Everything You Should Know About Medicare Part D
Key Takeaways
- Medicare Part D plans are provided by private insurance carriers to cover prescription drugs.
- You can add a standalone plan to Original Medicare (Part A and Part B),Original Medicare is a fee-for-service health insurance program available to Americans aged 65 and older and some individuals with disabilities. Original Medicare is provided by the federal government and is made up of two parts: Part A (hospital insurance) and Part B (medical insurance). or you can enroll in a Medicare Advantage plan (Part C)Medicare Advantage (Medicare Part C) is health insurance for Americans aged 65 and older that blends Medicare benefits with private health insurance. This typically includes a bundle of Original Medicare (Parts A and B) and Medicare Prescription Drug Plan (Part D). . Medicare Advantage plans substitute for Medicare Parts A and B, and most include Part D prescription drug coverage.
- Anyone enrolled in Original Medicare (Part A and Part B) is eligible for Part D prescription drug coverage.
- Part D plans offer a wide range of coverage to fit your prescription needs.
What’s Medicare Part D?
Medicare Part D plans provide prescription medication insurance for people on Medicare. Plans are administered through private insurance companies that contract with the federal government. That means there’s a variety of Part D plans available, depending on where you live, but they all must offer coverage that meets federal requirements.
After you have enrolled in Original Medicare (Part A and Part B), you can join a standalone Part D plan. Otherwise, you can switch to a Medicare Advantage (Part C) plan. Medicare Advantage plans substitute for Medicare Parts A and B, and most include Part D prescription drug coverage.
Ready for a new Medicare Advantage plan?
What’s Covered?
All Medicare Part D plans must cover at least two drugs in the most frequently prescribed categories, plus nearly all drugs in certain protected classes (such as medications to treat cancer or HIV). An individual plan’s formularyA formulary is a list of prescription drugs covered by a specific prescription drug plan.
may feature variety of other drugs, which are organized into tiers to determine how much you’ll pay for a supply. Part D plans also cover some vaccines (like shingles and tetanus-diphtheria-whooping cough) that aren’t covered by Medicare Part B.
Take a look at our Medicare Part D coverage guide for more information.
What Costs Should I Consider?
Medicare Part D plans charge monthly premiumsA premium is a fee you pay to your insurance company for health plan coverage. This is usually a monthly cost. , plus copaysA copayment is the fixed amount you pay directly to your provider for medical services or prescription drugs covered in your plan. For example: If your plan includes a copayment of $20 for office visits, you’ll pay $20 to your doctor whenever you have an appointment. when you use your benefits to purchase medications. Depending on the plan, your costs may need to reach an annual deductibleA deductible is an amount you pay out of pocket before your insurance company covers its portion of your medical bills. For example: If your deductible is $1,000, your insurance company will not cover any costs until you pay the first $1,000 yourself. before insurance starts to pay. Part D plans can offer deductibles as low as $0.
Each Part D plan organizes drugs into numbered tiers, which determine how much the copay will cost (tier one is the least expensive). The federal government places certain requirements on pricing, such as capping the cost of a monthly supply of insulin to $35 and limiting how much anyone on Part D can spend out of pocket: People enrolled in Part D will not pay more than $8,000 out of pocket for their covered drugs in 2024 and then no more than $2,000 in 2025. From then on, the cap will adjust annually.
If you have a low income (under $22,590 for an individual or $30,660 for a married couple) and limited financial resources, you may qualify for Extra Help. This program makes it easier for people on Medicare to access the medications they need by assisting with the costs of Medicare Part D. In 2024, people who receive this assistance pay no monthly premium, have a $0 deductible, and pay more than $4.50 for covered generic drugs or $11.20 for a covered brand-name drug.
If you know you will need to take a prescription regularly, be sure to check how much you’ll pay for a supply before selecting a Medicare Part D or Medicare Advantage plan. Learn more about Medicare Part D costs.
What Is the Donut Hole?
If you spend a specific dollar amount on drug costs ($5,030 in 2024), you go over the initial coverage limit for your Medicare Part D plan. You then move into the coverage gapThe Medicare Part D coverage gap, also known as the donut hole, is the payment stage between the initial coverage limit and catastrophic coverage. The portion you pay for prescriptions is usually higher in this phase until you enter the catastrophic level. , also known as the “donut hole” until you reach the spending level required for catastrophic coverage.
