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What part of Medicare covers prescriptions?

Medicare prescription drug plans include Part C (Medicare Advantage) and Part D
Lindsay Malzone writer headshot
By | Updated on Apr. 7, 2024 Medically reviewed by Scott Dershowitz, LMSW, CMC

About 66% of adults in the United States take prescription drugs. The affordability of these medications is a common concern, as the average American spends more than $1,400 per year on medications. Fortunately, people in this age group are eligible for Medicare coverage of prescription drugs. According to a Medicare survey by SingleCare, 28% of respondents did not know that Medicare offers prescription drug coverage. Learn how to join the 50.5 million people receiving Medicare prescription drug plans (PDPs).

What are my options for Medicare prescription drug coverage? 

When enrolling in Medicare, many beneficiaries don’t realize prescription drugs aren’t included in Medicare Part A or Medicare Part B. To receive coverage for prescription medications, you must choose between a Part C Medicare Advantage plan that includes a prescription drug benefit or a stand-alone prescription drug plan under Medicare Part D.

RELATED: Medicare Part D vs. Medicare Advantage

Private insurance companies like Blue Cross are contracted with the Medicare program to administer Part C and Part D plans.

Part C

Medicare Advantage plans combine the benefits from Original Medicare Parts A and B into one privately-administered plan. Not all Medicare Advantage programs include a prescription drug benefit. However, the majority do. Eligibility for a Medicare Part C plan requires you to be enrolled in Medicare Parts A and B and live in the plan’s service area.

Part C Medicare Advantage plans are most commonly offered as HMO or PPO plan options. You can expect similar prescription coverage from Medicare Advantage plans as a stand-alone Part D plan.

Part D

Medicare Part D is optional prescription drug coverage under Medicare. To enroll in Part D coverage, you must be eligible for Medicare Part A or enrolled in Medicare Part B. 

RELATED: Compare Medicare Part D plans

What do Medicare drug plans cover? 

Each Medicare Part D or Advantage plan has a formulary or list of covered drugs. Part D plans aren’t required to cover all prescriptions, but they must cover a certain number of drugs in each drug category. Before enrolling in a plan, review the formulary and ensure your prescriptions are covered and with as few restrictions as possible. PDP coverage breaks the prescriptions down into coverage tiers. These tiers outline the copays and costs and are broken into generic and brand-name medications.

Most Medicare drug plans consist of five drug tiers:

  • Tier 1: Preferred generics
  • Tier 2: Non-preferred generics
  • Tier 3: Preferred brands
  • Tier 4: Non-preferred brands
  • Tier 5: Specialty drugs

Some plans, such as Special Needs Plans for chronic conditions, may offer an additional drug tier. Tier 6 is for prescription drugs to help with specific health issues. Each drug tier will outline the cost-sharing for prescription medications. 

Medicare drug plans cover items such as:

  • Prescription medications listed in the plan’s formulary
  • Vaccines not covered by Medicare Part B

What’s not covered

Medicare prescription drug plans only cover medications filled at retail or mail-order pharmacies. Some items aren’t covered by Medicare prescription drug coverage.

Eligibility

To be eligible for a Medicare drug plan, you must be 65 or older, you’ve collected Social Security Disability Insurance for at least 24 months, you’ve been diagnosed with End-Stage Renal Disease (ESRD) and are on dialysis, or you’ve been diagnosed with amyotrophic lateral sclerosis (ALS or Lou Gehrig’s disease). 

Not everyone will need to enroll in a Medicare drug plan. Some beneficiaries have current creditable drug coverage, which is a prescription drug plan that is expected to pay as much or more than the standard Medicare Part D plan, such as through a retirement health plan, Tricare, or Veterans Affairs coverage. If you don’t enroll in Medicare prescription drug coverage or have creditable coverage when you’re first eligible for Medicare, you may be subject to a late enrollment penalty.

The late enrollment penalty will compound monthly for each month without coverage and never goes away. The only way to remove a Part D penalty is if you qualify for state or federal assistance programs such as Extra Help, Medicare Savings Program, or Medicaid or if you were provided incorrect information from your current drug coverage prior to enrolling in Part D. Also if your premium penalty applied to a person who is younger than 65, the penalty goes away at age 65.

How much does a Medicare prescription drug plan cost? 

Regardless of whether your drug coverage is through a Medicare Advantage Plan or a stand-alone PDP, there will be costs associated. Part D drug plans typically have a monthly premium and/or deductible, as do some Medicare Advantage plans.

