What Is Medicare Part D And What Drugs Are Covered?

Before the Medicare Part D program started in 2006, thousands of Medicare beneficiaries faced high price tags on drugs and had little help with curbing those costs. But now, Medicare Part D plans, also known as Medicare Prescription Drug Plans, give Medicare beneficiaries prescription drug coverage options.

How Does Medicare Part D Work?

Medicare Part D is a prescription drug plan added to your Original Medicare plan (Parts A and B). The monthly premium may vary between Part D plans, and higher-income beneficiaries may pay more per month.

There are a lot of common questions about Medicare Part D, and this article will help you answer them so you can choose the plan that’s best for you.

So if you’re soon becoming eligible for Medicare Part D plans, or thinking about switching your existing Medicare coverage, this Medicare Part D guide will cover all the basics and answer your questions, including:

• What is Medicare Part D?
• Who is eligible for Medicare Part D?
• When can you enroll in Medicare Part D?
• What does Medicare Part D cover?
• How does Medicare Part D work?
• How much does Medicare Part D cost?
• How can I get help with Medicare prescription drug costs?
• What is the Part D Senior Savings Model?
• Tips to shop for Medicare Part D plans

What Is Medicare Part D?

Medicare Part D is one of the four “parts” of the Medicare program. Under Original Medicare, also known as Medicare Parts A and B, only very limited drug coverage is provided. Any medications covered are generally restricted to medicines that must be administered by a doctor.

So as we mentioned before, the Medicare Part D program was created to help combat the high cost of prescription drugs.

Medicare Prescription Drug Plans (PDPs) are available through private insurance companies. These plans help Medicare beneficiaries with the cost of medications, and are available in 2 forms:

• Standalone Prescription Drug Plans (PDPs)
• Medicare Advantage Prescription Drug Plans (MAPDs)

Standalone Medicare drug plans work with Original Medicare. You stay enrolled in Medicare Part A and/or B, and obtain your prescription drug coverage through a Part D plan from a private insurance company.

An MAPD plan is an alternative to the Original Medicare program, and combines all the benefits of Medicare Part A and B with drug coverage. All these benefits are provided by a private insurance company.

Many private insurance companies provide Medicare Part D drug plans, including large nationally known ones and smaller, local companies. You can get Medicare Part D drug coverage in all 50 States.

Who Is Eligible For Medicare Part D?

Medicare Part D eligibility depends on meeting two criteria. To be eligible, you must be either:

1) Enrolled in Medicare Part B, or entitled to Medicare Part A; and 2) Live in the plan service area.

If you qualify for Medicare Part A or are actively enrolled in Medicare Part B, then you can sign up for a standalone Medicare Prescription Drug Plan.

Note: You must have both Medicare Part A and B if you want to enroll in Medicare Advantage.

Medicare PDPs are a great fit for those who are Medicare-eligible and don’t have other creditable drug coverage. Examples of other creditable drug coverage include:

• Employer or retiree coverage
• Union coverage
• Certain military coverage, like VA benefits or Tricare, may provide good drug coverage. But they may not meet the criteria of “creditable coverage."

Do I Qualify for Medicare Part D?

To qualify for Medicare Part D, you need to have Medicare Parts A or B while also living in the service area of the Part D plan you are interested in.

You’ll have to shop around for Part D plans because there are different options available depending on where you live. Ensure that the plan you choose makes sense based on your medical and prescription needs.

You cannot be denied Medicare Part D due to health conditions, the number of prescriptions you take, or the cost of your prescriptions.

However, you might be denied coverage in a Part D plan for other reasons:

• Your Medicare eligibility can’t be confirmed
• You don’t live in the plan’s service area
• You didn’t apply during an available enrollment period
• You have creditable drug coverage from an employer, union, or pension and didn’t reply to the letter about how Plan D could affect that coverage
• The Part D plan asked for additional information about your enrollment and you didn’t respond within timely

Keep in mind that if you take a large number of prescriptions, you need to carefully choose a Part D plan that includes all of them in its covered formulary.

