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What Is Medicare Part D?

Published November 9, 2022

When you first sign up for Medicare, you may not take very many medications or consider prescription drug insurance. But, your need for expensive prescription drugs may grow with the passing years. So you may ask, "Does Medicare cover prescriptions?"

As a Medicare beneficiary, you are eligible for an optional prescription drug plan called Medicare Part D, which covers some of your costs.

What Is Medicare Part D?

Part D is one of Medicare's most popular programs, covering more than 49 million beneficiaries under a prescription drug plan. You are eligible for prescription drug coverage as soon as you become eligible for Medicare. You can enroll any time after that, but you may face a lifelong penalty if you go more than 63 days without creditable coverage once you’re eligible for coverage.

If you’d like Medicare coverage to help pay for your outpatient prescription drugs, you can join a private Medicare Part D plan for what's not covered by Medicare's Part A and Part B, which typically covers hospital and medical insurance. Your plan might be a standalone Part D plan (if you have Original Medicare) or it could be built into your plan if you have Medicare Advantage — also known as Medicare Part C with prescription drugs.

You will pay a separate premium for Medicare Part D coverage, offered by private insurance companies that the federal government contracts. Their plans have various premiums, shared costs, deductibles, and lists of covered drugs, often called formularies.

Standalone Part D drug plans have low premiums, and if you get a Medicare Advantage plan with prescription drug coverage, the premium is included with your health coverage. It makes sense to enroll when it becomes available to you to avoid the late penalties if you enroll at a later date. But it’s also important to note that Part D is not an insurance policy!

You can enroll through the Medicare.gov website, where available plans are presented according to where you live, since not all insurers cover all service areas. Alternatively, you can visit OpenMedicare’s website to see plans in your area, or give us a call at (844) 910-2061 to speak to a licensed insurance agent. Your costs will vary by provider and the plan you choose, as well as whether the pharmacy you choose is in-network or not. Each plan lists the brand name and generic drugs it covers. Once enrolled, you’re free to change plans annually during specific periods to meet new circumstances or needs.

Advantages of Medicare Part D

Does Medicare cover prescriptions? Medicare Part D is essential to making your medications affordable, as Original Medicare covers very limited medications for specific situations. With a Part D plan, you will pay significantly less than if you were paying out-of-pocket. You also have a cap on how much you spend on drugs every year, as your costs decrease dramatically once your out-of-pocket expenditures exceed a certain dollar amount.

Even if you take few or no medications regularly, you might ask, "Is Medicare Part D worth it?" Overall, Medicare Part D protects you from unforeseen prescription drug expenses in the future, which could be financially devastating.

Medicare drug plans vary widely in costs and coverage, so you can enroll in a low-premium plan early on and change to greater coverage only when needed. In addition, unlike some insurances, your coverage is not affected by pre-existing conditions, so you aren't penalized for making any changes in the future.

You might wonder if you should switch to Medicare coverage once you’re eligible if you still have employer-based insurance through your spouse's job or your own. From a financial viewpoint, that would depend entirely on your present policy's exact costs and benefits. However, you must enroll in Medicare Part A and Part B to enroll in Part D.

As long as you have creditable coverage — defined as being as good as standard Part D coverage — your delay in enrolling in Medicare Part D will not lead to late-enrollment penalties.

What Does Medicare Part D Cover?

What drugs are covered in Medicare Part D? Medicare prescription plans vary in the specific medications covered and how much you will have to pay. They cover both generic and brand-name drugs, with two types of drugs in every therapeutic category Medicare beneficiaries typically need. In addition, your plan is required to cover all or most drugs in six categories:

  • Anticancer
  • Anticonvulsants
  • Antidepressants
  • Antipsychotics
  • Antiretrovirals (HIV or AIDS treatment)
  • Immunosuppressants

Plans also have to cover adult vaccines not covered by Medicare Part B, such as shingles shots and the Tetanus-Diphtheria-Whooping Cough vaccine. Part B, on the other hand, covers your annual flu shot, pneumococcal and Covid-19 vaccines.

According to the Kaiser Family Foundation, as of 2023, Part D enrollees will pay no more than $35 per month for the insulin products covered on the plan's formulary.

Part D does not cover medications related to weight issues, colds, cosmetic purposes, fertility drugs, hair growth, over-the-counter drugs, sexual or erectile dysfunction, and most vitamins and supplements.

Types of Medicare Part D Plans

Medicare's prescription drug coverage is available in two ways:

  • First, as a standalone Part D drug plan purchased from a private insurer to supplement Original Medicare.
  • Second, as an integral part of most Medicare Advantage plans. You cannot enroll in a standalone Part D plan if your Medicare Advantage HMO or PPO plan does not provide drug coverage; an exception is if your plan is a private fee-for-service (PFFS).

Here are some tips to follow from Medicare.gov when choosing a plan:

  • Your monthly premium has to fit within your budget, but affordable cost-sharing elements — such as Medicare Part D deductibles, coinsurance, and copays — will also be essential when you use the plan. Unfortunately, a low premium doesn't always mean low prescription drug costs.
  • Your premium costs may be lower with a Medicare Advantage plan, although you may find restrictions on your network of providers or higher costs for going out of network.
  • If you take specific medications regularly, find several plans that cover them and compare the prices. If you take generics, some plans charge very little to nothing for them.
  • If you take few or no medications, look for a low-premium, high-deductible plan. Then, if your needs increase, you can always change plans during the next Annual Enrollment Period.
  • If you take several costly drugs, look for plans that offer additional coverage in the "donut hole" coverage gap, which you will surely reach during the year.
  • If you have a preferred pharmacy, add that to your list of filters as you search for your plan options.