Currently, while you’re in the donut hole, you pay no more than 25% of the retail cost of medications that are covered by your plan. The coverage gap applies until your out-of-pocket costs reach a specific dollar amount ($8,000 in 2024).
When you reach catastrophic coverage, your Part D plan will cover 95% of your drug costs for the remainder of the year.
Federal law will eliminate the coverage gap as of 2025 and establish a cap on out-of-pocket costs.
Drug Tiers in a Medicare Part D Formulary
Part D plans may organize their tiers in various ways. Here is an example of a five-tier formulary:
- Tier 1 has the lowest copay for generic drugs. To receive approval from the Food and Drug Administration, generic drug makers must prove that their product performs the same way as the corresponding brand name drug. Generic drugs use the same active ingredients as brand name drugs to achieve desired results.
- Tier 2 has a medium copay for preferred brand name drugs. Preferred brand name drugs are medications manufactured by one manufacturer that are typically lower-cost among all brand name drugs. This is partly because these medications have been in the market for some time and are widely accepted).
- Tier 3 has a higher copay for preferred brand and non-preferred brand name drugs. Non-preferred brand name drugs, on the other hand, tend to cost more because they are new to the market. You may have heard the term “designer drugs.” These high-cost drugs fall into the same category.
- Tier 4 has a higher copay for non-preferred brand drugs and non-preferred generic drugs.
- Tier 5, or the Specialty Tier, has the highest copay. It contains very high cost brand and generic drugs, which may require special handling and/or close monitoring.
Can I bundle multiple benefits into one plan?
Who’s Eligible for Part D Insurance?
You are eligible for a Medicare Part D plan if:
- You are 65 years of age or older.
- You have a qualifying disability for which you have been receiving Social Security Disability Insurance (SSDI) for more than 24 months.
- You have been diagnosed with End-Stage Renal Disease (permanent kidney failure requiring a kidney transplant or dialysis).
- You are entitled to Medicare Part A or Part B.
- Have a regular prescription drug need.
- Will have a prescription drug need in the future.
- Have trouble paying for your current prescription drug needs.
- Do not have prescription drug coverage.
- Want to avoid a penalty.
How Do I Enroll in Part D?
The Open Enrollment PeriodThe Medicare Open Enrollment Period (OEP), also known as the Annual Enrollment Period, runs from October 15 to December 7 each year and allows you to make multiple Medicare-related changes. In addition, Affordable Care Act Open Enrollment allows changes to non-Medicare coverage from November 1 to December 15. for Medicare and Part D is October 15 to December 7. If you don’t purchase a plan then, you may qualify for a Special Enrollment Period (SEP).A Special Enrollment Period is an opportunity outside of a standard enrollment period in which your specific circumstances allow you an opportunity to make changes to your Medicare-related coverage.
New to Medicare and Part D?
If you’re preparing to enroll for the first time, the initial Medicare enrollment period is open for seven months. We think it’s easiest to explain initial enrollment when you slice it three ways:
- You can enroll in the three months before your 65th birthday month. Coverage begins the first day of your birthday month.
- You can enroll the month of your birthday. Coverage begins the first day of the month after your birthday.
- You can enroll in the three months after your birthday month. Coverage begins the first day of the month after enrollment.
What if the Drug I Need Isn’t Covered?
Each Part D plan has a formulary. Simply, it’s a list of the drugs covered. If the drug you need is not on a formulary, you can request an exception. You can contact the carrier to ask if your drug has a different name you don’t recognize. Part D offers at least two types of drugs in most categories, and is required by Medicare to cover all drugs in the six most essential categories.
Learn more about how to navigate Medicare Part D enrollment.
What types of prescription drugs are covered?
Medicare requires every Part D plan to cover most drugs in protected classes and at least two drugs in the most commonly prescribed categories. Otherwise, formularies can vary, so it’s important to check on the coverage and cost of any prescriptions you take before enrolling in a plan. If you still have questions about prescription drug coverage, contact us.
Do I need Medicare Part D if I’m enrolled in Medicare Advantage?
Do I already have Part D if I enrolled in Original Medicare?
Find the Medicare Advantage plan that meets your needs.
Sources
- Drug Coverage (Part D). Medicare.gov.
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