Medicare Part D Prescription Drug Coverage Explained
Medicare Part D helps cover the cost of prescription drugs. Part D is optional and only provided through private insurance companies approved by the federal government. However, Part D is offered to everyone who qualifies for Medicare. Costs and coverage may vary from plan to plan. Read on to learn more about Medicare Part D prescription drug coverage, how to get it and what it covers.
How to get prescription drug coverage?
There are 2 ways to get Medicare Part D prescription drug coverage:
As a standalone prescription drug plan with Medicare: If you have Medicare Part A and Part B (also called Original Medicare), you can add a Part D prescription drug plan to your existing coverage.
As part of a Medicare Advantage plan (Medicare Part C): Medicare Advantage plans include all your Part A and Part B coverage. They may also include prescription drug insurance. Not all Medicare Advantage plans include prescription drug coverage, and you must already have Part A and Part B to qualify for Medicare Advantage.
What does Medicare Part D cover?
Each Medicare Part D plan uses a list of approved drugs to decide what’s covered and what isn’t. This list is called a drug formulary. The formulary may differ from plan to plan. Many plans arrange their list of covered drugs in different levels, called “tiers”. Generally, drugs in a lower tier will cost less than drugs in a higher tier. Here is one example of a typical Medicare drug plan’s tier system (but remember, your plan may be different):
Tier 1 - Preferred Generic: Generic or brand drugs that are available at the lowest cost share for the plan
Tier 2 - Generic: Generic or brand drugs that the plan offers at a higher cost to you than Tier 1 Preferred Generic drugs
Tier 3 - Preferred Brand: Generic or brand drugs that the plan offers at a lower cost to you than Tier 4 Non-Preferred drugs
Tier 4 - Non-Preferred Drug: Generic or brand drugs that the plan offers at a higher cost to you than Tier 3 Preferred Brand drugs
Tier 5 - Specialty Tier: Some Injectables and other high-cost drugs
Tier 6 - Select Care Drugs: Select generic and brand drugs used to treat certain chronic conditions
What drugs are not covered by Part D?
Some medications may not be covered by your Medicare Part D plan. This could depend on your plan’s formulary, which may limit coverage of some drugs based on medical necessity, cost or safety.
Medicare Part D restrictions and limitations
Some prescription drug plans may have restrictions on certain medications. These can include:
Prior authorization: Your doctor may need approval from your plan before prescribing some medications. This may be because a drug is only approved for certain conditions, or to ensure that the drug is medically necessary.
Step therapy: For some conditions, your plan may require you to try a cheaper drug on your formulary first. If the cheaper medication doesn’t work for your condition or produces bad side effects, you may be able to move up a “step” to a more expensive drug.
Quantity limits: Sometimes, plans may limit the amount of medication prescribed over a period of time. This is done for safety reasons, or to cut down on costs.
What to do if your drug isn’t covered
If you have trouble getting the medication that you want covered, you may be able to appeal. You and your doctor can submit a formal request for an exception to a drug coverage rule. For example, you could send a request to get coverage for a drug that’s not in your formulary. You could also send a request to waive a step therapy requirement to use a lower-tier drug.
How much does Medicare Part D cost?
Your costs for Medicare Part D consist of several different payments. The exact amount of these costs may vary depending on your plan, what tier a drug is in or what pharmacy you use.
Monthly premiums
For most prescription drug plans, you will pay a premium, or a monthly fee. This premium is paid in addition to the one you pay for Medicare Part B.
Monthly adjustment
If your income is above a certain limit, you may pay a monthly adjustment payment in addition to your prescription drug premium. See this chart on the Medicare website for an explanation of Part D monthly costs by income.
Yearly deductibles
For many plans, you may have to pay a certain amount each year for your prescription drugs before the Medicare drug plan kicks in to cover costs. This amount is called the yearly deductible. For 2024, no Medicare drug plan may have a deductible higher than $545.
Copayments or coinsurance
After you meet your deductible, your plan may require you to pay for part of the cost of your prescriptions. This amount is called the copayment or coinsurance. In 2024, once you and your insurance spend a combined total of $5,030 (including any applicable deductible), you will pay no more than 25% of the cost for prescriptions. This 25% cap will continue until your out-of-pocket spending hits $8,000.
Understanding the Coverage Gap
For most Medicare prescription plans, there is a temporary limit on what the plan covers. This is called the Coverage Gap, also known as the donut hole. In 2024, this Coverage Gap will be triggered once you and your plan spend a combined $5,030 on covered medications. Once you’re in the Coverage Gap, you will pay no more than 25% of the cost for covered Part D drugs in your plan.
Catastrophic coverage
Starting January 1, 2024, once your out-of-pocket spending reaches $8,000 (including certain payments made by other people or entities, including Medicare’s Extra Help program, on your behalf), you’ll move to the Catastrophic Coverage stage. This means you won’t have to pay a copayment or coinsurance for covered Part D drugs for the rest of the calendar year.
How to get Extra Help
Depending on your income, you may qualify for Extra Help. Extra Help is a program that assists those with limited resources in paying for their Medicare prescription drug costs.
You may automatically qualify for Extra Help if you have Medicare and are enrolled in any of the following programs:
Full Medicaid coverage
Assistance from your state Medicaid program for covering Part B premiums
Supplemental Security Income benefits