What does Medicare Part D cover?

How does Medicare Part D prescription drug coverage work, and what does it include?

Medicare Part D is the prescription drug coverage component of Medicare, designed to help lower the cost of prescription medications for people enrolled in Medicare. Part D can be added to Original Medicare or included as part of a Medicare Advantage (Part C) plan that offers prescription drug coverage. Here’s how it works and what it includes:

1. Enrollment Options:

   • Standalone Part D Plans: If you have Original Medicare (Parts A and B), you can enroll in a standalone Medicare Part D plan specifically for prescription drugs. These plans are offered by private insurance companies and provide coverage for outpatient prescription medications.

   • Medicare Advantage Plans with Part D: Many Medicare Advantage plans (Part C) include Part D prescription drug coverage bundled into the plan, so you don’t need to enroll in a separate plan.

2. Formulary (List of Covered Drugs):

   • Every Medicare Part D plan has a formulary, which is a list of prescription drugs covered by the plan. The formulary includes both brand-name and generic medications and is organized into tiers. Each tier represents different cost levels:

     • Tier 1: Low-cost generic drugs

     • Tier 2: Preferred brand-name drugs

     • Tier 3: Non-preferred brand-name drugs

     • Tier 4+: Specialty drugs (higher-cost drugs for complex conditions)

   The cost of your medication depends on which tier it falls into. It’s important to review a plan’s formulary to make sure it covers your specific medications before enrolling.

3. Costs and Coverage Stages: Medicare Part D plans have several cost components and coverage stages that impact how much you pay for prescription drugs throughout the year:

   • Monthly Premium: You pay a monthly premium for your Part D plan. This amount varies by plan.

   • Deductible: Some plans require you to pay a deductible before the plan begins covering your medications. This amount also varies by plan but cannot exceed the annual limit set by Medicare ($545 in 2024).

   • Copayments and Coinsurance: After meeting the deductible, you may pay a copayment (a flat fee) or coinsurance (a percentage of the drug cost) for each prescription.

   Medicare Part D coverage is divided into the following stages:

   • Initial Coverage Stage: After you meet your deductible (if your plan has one), your plan helps pay for your prescription drugs, and you pay your copayment or coinsurance until you reach the next stage.

   • Coverage Gap (Donut Hole): After your total drug costs (what you and the plan pay combined) reach a certain amount ($5,030 in 2024), you enter the coverage gap, also known as the donut hole. During this stage, you’ll pay up to 25% of the cost for both brand-name and generic drugs until your out-of-pocket costs reach a set limit ($8,000 in 2024).

   • Catastrophic Coverage Stage: Once you exit the donut hole, you enter catastrophic coverage, where you’ll only pay a small copayment or coinsurance for covered drugs for the rest of the year.

4. Late Enrollment Penalty:

   • If you don’t enroll in Medicare Part D when you’re first eligible and don’t have creditable drug coverage (coverage as good as Medicare’s), you may face a late enrollment penalty. This penalty is added to your monthly premium and continues for as long as you have Part D coverage.

5. Extra Help Program:

   • If you have limited income and resources, you may qualify for Extra Help, a federal program that helps pay for Part D premiums, deductibles, and copayments. Eligibility is based on your income and financial resources.

Medicare Part D is designed to make prescription drugs more affordable, but it’s important to choose a plan that fits your medication needs and budget. For help understanding your options or enrolling in a Part D plan, you can schedule an appointment with a Tsunami Advisor here: Schedule an Appointment.