What is Medicare Part D?

Prescriptions can be expensive, and that’s stressful if you’re having trouble affording them. A health insurance plan that covers some of your medication costs can help make staying healthy a little easier. Medicare Part D prescription drug benefits can help.

What is Medicare Part D?

Medicare Part D is provided by the federal government and is an optional part of Medicare that helps cover prescription drug costs. Part D is offered through private insurance companies that many people on Medicare choose to help offset drug costs. You must be eligible for Medicare to get Medicare Part D coverage.

Medicare beneficiaries can enroll in a stand-alone Medicare Part D prescription Drug Plan (PDP) or a Medicare Advantage Prescription Drug plan (MAPD) to get prescription drug coverage. Note: Medicare Advantage would change the way a consumer receives Parts A and B, too.

RELATED: Medicare Part D vs. Medicare Advantage

Not all Medicare Part D drug plans have a deductible, but for those that do have a deductible, the beneficiary must meet the deductible before the plan starts covering any medication costs. Medications that the insurance company covers can be purchased for a copay or coinsurance after the deductible is met. The insurance company covers the remaining costs.

Coverage

The prescription drugs covered by Medicare Part D plans will vary based on what each individual insurance carrier covers.

A Medicare Part D plan generally covers at least two drugs from every drug category. Plans are also required to cover almost every drug from the following classes:

• Antipsychotics: These drugs are prescribed to help manage psychosis. Examples of commonly prescribed antipsychotics include Haldol (haloperidol) and Risperdal (risperidone).
• Antidepressants: These drugs help treat depressive and anxiety disorders for many people. Effexor XR (venlafaxine) and Prozac (fluoxetine) are two commonly prescribed antidepressants.
• Anticonvulsants: This group of drugs consisting of pharmacological agents helps those who experience epileptic seizures. Examples of anticonvulsants that may be covered by a Medicare Part D plan include Keppra (levetiracetam) and Lamictal (lamotrigine).
• Immunosuppressants: These drugs reduce the strength of the body’s immune system, which is sometimes required for organ transplants or to treat autoimmune diseases. Prednisone medications, like Deltasone and Orasone, are examples of commonly prescribed immunosuppressants.
• Cancer drugs: Medicare prescription drug coverage does include some cancer drugs. It’s important to talk with your healthcare provider and insurance carrier to make sure the drug you need is covered before enrolling in a prescription drug benefit. Examples of commonly prescribed cancer drugs include Avastin (bevacizumab) and Revlimid (lenalidomide).
• HIV/AIDS drugs: A Medicare Part D plan will cover some prescription medications for HIV/AIDS. Some examples of these types of drugs include Truvada (emtricitabine-tenofovir), Norvir (ritonavir), and Isentress (raltegravir).

It is more likely for generic drugs to be covered by Medicare Part D; however, brand-name drugs without a generic alternative may also be covered by Medicare Part D. 

Drugs are placed into tiers by Medicare Part D plans, and costs will vary by tier. For example, brand-name drugs may be placed into higher tiers that have a higher copay or coinsurance.

One thing to know about Medicare Part D costs is that it doesn’t cover over-the-counter medications, prescription vitamins, and certain other medications. Talking with a healthcare provider and reviewing your plan options annually is the best way to determine if your Medicare Part D plan is the right plan for you based on your individual medical needs.

Cost

Every Part D plan has its own premium, deductible, and copays/coinsurance based on the plan’s formulary. 

Beneficiaries may pay a monthly premium to their insurance carrier. The monthly premium for those with Medicare Part D varies depending on the plan. The national monthly average for 2024 is $55 per month. People with higher incomes may pay higher costs for their Part D premium. You can choose to have the costs of your Part D premium automatically deducted from your Social Security check, but it’s almost always better to pay the plan directly.

If the insurance company requires a deductible, the beneficiary will pay full price for every covered drug until the deductible amount is met. There are limits to how much a deductible will be. The limit for 2024 cannot be more than $545. Not all Part D plans have a deductible.