Medicare Part D Costs

The cost of Part D plans is made up of monthly premiums, deductibles, copayments, and coinsurance.

Premiums

Premiums are paid in addition to the Medicare Part B monthly premium ($164.90 in 2023). Medicare Advantage plans with drug coverage are frequently available with $0 premiums. Premiums for standalone Part D plans vary considerably, from a low of $1.60 in the Oregon and Washington area to a high of $201.10 in South Carolina. They even vary within a state, such as Florida's range of $8.40 to $170.10. According to the Kaiser Family Foundation, the average premium for a standalone plan in 2022 was $40.

Premiums are also affected by higher incomes, starting at $97,000 for individuals and $194,000 for couples in 2023. The income-related premium surcharge (IRMAA) will range from $12.20 to $76.40 per month in 2023 and will affect both standalone plans and Medicare Advantage.

Deductibles

A deductible is an out-of-pocket amount you must pay before your plan kicks in. These are determined by the plan provider — starting at $0 — but cannot exceed $505 for the year 2023. Plans with lower premiums typically have higher deductibles.

Copayments and Coinsurance

These include your portion of the shared cost of medications, whether as a percentage or as a fixed amount. Covered drugs are priced in tiers where the higher the tier number, the higher the cost. For example, Tier 1 includes preferred generic medications, while Tier 4 (and higher) are specialty high-cost medications. The copayments and coinsurance can vary by tier level as well.

You pay a share of costs until your total drug costs reach $4,660 in 2023. Once in this "coverage gap," you pay 25% of the costs of brand and generic drugs until the total out-of-pocket reaches $7,400, the catastrophic limit in 2023. Drug costs are then minimal for the rest of the year.

Medicare Part D Eligibility

You are eligible for Medicare Part D coverage if you:

  • Are 65 or older and are either entitled to or enrolled in Original Medicare (Part A and Part B) or Medicare Advantage (Part C)
  • Have received Social Security Disability Insurance (SSDI) for over 24 months
  • Have been diagnosed with end-stage renal disease

You may qualify for lower premiums, deductibles, and coinsurance through Medicare's Extra Help program, also called the Part D Low-Income Subsidy. This assistance with out-of-pocket costs is estimated to be worth about $5,100 per year.

Your annual income cannot exceed $20,385 for an individual and $27,465 for a couple, calculated on your income from the previous year. Your resources should also be limited, including the things you own — such as real estate other than your home, bank accounts, stocks, bonds, IRAs, and cash. But, even if your income and resources are higher, you may still get some help. If you do qualify, you don't have to pay the Part D late-enrollment penalty.

If you’re enrolled in Medicaid, Supplemental Security Income (SSI), or one of the Medicare Savings Programs (MSP), you are automatically enrolled in Extra Help.

With full Extra Help benefits, your premium and deductible will be $0, generic drugs will cost up to $4.15, and brand-name drugs $10.35. With partial Extra Help, your premium is based on your income, your deductible is under $104, and you will pay no more than 15% of the cost of covered prescription drugs.

You can apply for Extra Help online at any time at www.ssa.gov/extrahelp or call Social Security at (800) 772-1213.

How to Get Medicare Part D

To sign up for Medicare Part D, use the online Medicare Plan Finder tool to identify possible standalone Part D plans and Medicare Advantage plans with drug coverage in your ZIP code. Then, by entering your existing prescriptions, the tool displays each plan's Medicare star rating, premiums and deductibles, and the estimated total annual cost for your premium and drugs.

You can enroll in Part D by going to the plan's or Medicare's websites. You can also call the company and ask for a paper application or talk to a customer service representative at (800) 633-4227.

"When can I sign up for Medicare Part D?" you ask. As with some other parts of Medicare, you must enroll in Part D during specific windows:

  • Initial Enrollment Period: This is when you first become eligible for Medicare and choose Original Medicare or Medicare Advantage. Then, for 12 months, you have the option to switch from a Medicare Advantage plan with drug coverage to Original Medicare and purchase a standalone Part D plan.
  • Annual Enrollment Period: This window is between October 15 and December 7 every year, when you can change existing Part D and Medicare Advantage plans freely for plans effective January 1.
  • Medicare Advantage Open Enrollment Period: This is a plan-changing period between January 1 and March 31, when you can switch Medicare Advantage plans or revert to Original Medicare and enroll in a standalone Part D plan.
  • Special Enrollment Period: Certain individuals may qualify for this period due to retirement, loss of employer drug coverage, or moving out of your plan's service area, for example. If so, you can change your Medicare plans, too.

OpenMedicare Is Here To Help

Fortunately, you can change your Medicare Part D prescription drug plan each year, so your first decision does not have to meet your needs for the rest of your life. But you still want to make the best decision, and the process can be confusing with all the different features. OpenMedicare makes it easy to find peace of mind knowing you have great prescription drug coverage. Give us a call at (844) 910-2061 to be connected to a licensed insurance agent who can assist you, or visit our website to find Medicare plans in your area!

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