Medicare Part D Plans are also called Prescription Drug Plans, and they cover your prescription drug costs. These plans are offered by private insurance companies.

What is Medicare Part D?

Medicare Part D is an optional coverage that is available to Medicare beneficiaries who want coverage for outpatient prescription drugs.

There are two ways to get prescription drug coverage through Medicare:

1. Add a Medicare Part D plan to your Original Medicare Plan. Original Medicare is offered by the federal government and consists of Medicare Part A (hospitalization) and Medicare Part B (medical services including doctor visits). However, you are not covered for prescription drugs under Original Medicare. To get this coverage, you must sign up for a Prescription Drug Plan offered by Medicare-approved private providers. Keep in mind that if you do not enroll for Medicare Part D when you first become eligible for Medicare, you may incur a penalty for late enrollment. 
2. Choose a Part C Medicare Advantage Plan that includes prescription drug coverage instead of getting Original Medicare. If your Medicare Advantage Plan does not include a Prescription Drug Plan, you will have to buy Part D separately.

What does Medicare Part D cover?

Medicare Part D offers prescription drug coverage, so beneficiaries do not have to pay out-of-pocket for covered drugs.

Each Medicare Prescription Drug Plan covers different drugs and displays them on its list, which is also called a “formulary”.

What drugs are covered by Medicare Part D?

Medicare Part D plans are offered by private companies, so it is important to understand that each plan will have its own list of the specific drugs that are covered. All Medicare Part D providers are required to include brand name drugs and generic drugs in their list of approved drugs, but each provider can choose which specific drugs to include in their formulary.

All Medicare Part D plans are required to include at least two drugs per drug category in their formulary. This ensures that Medicare beneficiaries can find their prescription drugs or a similar drug in the list of covered drugs.

All Part D plans are required to provide coverage for the following categories of drugs:

• Antidepressants;
• Anticancer drugs (unless covered by Part B);
• HIV/AIDS medications;
• Antipsychotic medications;
• Anticonvulsive medications;
• Immunosuppressant drugs;
• Most vaccines. 

How does Part D Medicare work?

You can enroll for Medicare Part D voluntarily once you become eligible for Medicare. Alternatively, if you are enrolled in a Medicare Advantage plan, your plan may already include prescription drug coverage. In both cases, you need to pay a premium to receive Part D prescription coverage. 

Once you have enrolled in a Part D plan and paid your premium, Medicare will cover your prescription drug costs. You will be required to pay coinsurance and deductibles for your coverage. 

In general, Medicare Part D plans classify drugs based on costs and the type of drug as follows. 

• Tier 1 — generic prescription drugs: low copayment;
• Tier 2 — brand-name prescription drugs (preferred): moderate copayment;
• Tier 3 — brand-name prescription drugs (non-preferred): high copayment;
• Specialty tier — high-cost prescription drugs: highest copayment; 

Your plan provider may adjust their list of covered drugs, so always check your plan coverage details every year for any adjustments. 

Medicare Part D notices

Some of the notices that you may receive for Medicare Part D include: 

• Evidence of Coverage: Your Plan will send you this notice yearly to notify your benefits, the cost of your plan, how to file an appeal, and other terms of your coverage.
• Annual Notice of Change: This notice is sent every fall to advise you about any changes in your coverage benefits, costs, or service area. Any changes indicated in this notice take effect starting January of the next year.

Medicare Part D Cost 2024

Medicare Part D plans are sold by private insurers, so costs and benefits can vary. High-income Part D beneficiaries may also find that their Part D costs increase depending on their income. If you fall in the high-income category, you will be required to pay the standard Part D premium plus an income-related monthly adjustment amount. 

Medicare Part D premium 2024

The average total premium for standard Medicare Part D coverage for 2024 is projected to be $55.50 per month. Compared to the 2023 premium, $56.49, the premium will be lower by 99¢ in 2024.

However, it is important to remember that apart from the monthly premium, your Part D coverage also comes with other costs like deductibles and coinsurance. The projected maximum annual deductible for Part D in 2024 is $545. 

