Part D - Prescription Drug Plans
Medicare Part D Plans are offered through private insurance companies that are contracted by Medicare, so costs and availability may differ between carriers and by location. Part D Plans include stand-alone Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug Plans (MAPDs).
It is recommended that beneficiaries enroll in a Part D Plan when they are first eligible to avoid any late enrollment penalties. Beneficiaries who have employer health insurance with creditable drug coverage may elect to delay enrollment in a Part D Plan without a late enrollment penalty.
Medicare Part D Coverage
Each Medicare Prescription Drug Plan has its own list of covered drugs (called a formulary). Many Medicare drug plans place drugs into different "tiers" on their formularies. These formularies include coverage of certain generic and brand-name drugs. Drugs in each tier have a different cost. A drug in a lower tier will generally cost you less than a drug in a higher tier. In some cases, if your drug is on a higher tier and your prescriber thinks you need that drug instead of a similar drug on a lower tier, you or your prescriber can ask your plan for an exception to get a lower copay.
A Medicare drug plan can make some changes to its formulary during the year within guidelines set by Medicare. If the change involves a drug you're currently taking, you plan must do one of the following:
- Provide written notice to you at least 60 days prior to the date the change becomes effective
- At the time you request a refill, provide written notice of the change and a 60-day supply of the drug
under the same plan rules as before the change.
All plans must cover certain categories of drugs, but which drugs are covered in each category may differ between insurance companies and by plan. All plans must cover at least two drugs in each drug category and most drugs in the anti-psychotics, anti-depressants, immunosuppressants, cancer, and HIV/AIDS categories.
Keep in mind that if you fill a prescription that is not in your plan's formulary, then you may be responsible for the full retail cost of the drug.
2 ways to get drug coverage
- Medicare Prescription Drug Plan (Part D). These plans (sometimes called "PDPs") add drug coverage to
Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) Plans,
and Medicare Medical Savings Account Plans (MSAs).
- Medicare Advantage Plan (Part C) or other Medicare health plan that offers Medicare prescription drug
coverage. You get all of your Medicare Part A and Part B coverage, and prescription drug coverage
(Part D) through these plans. Medicare Advantage Plans with prescription drug coverage are
sometimes called "MAPDs."
Medicare Part D Costs
Because plans have the opportunity to set their own monthly premiums, the costs associated with Part D plans may differ by insurance company. In general, each plan requires payment of a monthly premium in addition to your Part B monthly premium. A small number of individuals may be responsible for a higher monthly premium based on income.
Other costs may include the following:
- Yearly deductible: the amount that you must pay before your plan coverage begins. The government
sets a maximum deductible that may change each year. Some plans have no deductible.
- Copays and coinsurance: you are responsible for paying these amounts for your medications after you
have met your plan deductible (if required).
- Coverage Gap, aka the "Donut Hole": After you and your plan have spent a certain amount on
medications, you may enter the coverage gap, in which you pay all costs for prescription drugs out-of-
pocket. There are discounts on the costs of brand name and generic drugs in the coverage gap. Once
you have paid up to a certain amount out-of-pocket, your plan begins catastrophic coverage, during
which you pay only a small copay or coinsurance while your plan covers the rest of the costs.
*True Out-of-Pocket means the total cost of your drugs (the deductible and copays you pay, plus the amount the plan pays, plus the amount of the discounts you receive while in the “Donut Hole”)
Part D Enrollment and Eligibility
To be eligible to enroll in Medicare Part D, you must be eligible for and enrolled in Original Medicare (Part A and Part B), and you must also reside in the county of the plan that you wish to join.
If you qualify for a Medicare Part D plan, you have the option of enrolling during a few different enrollment periods, including your Initial Election Period, also known as the Initial Enrollment Period or IEP, and the Annual Election Period, also know as the Annual Enrollment Period or AEP.
It is recommended that those without creditable drug coverage enroll in a Part D drug plan during the seven months of their Initial Enrollment Period, which begins three months before the month that they first become eligible for Medicare. Enrolling during this time ensures that you will not face a late enrollment penalty.
Those that wish to enroll in or switch Part D plans may do so during the Annual Enrollment Period, which lasts from October 15th to December 7th of each year.
Creditable Coverage and Penalties
The types of insurance listed below are all considered creditable prescription drug coverage. If you have one of these types of insurance, in most cases, it will be to your advantage to keep your current coverage:
- Federal Employee Health Benefits Program (FEHB)
- Veterans' Benefits - Veterans Affairs Program (VA)
- TRICARE (military health benefits)
- Indian Health Services
The late enrollment penalty is an amount added to your Medicare Part D monthly premium. You may owe a late enrollment penalty if you go without Part D or creditable prescription drug coverage for any continuous period of 63 days or more after your Initial Enrollment Period is over.
The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($33.37 in 2022) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $0.10 and added to your monthly Part D premium. The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.
Mrs. Martin is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2011. She doesn't have prescription drug coverage from any other source. She didn't join Medicare Part D by May 31, 2011, and instead joined during the Open Enrollment Period that ended December 7, 2013. Her drug coverage was effective January 1, 2014.
Since Mrs. Martin was without creditable prescription drug coverage from June 2011 - December 2013, she will incur a penalty when her drug coverage becomes effective on January 1, 2014 of 31% of the national base beneficiary premium for 2014, which was $32.42 (31% x $32.42 = $10.10). Mrs. Martin's monthly prescription drug premium will be increased by $10.10 each month in 2014. Additionally, her penalty amount may increase in future years subject to the increase of the national base beneficiary premium.
If you would like to discuss your existing Medicare Prescription Drug Plan, or if you are newly eligible for Medicare and would like to enroll in a Medicare Prescription Drug Plan, please refer to the “Contact Us” section of our website. We welcome the opportunity to sit down with you to discuss your Medicare insurance needs.