Medicare Part D Enrollment Periods

Can I sign up for Medicare Part D at any time? Unfortunately not. However, there are a couple of times per year that allow enrollment, and you may qualify for a special enrollment period at other times.

It’s important to join Medicare Part D when you’re first eligible unless you have other creditable coverage. Otherwise, you may have to pay a lifetime late enrollment fee for Part D when you do enroll.

Medicare Initial Enrollment Period

You generally have an initial enrollment window when you first become eligible for Medicare Part D. This first enrollment window is known as your Initial Enrollment Period (IEP), which lasts for seven months that include:

• Three months before the month you become eligible for Medicare
• The month you become eligible for Medicare
• Three months after the month you become eligible for Medicare

Note: Your IEP lasts for seven months, regardless of whether you’re entering Medicare because you turn 65, or if you will enter due to permanent disability.

If you have other creditable drug coverage, like from an employer or spouse’s employer, then you can delay enrollment into Part D without being subject to a penalty. Be sure that your drug coverage is considered creditable though.

If you enroll in Medicare Part D after your IEP and don’t have other creditable drug coverage, then you will be subject to a late enrollment penalty. You can be subject to this penalty for either of 2 reasons:

• You had no drug coverage at all after becoming eligible for Medicare.
• You had drug coverage from another source, but it wasn’t considered creditable by Medicare.

Your late enrollment penalty will increase for each month that you go without creditable coverage. So it’s very important to get Medicare Part D drug coverage as soon as you’re eligible, or make certain that your non-Medicare drug plan will satisfy Medicare coverage requirements.

Medicare Part D Special Enrollment Periods

Beyond your IEP, you may qualify for a Special Enrollment Period (SEP) that will allow you to enroll in, or change, your Medicare Prescription Drug Plan. Generally, you’ll qualify for an SEP when you experience abrupt changes in your circumstances. Some common SEPs include:

• Moving out of your plan’s service area.
• Losing creditable drug coverage from your employer.
• Your Medicare Drug plan doesn’t renew its contract with the Centers for Medicare & Medicaid Services (CMS).

During a Special Enrollment Period, you generally will only have one chance to enroll in a Medicare Part D drug plan.

Medicare Annual Enrollment Period

Everyone eligible for Medicare can enroll in or switch Medicare Part D plans during the Annual Election Period (AEP), also called the Medicare Open Enrollment Period.

AEP runs from October 15 to December 7 each year. If you enroll in a plan during this window, your coverage will be effective on January 1 the following year. During the Medicare AEP, you can:

• Change from one Prescription Drug Plan to another PDP.
• Switch from a Medicare Prescription Drug Plan to a Medicare Advantage Prescription Drug Plan (MAPD).
• Switch from one Medicare Advantage Prescription Drug Plan to another MAPD.
• Switch from Original Medicare to an MAPD.
• Drop your MAPD plan and return to Original Medicare with the option to add a standalone drug plan.

Medicare Advantage Open Enrollment Period

If you’re enrolled in a Medicare Advantage plan, you have access to an additional enrollment window: the Medicare Advantage Open Enrollment Period (MA-OEP).

The MA-OEP is from January 1 to March 31 each year. During the MA-OEP, you can:

• Switch from one Medicare Advantage plan to another with or without drug coverage.
• Drop MAPD and return to Original Medicare. You’ll get a chance to enroll in a standalone Medicare Part D plan if you do this.

What is Covered by Medicare Part D?

Medicare Prescription Drug Plans provide coverage for many prescription drugs. These Medicare PDPs are required to cover certain kinds of medications and prohibited from covering others. Generally, medications that are approved for therapeutic use are covered by Part D.

It’s important to know, however, that Medicare Part D plans are not required to cover every drug that’s on the market. Instead, Medicare drug plans are allowed to choose which drugs they will cover. There are certain requirements that plans must use when they create their lists. The list of covered drugs is known as a formulary. Because of this freedom, each plan’s formulary is unique.