Coinsurance or copayment costs for your Plan D coverage will typically depend on your particular plan and the tier of drugs needed. In most cases, copayments are lowest for Tier-1 drugs (most generic prescription drugs) and highest for the highest tier of drugs (high-cost prescription drugs). 

Medicare Part D donut hole

If you have Part D prescription coverage, it is important to understand the temporary limit on what your plan will pay for your prescription drugs. This limit or coverage gap is reached when you and your plan have covered a certain amount of your prescription medication costs. 

In 2024, once your total drug costs reach $5,030 on covered drugs, you will have entered the coverage gap. This means that after this limit, you will need to pay 25% of the cost of any covered prescription drugs. Keep in mind that the limit includes both what your Plan D has paid as well as your copayments. The annual limit to reach the coverage gap or Part D donut hole may change from year to year.

Your Part D plan will typically keep track of your out-of-pocket costs for covered drugs. Once you have spent $8,000 in out-of-pocket costs, you will enter catastrophic coverage. This means you will no longer be in the donut hole or coverage gap. Up until 2023, enrollees had an obligation to pay 5% of the cost of covered prescription drugs until the end of the year without any cap or maximum limit, but starting in 2024 this requirement is eliminated as per the Inflation Reduction Act. Instead, the out-of-pocket spending will be capped at approximately $3,300.

Apart from that, starting in 2025, Medicare Part D out-of-pocket costs will be capped at $2,000.

Extra help Medicare Part D

If you are a Medicare beneficiary with limited income, you may be eligible for Extra Help for your Medicare Part D costs. Extra help will help seniors with limited income cover costs like Part D premiums, deductibles, and coinsurance. 

Depending on your situation, you may be eligible for Extra Help automatically. This includes people who:

• Get help from the state to pay Part B premiums;
• Those covered in full by Medicaid;
• Those who get SSI benefits from Social Security;

If you do not qualify for Extra Help automatically, you also have the option to apply for the Extra Help program through the Social Security Administration. Keep in mind that Extra Help only helps you with the cost of covered prescription drugs and will only start once you have enrolled in a plan with a Medicare-approved prescription drug provider.

Medicare Part D eligibility 

Anyone with Medicare (Part A and/or B) is eligible to enroll for Part D prescription coverage. It is advisable to enroll for Medicare Part D when you first become eligible for Medicare at the age of 65 unless you have creditable drug coverage from an employer or other private insurance. If you do not have creditable coverage and fail to enroll when you first become eligible, you will incur a penalty for late enrollment.

If you do not have Original Medicare but are enrolled in Medicare Advantage, you are also eligible for Part D coverage under your Medicare Advantage plan. However, not all Medicare Advantage plans have prescription drug coverage, so you need to verify with your provider if your plan includes this coverage.

For seniors who qualify for Medicaid, you will typically be automatically eligible for Medicare Part D, and you will not be required to pay any premium for the coverage. 

When can you sign up for Medicare Part D?

There are three periods during which you can enroll for Medicare Part D plans.

1) Initial Enrollment Period (IEP)

You can enroll for Medicare Part D when you first become eligible for Medicare. This is the period that runs from three months before your 65^th birthday month to the three months after. If you enroll in the three months prior to your 65^th birthday, your Part D coverage will begin on the first day of the fourth month. 

It is best to enroll in Part D coverage during the initial enrollment period, but if you miss the IEP, other enrollment options are available.

2) Annual Election Period (October 15 to December 7)

You have the option to enroll for Part D coverage during the annual election period, which runs from October 15^th to December 7^th each year. If you enroll during this period, your coverage will take effect on the 1^st of January the following year. Note that you also have the option to switch from one Plan D coverage plan to another during this period.

3) Special Enrollment Period (SEP)

In special circumstances, you may be eligible to enroll for Part D during the Special Enrollment Period. You may qualify for special enrollment in various circumstances, including: 

• You move outside of your plan’s service area;
• You qualify for Extra Help;
• Your plan is discontinued by Medicare; 
• You are no longer eligible for Medicaid;
• You have recently been released from jail;

Medicare Part D late enrollment penalty

If you do not enroll in Medicare Part D when you first become eligible, you will incur a penalty for late enrollment when you eventually enroll. The Medicare Part D penalty for late enrollment is typically 1% of the standard beneficiary premium for each month you were not enrolled. 

