The national base beneficiary premium for Part D plans is $33.06 per month for 2021.
Medicare Part D plans — which cover prescription drugs and are also known as Medicare drug plans — come with monthly premiums that vary by policy. According to Centers for Medicare & Medicaid Services for 2021, the national base beneficiary premium for Part D plans amounts to $33.06 per monthly. This number is based in part on the average monthly bid amount submitted from private insurers.
Your upfront costs may be higher or lower depending on which plan you choose. According to the Kaiser Family Foundation, 2021 plan premiums ranged between $5.70 per monthly and $205.30 per month. Additional fees may apply if you are late to enroll, have a long gap in your drug coverage, or earn a high-income.
What is Medicare Part D?
Medicare Part D, Medicare’s prescription drug benefit, is what Medicare is. It helps cover the costs of outpatient prescription drugs, something that’s typically not covered by Original Medicare Parts A or B, which cover hospital and outpatient medical insurance, respectively.
Parts A, B and C are provided by the government directly. Part D policies can be issued by private insurance companies who have signed contracts with the federal government.
Additional Part D coverage can be purchased if you have Original Medicare. This will add important prescription coverage to your overall insurance protection. Most Medicare Advantage plans already include drug coverage; if you have such a plan, you don’t need a separate Part D policy.
Are Part D plans expensive?
In general, no — at least, not compared to standard premiums for Part B, which are $148.50 per month in 2021 for most Medicare recipients. However, these Part D plans aren’t premium-free, like Part A generally is, and some can be quite costly.
Each plan has its own premium and deductible. These premiums can be deducted from your Social Security payments, rather than being paid directly to your insurer.
Plans with lower premiums generally have higher deductibles. Although the initial premium cost might be lower than expected, coverage will not kick in until you reach the deductible. This could make plans with higher-deductibles more costly overall. Here are a few examples to give you a ballpark idea of what you might expect to pay for this type of coverage.
Are there any additional costs for high income earners?
Your Medicare Part D insurance may require you to pay a surcharge if your income exceeds a certain level. The surcharge, known as Part D Income-Related monthly Adjustment Amount (or Part D IRMAA), is not included in your premium.
If you have earned over $88,000 in an individual tax return or $176,000 jointly, then you won’t owe Part D IRMAA. As income increases, the surcharge amount will increase incrementally. It starts at $12.30 per monthly and reaches $77.10 for individuals with an annual income over $500,000 or $750,000 when filing jointly. Check current rates on Medicare.gov.
Part D IRMAA must be paid by high-income earners, regardless of whether they select a Medicare Part D or Medicare Advantage plan with prescription drug coverage. The Part D IRMAA does not go to your insurance company and is typically deducted from your Social Security check.
What about the Part D late enrollment penalty?
Medicare imposes a late enrollment penalty if you don’t purchase Part D coverage before the end of your Initial Enrollment Period — the seven-month period starting three months before the month you turn 65 — or if you’ve gone 63 consecutive days or more without prescription drug coverage. This penalty is added to your monthly premium and remains in effect as long as you have Medicare drug coverage.
Medicare calculates the penalty amount by multiplying your eligibility for drug coverage by 1% and then multiplying this product by the national beneficiary premium ($33.06 in 2021). The sum is round to the nearest 10 Cents. The penalty is higher if you delay purchasing drug coverage. You may also notice that the monthly penalty amount can increase as the national base beneficiary premium is subject to change each year.
Imagine that you waited two more years before purchasing prescription drug coverage. This is what happens after your Initial Enrollment Period ends. Your penalty would be 0.24 (1% per 24 months that you were uninsured) x $33.06(national base beneficiary premium), for a total $7.93. Rounded to $7.90. This $7.90 monthly penalty would be added to your premium cost as long as you have Medicare drug coverage. Although it may not seem like much, this adds up over a year to nearly $95 and could increase in cost if the national beneficiary premium rises.
To avoid the Part D late enrollment penalty
- Enroll in Medicare Part D or a Medicare Advantage plan that includes drug coverage as soon as you become eligible for Medicare.
- Register for Medicare Drug Coverage immediately if you have lost your prescription plan.
- Keep accurate records of your past drug insurance coverage so that you can provide proof of continued coverage.
You can request a reconsideration if you believe Medicare has wrongly penalized you. You have 60 days to respond to the notification of the penalty. The documentation supporting your case will also be required. You will usually receive a decision within 90-days.