Every Medicare drug plan formulary is organized into tiers. Each tier includes certain kinds of drugs in the following manner:

• Tier 1 – generic drugs
• Tier 2 – preferred brand name drugs
• Tier 3 – non-preferred brand name drugs
• Tier 4 – specialty drugs

What Drugs are Not Covered by Medicare Part D?

Some drugs are never covered by Medicare. In many cases, this is because the drugs are considered elective and not deemed medically necessary.

Drugs that no Medicare Part D plan covers include:

• Drugs to treat anorexia, weight loss, or weight gain (unless physical wasting caused by AIDS, cancer, or other illness)
• Fertility drugs
• Cosmetic drugs and medication for hair growth (note: prescriptions to treat medical conditions like psoriasis, acne, rosacea, or vitiligo are not considered cosmetic)
• Drugs for the relief of cough or cold symptoms
• Prescriptions to treat erectile disfunction
• Prescription vitamins and minerals, unless prescribed for pregnancy
• Over-the-counter drugs that don’t have a prescription
• Drugs that do not meet the FDA’s Drug Efficacy Study Implementation (DESI) standards

Some drugs have multiple purposes, and a drug that’s approved by the FDA to treat a specific health condition you have may be covered even if it falls into one of the above categories.

How Much Does Medicare Part D Pay for Prescriptions?

How much Medicare Part D pays, and how much you pay out-of-pocket for prescriptions, will depend on the exact plan you choose. Each plan will have a formulary and will divide prescription drugs into tiers.

Lower tiers are generally for generic drugs and inexpensive prescriptions, and you’ll pay less of a copayment or coinsurance for those. Higher tiers are for name-brand and expensive drugs, and you’ll pay more for those.

The amount your plan pays will also depend on what phase of Plan D you’re in: paying the initial deductible, the initial coverage phase, the “donut hole”, or the catastrophic coverage phase.

There is no Part D limit on the number of prescriptions you fill, either in a year or over your lifetime. These will be based on your medical needs as determined by your doctor.

Are Vaccines Covered by Medicare Part D?

Medicare Part D covers many vaccines, including:

• Hepatitis B (if you are not considered intermediate or high risk for Hepatitis B)
• Shingles
• Tdap (tetanus) boosters

Note: While Medicare PDPs do not cover flu or COVID-19 vaccines, they are covered by Part B.

How Much Does Medicare Part D Cost?

You pay a monthly premium to the insurance company for Medicare Part D coverage. In exchange, you pay less for many prescription drugs than if you paid cash at the pharmacy.

You will likely pay some or all of these costs under Part D:

• Annual deductible
• Copayments
• Coinsurance

If your plan has a Medicare Part D deductible, you’ll pay the full price for medications until you’ve met the deductible. For 2021, the maximum Part D deductible is $445.

While many PDP plans don’t have an annual deductible, most do, and the average 2021 Medicare Part D deductible across all Part D plans is expected to be around $345.

For those plans without deductibles, you would pay a copayment or coinsurance amount for medications starting with your first prescriptions.

Premiums for higher-earning Medicare beneficiaries can be higher. Thanks to IRMAA (Income Related Monthly Adjustment Amount), you can expect to pay higher premiums for Medicare Part D coverage if you are single and have an adjusted gross income over $88,000, or if you file jointly and have gross income greater than $176,000.

The additional cost of Part D coverage increases in several income bands:

• The first IRMAA band adds $12.30 per month to the cost of your Medicare Part D coverage.
• The highest band for single incomes over $500,000 and joint incomes above $750,000, adds an additional $77.10 per month to the cost of your Part D drug coverage.

How Do Medicare Part D Costs Work?

The amount you pay for a medication changes during the year, depending on your coinsurance, copay, and how much you and your plan have paid for prescriptions.

Your Medicare Part D costs change as you move through four coverage stages.

What are the 4 Phases of Medicare Part D Coverage?

Medicare utilization is fluid over the course of the year, depending on how much you use prescription drug coverage. Keep in mind that you may not hit all of these phases every year, especially if your drug costs are lower.

The phases exist because you have a deductible to cover before Medicare Part D kicks in, and then there are maximums for regular coverage each year. The list below describes each phase of Medicare Part D coverage.