After the deductible is met, the beneficiary will pay a copay or coinsurance for every covered prescription. Copay amounts and coinsurance rates vary by plan. This stage is called the initial coverage period.

One of the problems affecting people using the Medicare program is something called the coverage gap, or “donut hole.” The coverage gap is reached when total drug costs paid by the consumer and the plan reach a certain limit. The limit in 2024 is $5,030. Once the limit is reached, the beneficiary will pay 25% of their medication costs.

Catastrophic coverage is the final stage of Medicare Part D coverage. It’s reached after the beneficiary alone pays $8,000 in total out-of-pocket costs. After the beneficiary spends $8,000, they’ll pay nothing for their covered medications through the end of the year.

How to save: People on Medicaid or those who qualify for Extra Help (a low-income subsidy) may pay significantly lower costs and have cost-sharing under Part D. If you require insulin, insulin now costs $35 or less per month with a Part D plan. Medigaps, or Medicare supplement insurance, may also help cover some of these costs.

Eligibility

If you’re 65 years of age or older, you qualify for Medicare coverage. 

It is also available to younger people who have disabilities and those who have amyotrophic lateral sclerosis (ALS) or End-Stage Renal Disease and are on dialysis.

Everyone eligible for Medicare is also eligible for Medicare Part D. However, you’ll need to be enrolled in either Part A and/or Part B to receive Medicare Part D services. 

Enrollment

It’s easy to compare plan options on medicare.gov if you’re interested in signing up for a Medicare prescription drug plan. Call 1-800-Medicare to speak to a counselor if you need assistance.

Sometimes, individuals may be automatically enrolled in Medicare, and other times, you’ll need to sign up yourself. 

The Initial Enrollment Period for those new to Medicare and who are turning 65 years old includes the three months before, the month of, and the three months following their birthday. 

The annual Open Enrollment Period runs from Oct. 15 to Dec. 7. You can switch plans to one that better suits your needs during open enrollment. 

Enrollees with Medicare Advantage plans may be able to switch plans during the Medicare Advantage Open Enrollment Period, which is from Jan. 1 to Mar. 31.

If you don’t enroll within these timeframes, you may pay a late enrollment penalty unless you qualify for Extra Help. It’s a good idea to mark the deadlines on your calendar and visit medicare.gov to see if you qualify for a Special Enrollment Period.

How to choose the best Medicare Part D plan

The best Medicare Part D plan will vary between each enrollee and their specific needs. 

“It’s important to consider what maintenance medications you’re taking regularly and where you like to fill your prescriptions since a plan’s preferred pharmacy will generally offer you the best price,” said Kate Ashford, Medicare specialist at NerdWallet. “Medicare’s plan comparison tool allows you to input your drugs and pharmacies so you can do some comparisons on plans in your area. A surprising number of people don’t do this, but choosing the right drug plan can save you a lot of money if you take regular prescriptions.” 

Although we cannot attribute any plan to being the “best,” Medicare consumers should consider several factors when choosing a plan, such as: 

• Which plan covers the majority (if not all) of your prescriptions?
• Are there any restrictions, such as step therapy and prior authorization? 
• If you take a brand-name drug that is not covered, can you switch to a generic, or do you qualify for an exception?
• Do you want to avoid limited provider networks for your health (non-drug) coverage? A stand-alone Part D plan with Original Medicare may be preferable to a Medicare Advantage plan with drug coverage.
• Do you want or need additional healthcare services that Original Medicare does not provide? A Part C plan that includes drug coverage may be better for you than Original Medicare with a standalone Part D plan.
• Are you not interested in a prescription drug plan at this time? If not, you may want to still consider ensuring you have creditable drug coverage while you are eligible for Medicare. Creditable drug coverage is a prescription drug plan that’s expected to pay as much or more than the standard Medicare Part D plan. If you do not sign up for Part D during initial enrollment and you do not have creditable drug coverage, you may have to pay a late enrollment penalty if you choose to enroll in Part D later. 

The best-rated plans will vary from state to state, so use the Medicare Plan Finder tool provided by the Centers for Medicare & Medicaid Services and put in your specific location to see the ratings of the plans available to you.