MEDICARE PART D

Medicare Part D:  Prescription Drug Coverage

Helps with the cost of prescription drugs.

Since Medicare Part A and B do not include prescription drugs, you can get drug coverage with a standalone Part D plan or as part of a Medicare Advantage plan (Part C). Some plans have pharmacy networks and mail order pharmacies that offer discounted prices.

Plans are offered by private insurance companies approved by Medicare. Your choices vary depending on where you live. Coverage and costs beyond the standards set by Medicare vary from plan to plan.

You must be enrolled in Part A or Part B to be eligible for a Part D plan.

For more details on how Medicare Part D works please watch our video.

Drugs Medicare Part D plans cover:

  • Types of drugs most commonly prescribed according to federal standards
  • Specific brand name and generic drugs on the plan formulary, or list of drugs
  • Commercially available vaccines not covered by Part B

Key Point

Even if you don’t require prescription drugs currently, if you don’t sign up for a Prescription Drug plan when you are first eligible, you will incur a monthly premium penalty when you do enroll that will last for the rest of your life unless you have a Special Enrollment Period and have a credible plan. 

Part D Costs

  • Premium
    • Plan premiums vary widely and can change from year to year.
    • Unless you qualify for an exception, you will pay a premium penalty if you are late to enroll in Part D.
    • Many Part C plans include drug coverage.
  • Deductible
    • There can be an annual deductible, but not all plans have a deductible.
    • Plans may apply separate deductibles for drugs in different tiers.
  • Copay
    • Plans charge copays for prescriptions and refills.  Amounts vary.
  • Coinsurance
    • Plans may charge a coinsurance for drugs in certain tiers.  Amounts vary.

Formulary

Each Part D plan or Medicare Advantage plan that includes drug coverage creates a list of specific drugs that it will cover. The list is called a “formulary.” Each plan has its own list of covered drugs, but every plan must cover a range of both generic and brand name drugs that are generally needed by people on Medicare. Plans also cover all commercially available vaccines, like the shingles shot, that aren’t covered by Part B. Part B covers things like flu and pneumonia shots.

Tiered formulary

  • Drugs are grouped into tiers based on cost
    • Tier 1: $ Preferred Generic
    • Tier 2: $$ Generic
    • Tier 3: $$$ Preferred Name Brand
    • Tier 4: $$$$ Name Brand
    • Tier 5: $$$$$ Specialty Drugs
    • Tier 6: A few companies offer Tier 6 drugs which
  • In general, the lower the tier, the lower the cost
  • Deductibles may be charged by tier

Coverage Stages

Part D coverage has four stages. You pay a share of the cost for your drugs in each stage up to a limit. You may not reach all stages. The cycle restarts each year.

  1. Annual deductible: You pay 100% of the cost up to the plan deductible amount. 
  2. Initial coverage: You pay copays or coinsurance up to a set limit. 
  3. Coverage gap (donut hole): You pay a percentage of the cost up to an out-of-pocket limit.
  4. Catastrophic coverage: You pay reduced copays for the rest of the year.

Coverage Gap

Coverage Stages

  • Amount paid for prescriptions depends on stage
  • Dollar limits can change each year
  • Not all plans have a deductible
  • Many people never reach the coverage gap
  • Starts over on January 1 each year
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