Are prescription drug costs covered by Medicare?
Will I have to pay for my prescription drugs, or is that covered by Medicare Part D?
Medicare Part D provides coverage for prescription drugs, but you will still be responsible for some out-of-pocket costs. Here’s how Medicare Part D works and what you can expect to pay:
Monthly Premium:
Most Medicare Part D plans require you to pay a monthly premium, which varies by plan. If you have a Medicare Advantage plan that includes Part D coverage, the premium may already be bundled into your plan.
Annual Deductible:
Many Medicare Part D plans have an annual deductible, which is the amount you must pay out of pocket before your plan begins to cover the cost of your prescription drugs. For 2024, the deductible is capped at $545, but many plans have lower deductibles or no deductible at all.
Copayments and Coinsurance:
After meeting the deductible, you’ll typically pay either a copayment (a fixed amount per prescription) or coinsurance (a percentage of the drug cost) for your medications. The amount you pay depends on your plan’s formulary, which categorizes drugs into different tiers:
Tier 1: Low-cost generic drugs with the lowest copayments.
Tier 2: Preferred brand-name drugs with moderate copayments.
Tier 3: Non-preferred brand-name drugs with higher copayments or coinsurance.
Tier 4: Specialty drugs, which may have the highest out-of-pocket costs.
Coverage Gap (Donut Hole):
After you and your plan have spent a certain amount on covered drugs ($5,030 in 2024), you enter the coverage gap, also known as the donut hole. In this stage, you may pay up to 25% of the cost for brand-name and generic drugs until your total out-of-pocket costs reach $8,000.
Catastrophic Coverage:
Once your out-of-pocket costs hit the catastrophic coverage threshold ($8,000 in 2024), you enter the catastrophic coverage stage. In this phase, you pay only a small copayment or coinsurance for your prescriptions for the rest of the year.
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. This program significantly reduces out-of-pocket costs for prescription drugs.
Key Takeaways:
Medicare Part D helps cover the cost of prescription drugs, but you will still have out-of-pocket expenses like premiums, deductibles, copayments, and coinsurance.
The amount you pay depends on your plan’s drug formulary and the specific medications you need.
If you qualify for Extra Help, you may pay much less for your prescriptions.
To find the best Part D plan for your needs and get help understanding your prescription drug costs, schedule an appointment with a Tsunami Advisor here: Schedule an Appointment.
