Find Cheap Medicare Plans in Your Area
Medicare Part D, or Medicare drug coverage, is a prescription drug policy that can help you pay for a variety of medications. You can purchase drug coverage through a standalone Part D policy and pair it with your Original Medicare Plans (Part A and B). It’s also available through Medicare Advantage. Costs depend on the plan you select, but can increase if you decide to not get drug coverage during your initial enrollment period.
What is Medicare Part D and what does it cover?
Medicare Part D is the prescription drug portion of Medicare which helps enrollees pay for costs and care associated with brand-name and generic over-the-counter (OTC) drugs.
Part D usually provides coverage for drugs that are not already covered in Original Medicare Part B. Usually, drugs covered under Part B include outpatient drugs such as:
- Drugs used with medical equipment
- Blood clotting drugs
- Shots and vaccines
- Transplant drugs
- Injectable and infused drugs
All Part D policies are required by Medicare to cover a standard level of coverage, meaning there is a core set of prescription drugs that are included in the insurance policy. But each plan available on the market usually comes with a different combination of coverage and cost sharing. Therefore, it is important to review whether or not your drugs are covered by a given plan.
Furthermore, if you are looking for coverage regarding a specific medication that you take, it is important to view the plan's formulary.
The drug formulary for Medicare Part D policies is where all the drugs that plan covers are listed. In most cases, insurers will provide tier lists within these formularies which will denote and group drugs that have similar costs and copays. Generally, a drug that costs less is in a lower tier, while more expensive drugs occupy the higher tiers. For example, below is a sample of what a Medicare tier list could look like:
- Tier 1: Generic prescription drugs (low copayments)
- Tier 2: Preferred and brand-name drugs (medium copayments)
- Tier 3: Non-preferred brand name drugs or ones where there are generic alternatives (higher copayments)
- Tier 4: Very high cost prescription drugs (highest copayments)
As with the formulary in general, when seeing what each Medicare Part D plan covers, you should evaluate the policies tier list, identify which drugs you may need and then try and gauge the costs in order to find a suitable policy.
Medicare Part D plans
When looking for a Part D plan, there are primarily two options to choose from: adding Part D to your Original Medicare policy or enrolling in a Medicare Advantage policy that includes prescription drug coverage. In both cases, however, Part D coverage is handled by private health insurance companies which are approved by Medicare.
No matter what plan you select, it is crucial that you view the formulary carefully in order to see if the drug that you need is covered. This can be done by using Medicare.gov's Part D comparison tool.
Medicare Part D costs
Similar to Part B, Medicare Part D costs include a monthly premium, annual deductible and copays. Furthermore, the premium for Part D can be deducted from your Social Security benefits if you contributed to that fund during your working life.
The total cost of your monthly premium is the sum of a policy base plus an adjustment based upon your income. The monthly adjustment for Part D will be exactly the same as Part B and varies based on your modified adjusted gross income (MAGI) reported on your federal income tax return every year.
For example, say you have a MAGI of $100,000 last year and are currently enrolled in a Part D plan that costs you $50 per month. Based on the federal taxable income limits set by the Internal Revenue Service (IRS) and Medicare.gov you would need to pay the cost of your plan ($50) plus an income adjustment ($12.30) for a total monthly premium of $62.30.
Below we have a provided a full table regarding the income adjustments based on different levels of taxable income:
Individual taxable income
Joint taxable income
Monthly Part B premium
|$88,000 or less||$176,000 or less||Your plan cost|
|Above $88,000 or up to $111,000||Above $176,000 or up to $222,000||$12.30 + your plan cost|
|Above $111,000 or up to $138,000||Above $222,000 or up to $276,000||$31.80 + your plan cost|
|Above $138,000 or up to $165,000||Above $276,000 or up to $330,000||$51.20 + your plan cost|
|Above $165,000 and less than $500,000||Above $330,000 and less than $750,000||$70.70 + your plan cost|
|$500,000 or above||$750,000 or above||$77.10 + your plan cost|
Medicare Part D policyholders must also be aware of the coverage gap, better known as the Part D doughnut hole. This is a temporary limit on what the drug plan will cover for drugs. The coverage gap begins after you and the plan have spent a certain amount, which is $4,130 for the 2021 plan year. Once this coverage gap has been reached, you will pay a certain percentage for generic and brand-name prescription drugs going forward until you have reached your out-of-pocket maximum.
For example, you have a policy with an out-of-pocket amount of $6,000 and have spent $4,130 during the current policy year. During this time you have paid copays for drugs and the minimum coinsurance amount.
After hitting the $4,130 limit you have reached the coverage gap meaning any expenses after this point would require you to pay 25% of your medication costs. This would continue until you reached your out-of-pocket maximum at which point you are in the catastrophic portion of coverage and usually are only required to pay 5% of the cost or the copay amount.
Medicare Part D eligibility
Eligibility for Medicare Part D is the exact same as it is with Part A and Part B. In general, you must fall into one of the below categories:
- Over the age of 65
- Under the age of 65 with a disability
- Have end-stage renal disease
- Have Lou Gehrig's disease
It is important to note that you must first be enrolled in Original Medicare Part A and B before you decide if you want to add a prescription drug policy to your overall coverage.
Medicare Part D late enrollment fee
As is the case with Original Medicare Part B, there is a late enrollment fee that is associated with prescription drug coverage. This will occur if you decide not to enroll in Part D during your initial enrollment period that starts three months before your 65th birthday and ends three months after. This late enrollment penalty is a permanent amount that will be added to your overall Medicare Part D premium.
In general, the cost of the late enrollment penalty varies depending on how late you decide to enroll in a Part D policy. Medicare calculates this amount by multiplying 1% by the number of months that you were not enrolled in a prescription drug plan, then times the national base beneficiary premium, which is $33.06 for the 2021 plan year. The base beneficiary premium will change year to year, so your penalty will also change going forward.
For example, say you decided to enroll in a Part D plan exactly 12 months after your initial enrollment period. In this case, your penalty would be 12% (1% x 12 months during which you had no coverage) times the national base beneficiary premium ($33.06) which would equal $3.97. This means that you would pay $3.97 extra every month that you are enrolled in Medicare.
Which Medicare Part D plan is right for me?
When choosing a Medicare Part D policy, there are four scenarios to consider:
Below we have outlined your best Medicare Part D policy depending on the above scenarios:
Do I need a specific drug covered by my plan?
If you are in need of a very specific drug, then adding a Part D plan to your Original Medicare Parts A and B is typically the best option. In this case, you should carefully consider the drug formulary for every plan you view to confirm that the drug you need will be covered.
I take a lot of generic drugs.
If you only rely on generic drugs, then adding Part D when you enroll in Original Medicare may make the most sense. When enrolling, be sure to look at plans around their tier list and pick a policy where the lowest tier drugs charge small copayments for generic drugs.
I don't have drug costs now, but I want coverage for the future
In this case, you should browse for a Part D plan to pair with your Original Medicare policies. Furthemore, you should try and find a plan with a lower monthly premium since you do not need expansive coverage right now. Then, in the future, if you need more drug coverage, you can change to a different policy.
I want a simplified experience where I get my drug costs and benefits from one plan.
If you are looking for a policy where all your drug costs are grouped together and a plan that comes with extra benefits, then Medicare Part C or Medicare Advantage may be best for you. Make sure that the Part C plans that you are comparing specifically offer drug coverage.