The 2024 base premium for Part D prescription drug coverage is $34.70, and the average monthly premium for a Medicare Advantage plan is $18.50.

Medicare prescription drug plans consist of four coverage phases outlined by the Centers for Medicare & Medicaid Services (CMS). The 2024 costs of prescription drug coverage phases include:

  • Deductible phase: Up to $545
  • Initial coverage phase: After you meet your deductible, your plan will pay some costs of your medications, and you will pay a copay or coinsurance. In 2024, the initial coverage phase ends when you and your plan have accumulated $5,030 in total drug costs. 
  • Coverage gap phase (also known as the “donut hole”): Once you and your plan have accumulated $5,030 in total drug costs, you will pay 25% coinsurance of the cost of your medications. 
  • Catastrophic coverage phase: Once you have spent $8,000 in out-of-pocket costs (not including your plan premium) for covered drugs, you will have no cost-sharing for your medications.

You can find an example of the coverage phases here.

Other ways to save on prescription drugs with Medicare

With the costs of prescriptions rising, everyone is looking for ways to save money on their prescription drugs. Those with a low income can apply to see if they can qualify for the low-income subsidy or Extra Help program. 

If that doesn’t work, check with your SHIP and see if there’s a State Pharmaceutical Assistance Program (SPAP).

Another way to get financial assistance is to use SingleCare’s free discount prescription card. This card will give you instant savings on brand-name and generic drugs of up to 80%. Note: Using a SingleCare coupon on your prescription instead of Medicare, your out-of-pocket costs will not apply to your Medicare deductible.

How to enroll

You can call 1-800-Medicare, use your State Health Insurance Assistance Program (SHIP), or another local nonprofit to help you navigate the Part D enrollment process and ensure your medications are covered properly.

Some items to consider when comparing plans are:

  • Is my pharmacy in the network? If so, is it preferred or standard?
  • Are all my current prescriptions covered?
  • Which tiers do they fall under?
  • How much is the premium?
  • Will I reach the coverage gap phase?
  • What’s the projected annual cost of my prescriptions and premium combined?

The steps to enroll in Medicare prescription drug coverage include:

  1. Decide on a Medicare Advantage plan or Part D plan. You can review the plans and enroll using Medicare.gov’s plan finder or call 1-800-Medicare.
  2. Check the plan’s formulary
  3. Compare the costs associated
  4. Complete the enrollment form

When to enroll

Enrollment in a Medicare drug plan requires a valid enrollment period. A few times annually, Medicare beneficiaries can change, drop, or add their Medicare coverage. Below, we’ll describe when you can make changes.

Initial Enrollment Period (IEP)

Your Initial Enrollment Period occurs when you first become eligible for Medicare. For people who age into Medicare, this enrollment period allows you to start the enrollment process three months before and three months after the month in which you turn 65. Medicare beneficiaries who start Medicare before 65 will get a second IEP as they approach their 65th birthday.

When using the IEP, Medicare coverage starts on the first of the month after the month of enrollment. Once the plan starts, it becomes locked in. Making further changes would require a new valid enrollment period.

Annual Enrollment Period (AEP)

The Annual Enrollment Period is the most well-known yearly enrollment window. AEP occurs from Oct. 15 to Dec. 7. During this enrollment window, you can browse coverage options and enroll or change coverage as often as you like, with the last plan you choose taking effect on Jan. 1.

Medicare Advantage Open Enrollment Period (MAOEP)

The Medicare Advantage Open Enrollment Period is an enrollment window for Medicare beneficiaries actively enrolled in a Medicare Advantage plan. 

During the MAOEP, beneficiaries can drop their MA plan, enroll in Original Medicare with a PDP, or change to another Medicare Advantage plan. This enrollment period begins on Jan. 1 and continues through Mar. 31.

When making a change during the MAOEP, beneficiaries can make one change. The plan change will take effect on the first day of the following month.

Special Enrollment Period (SEP)

Outside the enrollment periods listed above, various life events can trigger a Special Enrollment Period. 

Some examples would be moving out of your plan’s service area, receiving federal or state assistance with Medicare costs, or losing creditable coverage. Most SEPs will last for two months after the life event occurs.

Many SEPs allow you to change your prescription drug coverage outside regular periods. In addition to the outlined Special Enrollment Periods, there are sometimes additional SEPs triggered by natural disasters and emergencies.