Medicare Part D
Medicare Part D is a separate Medicare option that covers prescription drugs. Like Medicare Part C, it is also provided only through private insurance companies registered with the federal government. Hence, to have Medicare drug coverage, you will have to enroll with a private Medicare prescription drug plan (PDP) or a Medicare Advantage Plan with drug coverage (MADP). Each plan can vary in cost and specific drugs covered.
Anyone with Medicare Part A and/or Part B is eligible for Medicare Part D. It is important to know that the Medicare rule says, if you go more than 63 days without Creditable prescription drug coverage you will be penalized once you do enroll. It is recommended you get Medicare drug coverage even if you are not on any prescription drugs.
To get Medicare Part D, you will have to enroll during an approved enrollment period. That is during your Initial Enrollment Period (IEP) or Medicare’s Annual Election Period (AEP).
What Medicare Part D Drug Plans Cover?
All Medicare Part D plans according to federal government policy must cover at least two drugs from most categories that people with Medicare take.
All Part D plans must cover all drugs available in the following categories:
These 6 categories are considered Part D protected classes.
Am I Eligible For Medicare Part D?
You must have been eligible and enrolled in Original Medicare, Medicare Part A and/or Medicare Part B to enroll in a Part D drug plan. However, to be eligible to enroll in a Part C plan that includes drug coverage you must be eligible for both, Medicare Part A and B.
It’s important to note that being eligible for Medicare drug coverage through either Part C or D is not age based. Therefore, even if you are on Original Medicare under the age of 65 due to disability you are still eligible for Part C and/or Part D.
How Do I Enroll In Medicare Drug Coverage?
There are 2 ways to receive Medicare drug coverage. You will have to buy either a private Medicare prescription drug plan (PDP) or a Medicare Advantage Plan with drug coverage (MADP).
Private Medicare Prescription Drug Plans (PDP)
These standalone plans add drug coverage to other Medicare options you might have had. This includes Original Medicare, some Medicare Cost Plans, some Private Fee‑for‑Service (PFFS) plans, and Medical Savings Account (MSA) plans.
Most people who elect to remain on Original Medicare A and B choose to purchase a Medigap plan and then enroll in a Part D drug plan for prescription coverage. You must be enrolled in Original Medicare (Part A or Part B) to be eligible to enroll in a Part D drug Plan
Medicare Advantage Plan With Drug Coverage (MADP)
Enrolling into a Medicare Advantage plan with drug coverage provides you with all of Part A and Part B benefits, as well as drug coverage all administered through a private insurance company. You must be enrolled in both Part A and Part B to be eligible to enroll in a Medicare Advantage plan.
Part D Costs
The Part D monthly premium varies by plan. If you are a higher income earner and subject to an IRMMA, you may pay more than the plan premium. In 2023 the national average for a drug plan premium is around $30 per month. Monthly premiums will vary by plan and your available options will also vary depending on the county that you live in.
Deductibles, Coinsurance & Copayments
These amounts vary by plan.
Late Enrollment Penalty
If you do not enroll in a Part D plan when you’re first eligible, and you don’t have other creditable prescription drug coverage (like employer drug coverage) or get Extra Help, you may pay a late enrollment penalty if you join a plan later.
For each month you delay enrolling in Medicare Part D, you will have to pay a 1% Part D late enrollment penalty (LEP). This penalty is paid for as long as you have a Medicare drug plan.
Part D Enrollment Periods
To get Medicare Part D, you will have to enroll during approved enrollment periods, that is during the initial enrollment period or Medicare open enrollment (or Medicare’s annual election period).
Initial Enrollment Period (IEP)
The initial enrollment period is a 7-month window where you are allowed to enroll in Medicare when you turn 65. This 7-month period includes the three months before the month you turn 65, your birth month, and three months after the month you turn 65.
For persons eligible due to disability, the initial enrollment period is also a 7-month period. It begins three months before their 25th month of disability benefits, includes the 25th month, and ends three months after.
If you've been automatically enrolled, you will still have an Initial Enrollment Period where you can buy or switch Medicare Part D plans.
Medical Annual Election Period (AEP)
The Medicare AEP is also known as the Annual Enrollment Period. This yearly period is in the fall and runs from October 15th to December 7th each year.
During this period, you can switch plans from Original Medicare to a Medicare Advantage (Medicare Part C) plan with drug coverage. You can also enroll in a Medicare Part D plan if you were only on Original Medicare or Medicare Part A. People who already had a Part D plan can also switch to another Part D plan.
These changes begin to take effect from January 1st the following year.
Medicare Advantage Open Enrollment Period
This runs from January 1 to March 31 each year. During this period, you can switch from one Medicare Advantage Plan to another with a drug plan.
What Is The Part D Coverage Gap AKA "The Donut Hole"?
All Medicare drug plans have a coverage gap or "donut hole". The coverage gap is the 3rd phase of all Medicare drug plan coverage. During this phase you are responsible for paying 25% of the retail cost of your prescriptions. Hence, if you take very expensive name brand medications your monthly out of pocket costs may skyrocket during this phase.
During the initial coverage phase (Phase 2), after your total drug costs (including what your plan has paid and your out-of-pocket payments) have reached a certain amount ($4,660 in 2023) you enter the coverage gap (Phase 3). Not everyone will enter the donut hole. Medicare beneficiaries enrolled in the Extra Help program don't have a coverage gap.
How Do I Get Out Of The Donut Hole?
In all Medicare drug coverage (whether you have it through a part C or D plan), after you reach your OOP threshold ($7,400), you enter catastrophic coverage phase (Phase 4). During this period, you pay significantly lower copays or coinsurance (5%) for your covered drugs for the remainder of the year.
When you’re in the donut hole, certain items count toward your total OOP cost to leave the donut hole. These include:
Your yearly deductible
What you paid during the initial coverage period
OOP costs for generic and brand-name drugs during the coverage gap/donut hole
Discounts on brand-name drugs while you’re in the coverage gap/donut hole, which includes a coverage gap discount plus a manufacturer discount
Amounts paid by others, including family members, most charities, and other persons on your behalf
Amounts paid by State Pharmaceutical Assistance Programs (SPAPs), AIDS Drug Assistance Programs, and the Indian Health Service
Your coinsurance or copayments
Costs that do not help you reach catastrophic coverage include:
Your drug plan monthly premiums
What your plan pays toward drug costs
What you pay for non-covered drugs
The cost of covered drugs from pharmacies outside your plan’s network, and the 75% generic discount.
What Is The Extra Help Program (LIS)?
Extra Help is a federal government program that helps pay for most of your Medicare drug coverage. In other words, it covers some of your out-of-pocket costs for prescription drugs, including premiums, and deductibles, among other costs. Some people with higher incomes get partial Extra Help. Hence, they pay reduced monthly premiums, deductibles, and copayments.
Some pharmacies may still charge you a copay for some prescription drugs. In 2022, the maximum copay is $3.95 for generic drugs and $9.85 for brand-name drugs. If you have partial Extra Help, you'll pay no more than 15% of the drug expenses cost under your plan till you reach the out-of-pocket limit.
Qualification for the Extra Help program is income and asset based. If you qualify for these Medicare Savings Programs, you automatically qualify for Extra Help:
Qualified Medicare Beneficiary (QMB)
Specified Low-Income Medicare Beneficiary (SLMB)
Qualifying Individual (QI)
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