Medicare Part D Prescription Drugs Coverage)

Medicare Part D prescription drug coverage helps beneficiaries pay for covered prescription drugs bought at certain centers, including retail locations and pharmacies. This benefit could help reduce prescription drug costs significantly.

Where to Get A Medicare Part D Prescription Drug Plan

Prescription drug coverage is available to every Medicare beneficiary. But, if you don’t choose a Medicare Part D plan when you are eligible, and you don’t join a Medicare Part C plan (Medicare Advantage) that includes prescription drug coverage, you could pay a late enrollment penalty if you try to join later. Exceptions exist if you have creditable prescription drug coverage or if you receive Extra Help.

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Medicare Advantage Part D Prescription Drug Coverage

Medicare Part D adds prescription drug coverage to your Medicare Parts A and B, some Medicare Cost Plans, some Medicare Private Fee-for-Service Plans, and Medicare Medical Savings Account Plans. They are offered by insurance companies and other Medicare-approved private insurers. The cost of each plan depends on the provider and your location. The Medicare Advantage and Prescription Drug Plan Annual Enrollment Period (AEP) takes place from October 15 to December 7 each year. During this period, you can get a prescription drug plan or a Medicare Part C plan.
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If you are about to turn 65 or otherwise become eligible for Medicare outside of the AEP, you have seven months to enroll in the following year’s plan in order to avoid a Late Enrollment Penalty.

*Those seven months consist of:

• The three months before your 65th birthday
• The month of your birthday
• The three months after your birthday

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Coverage begins on the first day of your birthday month if you enroll during the three months before your birthday. If you join during or after your birthday month, your coverage begins on the first day of the month after you enroll.

Here is an example:

• If you join in May, June, or July, your Medicare Part D coverage begins on August 1
• If you join in August, your coverage starts on September 1
• If you join in September, your coverage starts on October 1
• You can join up to and including the month of November

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Here are the important dates for enrolling in a Medicare Part D Prescription Drug Plan in a given year:

• October 15 – December 7: This is the (AEP) Annual Enrollment Period, where you can make changes to your Medicare prescription drug coverage for the next year.
• January 1 – December 31: You can enroll in any Medicare Prescription Drug Plan during the Initial Enrollment Period listed above. *

When you join, you’ll give your Medicare number and the dates when your Part A and Part B coverage started. This information is on your Medicare Card.

Part D Prescription Drug Plan Late Enrollment Penalty

If you go 63 consecutive days, or more, without prescription drug coverage after your Initial Enrollment Period ends, and don’t have a Medicare Prescription Drug Plan, a Medicare Advantage Plan (that offers prescription drug coverage), another Medicare health plan that offers prescription drug coverage, or creditable prescription drug coverage, you may face a penalty should you choose to enroll later. The penalty depends on the length of time you went without the coverage.

At present, Medicare multiplies 1% of a “national base beneficiary premium figure” ($32.74 in 2020) by the number of months you went without coverage. This penalty is rounded to the nearest $0.10 and added to your monthly Part D premium.

For example, if your Initial Enrollment Period ended on February 22, 2017, but you didn’t join a plan until October 14, 2018 (which may mean your effective coverage began on November 1), you would be 19 months late. This would lead to the following penalty (based on 2020 figures):

• $0.3274 x 19 = $6.22, which would round to $6.20

As a result, you would have to pay an extra $6.20 each month on top of your Part D premium.

Cost of Coverage for Medicare Part D Prescription Plans Vary

Most Medicare Part D plans charge a monthly fee, or premium, that varies according to the plan you choose. The charges can be complex, and you’re likely to pay different prices for prescription drugs depending on their “tier” (more on that later). You may have your monthly premium deducted from your monthly Social Security payment. To do this, contact your prescription drug plan.

Another cost is your annual deductible. The annual deductible is the amount you pay for your prescriptions before Medicare Part D coverage starts to pay its share of your covered prescription drugs.

