions continue to shift from hospitals and provider offices into the home, understanding Medicare's prescription drug benefits is increasingly confusing to providers and beneficiaries. Not only is it sometimes difficult to determine whether coverage is provided under Medicare Part A, Part B, or Part D, but this determination also has consequences for Medicare beneficiaries' out-of-pocket spending, which may be higher in certain situations. Although Medicare may be a single payer, the "system" of payment varies depending on where beneficiaries receive treatment; what their income and assets are; whether they are receiving inpatient, outpatient, or hospice services; and whether they are enrolled in original Medicare or a Medicare Advantage managed care plan. Policies are needed to address these anomalies in the design of Medicare prescription drug benefits and reduce the unjustified variation in out-of-pocket costs. J Am Geriatr Soc 66:2249-2253, 2018.