• Annual Deductible Stage – you pay full price until you’ve paid $480 (for 2022).
• Initial Coverage Stage – you pay a small copayment or coinsurance for each prescription until the amount you pay plus what your plan pays hits $4,130 (2021 amount).
• Coverage Gap Stage (also known as the Medicare donut hole) – you pay 25% of the total cost for both generic and brand name drugs.
• Catastrophic Coverage Stage – once your total costs, plus the value of manufacturer discounts exceeds $6,550, then you pay no more than 5% of the cost for any medications for the rest of the year.

You begin each year at the first coverage stage and move through them as the year progresses.

Note: Only drugs on your plan’s formulary count against these coverage stages, so it’s very important that you find a Part D plan that covers your medications.

How To Get Help With Medicare Prescription Drug Costs

While your Medicare drug plan can help with the cost of medications, you may still find prescriptions to be unaffordable. While there are several possibilities for obtaining lower-cost medications, the first place you should look is the Extra Help Program, also known as the Part D Low Income Subsidy program.

Extra Help is provided and designed to help people with limited incomes pay for the costs of prescription drugs, including:

• Premiums
• Deductibles
• Coinsurance/copayments

Extra Help benefits are available for those with limited means - both an overall asset or resource limit and an income limit. These limits depend on your marital status.

The resource limit does not count the value of your personal residence, vehicles you own, or certain other assets. But the income limits are:

• $19,140 for single individuals
• $25,860 for married households

Depending on the level of Extra Help you receive, you can expect to pay significantly less on prescriptions. At the full subsidy level, you’d pay no more than $3.70 for each generic drug filled, and no more than $9.20 for each brand name drug prescription filled.

What Is The Part D Senior Savings Model?

One of the 2021 changes to Medicare is the Part D Senior Savings Model. This program is a voluntary agreement between CMS and Medicare Part D plan sponsors. And it’s intended to bring down the cost of insulin for millions of Medicare beneficiaries.

Not all Part D plans are participating, but there is at least one participating plan in every state. Enrollees in participating Medicare Part D plans, including both standalone drug plans, and MAPD plans, will pay no more than $35 for a one-month supply of many kinds of insulin. This is expected to save people an average of $446 per year.

Tips To Shop For Medicare Part D Drug Plans

When finding Medicare prescription drug coverage, the first thing to understand is how you’re receiving your Part A and B benefits.

As an example, if you’re enrolled in Original Medicare, combined with a Medicare Supplement plan, then you’ll want to look for standalone Prescription Drug Plans.

But if you’re enrolled in a Medicare Advantage plan or will be, then you’ll want to look for MAPD plans.

But it’s important to know that you typically can’t have a Medicare Advantage plan and a standalone Prescription Drug Plan at the same time, so make sure you know your circumstances.

Once you know what kind of Medicare Part D drug plan you need, you can start to compare Part D plans. You should pay close attention to such details as:

• Monthly premiums
• Annual Part D deductibles
• Availability of the drugs you need on the plan formulary

Tip: Every Part D plan has a different formulary, and two different plans can assign the same medication to two different tiers. So it’s important to look up your medications to get a feel for anticipated out-of-pocket costs for your medications.

Also, if you take insulin, look for a Medicare Part D plan that participates in the Senior Savings Model. This alone can save you hundreds of dollars per year in insulin costs.

Find and Compare Medicare Part D Plans

Medicare prescription drug plans are available to help lower the burden of prescription drug prices for Medicare beneficiaries. Some of our final Part D takeaways include:

• Be sure to sign up for a Medicare PDP during your Initial Enrollment Period or as soon as your creditable coverage ends to avoid a Part D penalty.
• Do plenty of research, whether you’re signing up for a Medicare Part D plan for the first time or considering switching during an open enrollment period.
• Look up all of your drugs to ensure they will be covered.

If this seems daunting, you can get started by using our Medicare plan comparison tool to compare Part D plans and see if your drugs are covered.

You can also call 800-620-4519 to get help from a licensed insurance agent and discuss your Part D options.