Medicare Part D Prescription Drug Plans Co-pay/Co-insurance

This is what you pay for each prescription after the deductible, when applicable. A co-payment is the set amount you pay for all prescription drugs in a specific tier. Different tiers correspond to different types of prescription drugs, and how much your insurance will cover each type. For example, you may pay less for a generic prescription drug than for a brand one.

Co-insurance works similarly, but instead of paying a fixed fee, you’ll pay a percentage of the prescription drug’s cost. For instance, you may pay 25 percent co-insurance on a $100 prescription drug; this means you would pay $25 towards the cost while your plan covers the rest.

Medicare Part D Prescription Drug Coverage Gap/ Donut Hole

Sometimes nicknamed the “donut hole,” the Medicare coverage gap represents a temporary limit on what your plan will cover for prescription drugs. In order to reach the coverage gap, you and your prescription drug plan need to spend a certain amount on covered prescription drugs in a  calendar year. This dollar amount changes from year to year.  Once you’re in the coverage gap, you will only pay 25 percent of the plan’s cost for covered brand-name and generic prescription drugs.

Once you’re in the coverage gap, you will only pay 25 percent of the plan’s cost for covered brand-name and generic prescription drugs.

Medicare Part D Prescription Drug Plan Catastrophic Coverage

The out-of-pocket spending threshold for policyholders is the maximum amount you will spend each year. After you reach this figure, you’re out of the coverage gap and automatically receive catastrophic coverage. This 

reduces the amount you have to pay out-of-pocket for covered prescription drugs. 

Again, it is important to remember that this coverage only begins after the policyholder has spent the above amount on covered drugs.  

Prescription Drugs Covered by a Medicare Part D Drug Plan

Each individual Medicare Part D plan has its own covered prescription drug list, also known as a Prescription Drug Formulary. It is common for these plans to classify prescription drugs by tiers, which also means they have a different cost. Prescription drugs in lower tiers generally cost less than prescription drugs found in higher tiers.

Your plan may alter its formulary during the year, but only with Medicare approval. If these changes include a prescription drug you are taking, your plan has two options. One, it either must provide you with written notice at least 60 days before the change takes place. Alternatively, it can give you a 60-day supply when you request a refill as well as provide written notice of the change. See below for an example of levels of tiers and the general cost associated with them. Please keep in mind, each plans’ tiers may structure differently. Check with your plan to learn more about its specific tier structure.

• Tier 1/Lower co-payment: Most generic prescription drugs
• Tier 2/Medium co-payment: Preferred, brand-name prescription drugs
• Tier 3/Higher co-payment: Non-preferred, brand name prescription drugs
• Specialty tier/Highest co-payment or co-insurance: Unique, high-cost prescription drugs

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Medicare prescription drug plans may create their own formularies and don’t have to cover every Part D prescription drug. However, they may not create a “discriminatory” formulary that excludes specific prescription drugs in order to discourage certain beneficiaries from enrolling. If your plan won’t cover a prescription drug that you need, you can ask for a written explanation from your Medicare prescription drug plan. You can also ask for an exception to the formulary…drug list. Formularies or the drug list generally must include at least two prescription drugs in each category, and cover almost all of the prescription drugs in these protected classes of prescription drugs:

• HIV
• AIDS
• Antidepressant
• Antipsychotic
• Anticancer
• Immunosuppressant
• Anticonvulsant

Medicare Part D must cover all commercially available vaccines, when medically necessary to prevent illness, except for vaccines covered under Medicare Part B.

What you need to know about Medicare Prescription Drug Part D

Medicare Part D offers prescription drug coverage to anyone who is enrolled in Medicare. You can opt out of receiving this benefit, however if you choose not to sign up when you’re first eligible you will most likely pay a late enrollment penalty.

A few things about Medicare Part D Prescription Drug Coverage:

• Medicare prescription drug coverage is available only through private health insurers that are approved by Medicare.
• You can purchase a stand-alone plan, or your prescription drug coverage can be bundled with your Medicare Advantage plan (Part C), but you must have Medicare Part A and Medicare Part B to join a Medicare Advantage plan.
• Prices and coverage may vary from plan to plan, so it will most likely be worth your while to shop around.
• If you don’t sign up for prescription drug coverage (or have some other form of creditable prescription drug coverage) as soon as you’re eligible, you may be charged a late enrollment penalty.