This means that if you waited 11 months to enroll, your penalty will be 11% of the base Part D premium ($34.70 in 2024 – note that not the total premium is taken into account but a base premium). It is important to note that you will have to pay this penalty for as long as you have Part D prescription coverage.

If you have creditable drug coverage from an employer or union, you will not incur a Part D penalty for late enrollment, provided you do not go 63 days or more without creditable drug coverage. Check with your plan provider if your coverage meets Medicare requirements for creditable coverage.

To avoid incurring a Medicare Part D penalty, it is best to enroll for Part D when you first become eligible, even if you do not have prescription drug needs. This will ensure that you do not have to pay higher premiums in the future.

How to sign up for Part D Medicare? 

When looking for Part D prescription coverage, it is important to compare the plans available in your area to find one that will best suit your needs. Keep in mind that Part D plans are sold by private insurers, and costs and benefits may vary. It is also important to check your preferred plan’s formulary to ensure that any prescription medications that you need are included.

Medicare has a plan finder to help you find and compare Part D plans in your area. You can also get help signing up by calling 1-800-MEDICARE for guidance. You can also contact the plan provider directly for assistance in enrollment and understanding your plan’s coverage and benefits.

To get started on finding a plan, you can also use Hellahealth’s plan finder to compare Part D plans and find the best option for your needs. 

Frequently Asked Questions

If I have Medicaid, do I need Medicare Part D?

No, Medicare beneficiaries do not have to enroll for Medicare Part D, but they qualify for the coverage automatically with Extra Help. However, since Part D is voluntary, Medicaid beneficiaries can opt out of prescription drug coverage.

Is Medicare Part D mandatory?

No, Medicare Part D is an optional coverage that covers the cost of prescription drugs for seniors eligible for Medicare. You can opt not to enroll in Part D if you have creditable drug coverage from an employer or private insurance. 

Can you sign up for Medicare Part D anytime?

No, there are specific enrollment periods when you can sign up for Medicare Part D. You can sign up when you first become eligible for Medicare at the age of 65 or during the Annual Election Period (October 15 to December 7). In special circumstances, you may qualify for special enrollment outside of these two periods.

Do I need Medicare Part D if I have supplemental insurance?

Yes, it is best to get Medicare Part D even if you have supplemental insurance. Not all supplemental insurance will come with prescription drug coverage, so Medicare Part D will help to avoid coverage gaps. 

Does Medicare Part D cover the shingles vaccine?

Yes, the shingles vaccine and other vaccines that are required to prevent illnesses are all covered under Medicare Part D. 

What drugs are not covered by Medicare Part D?

Medicare Part D does not cover over-the-counter medication. Part D coverage also does not include cosmetic drugs and weight loss or weight gain pills. 

Is Medicare Part D worth it?

Yes, Medicare Part D is worth it, especially since older Americans are more likely to have high prescription drug costs. Part D prescription coverage helps to reduce out-of-pocket costs for prescription medications that seniors may need for various health conditions.

To help keep drug costs manageable for Medicare beneficiaries and the privately insured, the Inflation Reduction Act will require drug companies to pay rebates for drug price increases faster than inflation beginning in 2023. The government will also be able to negotiate the price of high-cost drugs covered under Medicare Parts D and B. But these changes won’t immediately solve the issue of rising drug prices. The implementation timeline is so gradual, in fact, that drug price negotiations will not begin until 2026 – ultimately, out-of-pocket spending on prescription drugs will still increase for millions of Medicare beneficiaries.

Hella Health recognizes that Medicare coverage can be daunting, particularly when it comes to drug price fluctuations. That’s why we created Medicare Angel, a digital autonomous advocate, to closely monitor changes to users’ specific plans and the Medicare market in general.

Questions about Medicare?

Shoot us an email at medicare@hihella.com.

Article updated on October 18, 2023.