Medicare Part D is the optional portion of Medicare that covers prescription drugs.
Medicare Part D, an optional program that covers prescription drugs and is offered by private insurers under federally approved plans, is available. The monthly premium for most recipients varies depending on the plan. There may also be co-pays or other costs. Part D was added to Medicare in 2006.
The program is designed primarily for those enrolled in Original Medicare (parts A and B). Sign up within your initial enrollment period, which is a seven-month period with your 65th birthday month at the middle. You can also add Medicare Part D during the annual Medicare fall open enrollment period, but you may incur a late penalty.
If you choose Medicare Advantage (instead of Original Medicare), most of those plans include prescription drug coverage. You may be eligible to enroll in a Part D plan if yours does not.
Different Medicare Part D plans cover different drugs and have different cost-sharing arrangements. “It is amazing how many people don’t realize that their Medicare drug coverage may not include the medicines they require,” says Judith Stein (executive director, Center for Medicare Advocacy). You need to verify carefully.
What Medicare Part D Plans Cover?
Medicare drug plans include both brand-name and generic drugs. Medicare sets a minimum level of coverage for all plans. They must cover the same types of drugs as Medicare, including asthma and diabetes medications. However, plans can select which drugs are included in each drug category.
A formulary is the list of drugs that Medicare Part D plans cover. The formulary will include brand-name and generic drugs, and at least two of the most frequently prescribed drugs. While a formulary might not contain your medicine, it may have a similar option. You should check that your Part D coverage includes the medications you require. Formularies can change year to year.
It is also worth checking with the insurance companies you are interested in to see if they have any restrictions on drug coverage. These may include prior authorization to prescribe a drug, limits on certain drugs, and step therapy where generic or lower-cost brand-name drugs must be used before the most costly drug can be used.
It is important to note that Medicare Part D covers self-administered prescription medications. Medicare Part A and Part B typically cover prescription drugs that are prescribed by a doctor in a hospital or doctor’s office.
If you or your prescriber believes none of the drugs on your plan’s formulary will work for your condition, you can ask for an exception. If your plan stops covering your drug, you can also request an exception.
Medicare Part D cost
You will be responsible for paying cost-sharing as part of your Medicare Part D coverage. This can take the form copays, deductibles, or coinsurance. There may be cost-sharing rules depending on how much you spend for prescription medication. Here is a breakdown of Part D costs.
Monthly premiums
The Medicare Part D monthly premium varies. The National Base Beneficiary Premium will be $33.06 in 2021. This will allow you to compare prices while you shop. Prescription drug coverage can be rolled into the Advantage plan premium if you have Medicare Advantage.
Monthly adjustment
High earners will be charged an Income Related Monthly Adjustment (Part DIRMAA) along with premiums. These amounts can range from $12.30 up to $77.10 depending on their income. You can find a full list of additional premium costs on Medicare.gov.
Annual deductibles
Different plans have different Part D deductibles. Some plans do not have a deductible, while others allow for a maximum of $445 per year.
Copayments and coinsurance
Medicare Part D and Medicare Advantage plans that offer prescription drug coverage almost always have a copayment for any medicine you buy. It varies from plan to plan.
Part D coverage often uses a tiered cost sharing structure. This means that you’ll pay different prices for different types of drugs. You’ll generally pay more for brand-name drugs in copays and coinsurance, while generics will cost you less.
Coverage gap, also known as the “donut hole”)
When you reach the Medicare coverage gap (also known as the “donut hole”), you may have to share more of your costs. When you and your insurance have paid $4,130 for prescription drugs, in 2021 you will be responsible 25% of all your medication costs.
The donut hole will continue to increase in cost until you are enrolled into Medicare Part D catastrophic coverage.
Coverage of catastrophic events
You will be eligible for catastrophic insurance if you have an annual out-of-pocket cost of $6,550 in 2021 for pharmaceutical drugs. This does not include your insurer’s portion. You will be covered for catastrophic coverage if you spend 5% of your drug costs or in 2021 $3.70 for generics or $9.20 to buy brand-name drugs. This catastrophic rate is payable for the remainder year.
Late enrollment penalty
If you wait to join Medicare Part D when you are first eligible, and you don’t have prescription drugs coverage, you will pay 1% of the standard Medicare Part D Premium ($33.06 2021). This is multiplied by the number of months that you did not have coverage. That amount is added to your monthly premium. A person who goes 10 months without insurance would be charged $3 more.
When is Medicare Part D available?
Initial enrollment period
You can either enroll in a Medicare Advantage plan that includes prescription drug coverage or a stand-alone prescription drugs plan (Medicare Part D). This is the seven month period that begins three months before your 65th birthday, and ends three months after your birthday. If you turn 65 in July you will have the opportunity to enroll from April 1 through October 31.
You will be charged a premium penalty if you do not enroll within the first enrollment period. Creditable prescription coverage is coverage provided by your spouse’s union or employer that covers at least the same level as Medicare standard drug coverage.
Remember that the national base beneficiary premium can increase each year. The penalty amount will be recalculated to reflect the increase in base premium and is then increased.
Special enrollment period (if you qualify)
This is the 2-month period that begins the month after your employment ends, or the month following the loss of your qualifying employer insurance. This special enrollment period is generally available to those who have “creditable prescription drugs coverage” and are 65 years old or older.
Open enrollment period
You can switch to a different Medicare Part D or Medicare Advantage plan during the fall Open Enrollment Period for Medicare and Medicare Advantage, which runs from Oct. 15 through Dec. 7 every year. You can also enroll in a Medicare Part D prescription drugs plan if you have Original Medicare. However, the premium penalty may apply.
How Medicare Part D interacts with other insurance
To avoid the Medicare Part D penalty, you must have “creditable prescription coverage” if you wish to retain your prescription drug coverage through an employer or union. Your plan should inform you if your coverage is creditable. You can contact your plan or your employee benefits department to inquire if you have not received word.
You should be aware that your spouse and dependents who are members of your union or employer may lose coverage if they sign up for Medicare Part D.
Creditable coverage is provided by the following government-sponsored insurance: It may be a good idea to keep your coverage from any of these sources.
- Federal Employees Health Benefits.
- Benefits for Veterans
- Tricare (military benefits)
- Civilian Health and Medical Program of Department of Veterans Affairs.
- Indian Health Services.
How to compare Medicare Part D Plans
This interactive tool on Medicare.gov can help find a Medicare Part D plan that covers your prescriptions and help you compare costs among Medicare Part D and Medicare Advantage plans available to you.
Here are some things to remember when comparing plans.
Make sure you check the formulary. You will want to ensure that the medications you take now and any future ones you may need are covered by the plans you’re considering. Before you sign up, talk to your doctor about which brand-name and generic medications you should look for. Also discuss any other options that might be available in the event you are unable to find the medicine you need.
Be on the lookout for changes in plan: Formularies are subject to frequent change. When the formulary changes, your insurer will send you a Notice to Change. This document should be carefully read.
Verify the pharmacy network. Most Medicare Part D plans have a network of pharmacies that offer the lowest prices. You can check to see if the plan includes your pharmacy, or another equally convenient one.
If your plan changes and it affects the prescription medications you need, you may switch plans during Medicare’s open enrollment period (Oct. 15 to Dec. 7). The changes take effect January 1.