When to Enroll in a Medicare Part D Prescription Drug Plan

• During your (IEP) Initial Enrollment Period: Occurs when you turn 65 (you may enroll starting 3 months before your 65th birthday, the month of your birthday, and up to 3 months after your birth month).
• When you’re under 65 and disabled: Your Medicare coverage begins 24 months after you receive Social Security or Railroad Retirement Board disability benefits. You can sign up for Medicare Part D starting three months before your 25th month of getting these disability benefits, during the 25th month, or three months after the 25th month you received these benefits.
• If you enroll in Part B (whether or not you have Part A) during the General Enrollment Period from January 1 – March 31, you can sign up for Medicare Part D between April 1 and June 30.

You may owe a late enrollment penalty if you go without a Medicare Prescription Drug Plan for any continuous period of 63 days or more after the Initial Enrollment Period is over. You will not have to pay the late enrollment penalty if you have other creditable prescription drug coverage or you get “Extra Help.”

The penalty itself is calculated by multiplying 1% of the national base beneficiary premium by the number of full months you were eligible for coverage but didn’t enroll. Learn more about the Part D late enrollment penalty.

Two Ways to Get Coverage Part “D” Prescription Drug Coverage

While Part D prescription drug coverage is only available through private health insurers, there are two ways you can receive your coverage:

• A stand-alone Medicare Prescription Drug Plan
• A Medicare Advantage (Part C) plan with prescription drug coverage included

If you have Medicare Parts A and B and don’t want to switch to a Medicare Advantage plan, then you’ll need to enroll in a stand-alone plan to avoid a late enrollment penalty (unless you have creditable coverage or are receiving extra help). While many Medicare Advantage plans offer prescription drug coverage as part of the plan, there are some that don’t.

Things to Consider when Choosing your Prescription Drug Plan

While price is always important, it’s not the only thing to consider when shopping for a prescription drug plan. You’ll want to keep these other factors in mind when making a decision:

Medicare Prescription Drug List /Formulary Drug List
Each Medicare Prescription Drug Plan has its own formulary, which is a list of the covered prescription drugs that the plan covers. If one or more of the prescription medications you take is not on a plan’s formulary, you may want to look elsewhere or talk to your doctor about alternative medications.

Medicare Part D Plans and Network of Pharmacies
Most plans have a network of pharmacies they want you to use in order to get better prices. If you go to a pharmacy that’s not in your plan’s network, you may have to pay more for your prescriptions.

Medicare Part D Mail Order Choices and Options
Some prescription drug plans can offer you a lower price if you get your medicine through a mail-order pharmacy. The plan may also require that you get a three-month supply at one time. In most cases, this isn’t a problem, but you may want to check with your doctor to make sure mail order is right for your medicines.

A Word about the Medicare Part D Coverage Gap / Donut Hole

During your Medicare Prescription Drug Plan research, you’ve probably heard about the donut hole or coverage gap. The donut hole is a gap in coverage that occurs once you and your plan have met a pre-set spending limit for prescription drugs. When that limit is reached…technically you’re in the coverage gap and must pay for the cost of your prescription drugs.  Once you’re in the coverage gap, you pay 25 percent of the cost for both brand-name and generic prescription drugs. 

You remain in the donut hole until your out-of-pocket costs reach the set limit for that year. Once that happens, you enter catastrophic coverage and leave the coverage gap. From there, you pay only a small co-pay or co-insurance for the rest of the year. Keep in mind that you may never reach the donut hole. Most people don’t.  What’s more, there are discounts available on both brand and generic prescription drugs for those who do reach the donut hole.

Keep in mind that you may never reach the donut hole. Most people don’t.  What’s more, there are discounts available on both brand and generic prescription drugs for those who do reach the donut hole.

When You’re Ready to Enroll in the Plan of Your Choice

If you’re eligible for Medicare Part D and ready to enroll, there are plenty of resources available to help you. You can also find out if you qualify for extra help when paying for your prescription drugs. Ready to get started?