What is Medicare Part D prescription drug coverage?
The Medicare program, which is a federal program that helps senior citizens and certain other individuals pay for health care, is divided into four parts. Part A covers hospital and inpatient services and Part B covers doctor visits and other outpatient services. Together, Parts A and B are referred to as Original Medicare. Part C, also known as Medicare Advantage, makes Medicare-covered services available through private health plans, such as HMOs, PPOs, and private fee-for-service plans (PFFSs). Part D prescription drug coverage is offered by private companies through stand-alone plans (for members who have Original Medicare) and through HMOs, PPOs, and PFFSs (for beneficiaries who have Medicare Advantage). Anyone who has Original Medicare or Medicare Advantage is eligible to enroll in Part D. Enrollment in Part D is voluntary.
Call (800) MEDICARE or go to Medicare's website at medicare.gov for more information.
What is covered under Part D?
Private companies that offer Part D coverage are allowed to design their own benefit plans, as long as the overall value of the plan is at least as good as the basic plan outlined in the 2003 Medicare Act. So, different plans offer different lists of medicines (called a formulary), and different costs. Beneficiaries should compare the different drug plans available in their area to find the one that best suits their needs.
The Medicare website provides an online tool to help you compare drug plans.
The basic plan
The basic plan generally meets the following criteria:
- The annual deductible can't be more than $505 (in 2023)
- The plan must cover at least two drugs in each drug class
- The plan must cover substantially all drugs in these six categories: antidepressants, antipsychotics, anticonvulsants, antiretrovirals (AIDS treatments), anticancer drugs, and immunosuppressants
- Members must be able to seek an exception if a drug is medically necessary but not covered under the plan
- Plans must have a network of pharmacies that provide convenient access
- Lists of covered drugs and pharmacy networks must be readily available to members
- Plans must work with nursing homes
- Plans must help transition a member's current drug coverage
- Plans must offer catastrophic coverage that is at least as good as the coverage outlined in the 2003 Medicare Act
As of 2023, Part D plans will now offer all covered insulin products at a monthly cost of $35 or less. They will also fully cover recommended vaccines (no copays, deductibles, or coinsurance will apply under Part D).
What is not covered
Some drugs are generally not covered by Medicare Part D, including:
- Over-the-counter drugs
- Most prescription vitamins and minerals
- Certain anti-anxiety and anti-seizure drugs
- Fertility drugs
- Drugs for weight loss or gain, and anorexia
- Cosmetic and hair growth drugs
- Drugs that treat symptoms of the common cold (e.g., coughs, congestion)
- Drugs covered under Part A or Part B
How much will it cost?
What you'll pay for Medicare drug coverage depends on which plan you choose. But here's a look at how the cost of Medicare drug coverage for a standard plan is generally structured. All figures are for 2023.
A monthly premium. Most plans charge a monthly premium. Premiums vary considerably, but average $31.50. (Source: Centers for Medicare & Medicaid Services.) This is in addition to the premium you pay for Medicare Part B. You can have the premium deducted from your Social Security check, or you can pay your Medicare drug plan company directly. If your modified adjusted gross income is above a certain amount, you may also pay a Part D income-related monthly adjustment amount (IRMAA). The Social Security Administration will contact you if you have to pay Part D-IRMAA.
Annual deductible. Plans may require you to satisfy an annual deductible of up to $505. Deductibles vary widely, so make sure you compare deductibles when choosing a plan.
Initial coverage phase. Once you've satisfied the annual deductible, if any, you'll generally need to pay 25% of your prescription costs and your Medicare drug plan will pay 75% of your costs until they total $4,660 (including the deductible).
Coverage gap phase. After the initial coverage phase, there's a coverage gap (also called the "donut hole"). In this phase, you'll pay no more than 25% of costs for both brand-name and generic drugs.
Catastrophic coverage phase. Once you've spent $7,400 out-of-pocket you enter the "catastrophic" phase.* Your Medicare drug plan will then generally cover at least 95% of any further prescription costs. For the rest of the year, you'll pay either a coinsurance amount (e.g., 5% of the prescription cost) or a small copayment for each prescription, whichever is greater.
Again, keep in mind that all figures are for 2023 only, and costs and limits vary among plans. Not all plans will work exactly this way. For example, some plans may charge a copayment that is smaller than 25% of prescription costs in the initial coverage period or offer even lower costs during the coverage gap.
*Costs that help you reach catastrophic coverage for the year include your deductible, what you paid during the initial coverage period, and what you paid in the coverage gap. The discount you get on brand-name drugs also counts — you get credit for almost the full price of brand-name drugs purchased in the coverage gap, because you get credit for both the discounted price you actually paid (25% of the cost) and what the manufacturer paid to discount the price for you (70% of the cost).
Extra help with Medicare drug plan costs is available to people who have limited income and resources. Medicare will pay all or most of the drug plan costs of those who qualify for help.
Enrolling in Part D
Medicare prescription drug coverage is available in two ways:
- You can join or remain in a Medicare Advantage plan that provides all your Medicare benefits, including Part D benefits
- You can enroll in a stand-alone plan, which will cover only Part D while you continue to get your other services through Original Medicare
If you are in an HMO or PPO, you must receive drug coverage through that plan.
If you are currently enrolled in Medicare, you can enroll in Part D (or make changes in your Part D coverage) from October 15 though December 7 of each year (the annual election period). If you're new to Medicare, you have seven months to enroll in a drug plan (three months before, the month of, and three months after becoming eligible for Medicare). If you qualify for special (extra) help, you can enroll in a drug plan at anytime during the year.
If the initial enrollment period is missed, you will be able to enroll (or disenroll, or change drug plans) during the annual election period. However, a premium penalty will generally apply unless the reason you didn't join sooner was because you already had creditable prescription drug coverage that was at least as good as the coverage available through Medicare.
You can join or change plans during a special enrollment period (SEP) in certain situations, including (but not limited to):
- Moving out of your plan's service area
- Losing drug coverage provided by a non-employer through no fault of your own
- Losing employer-provided drug coverage for any reason
- Losing full Medicaid coverage
- Entering, residing in, or leaving a long-term care facility