Learning Center > What Is Medicare Part D And What Drugs Are Covered?

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.

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."

Medicare Part D Enrollment Periods

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

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?

  • Annual Deductible Stage – you pay full price until you’ve paid $445 (for 2021).
  • 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.

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What you should read next

 a donut with a bite as a visual metaphor for the Medicare Donut Hole

If you choose to have Original Medicare with Medicare Part D added, you’ll receive prescription drug coverage through Medicare Part D. However, there can sometimes be a gap in the coverage of your prescriptions. This gap is known as the “donut hole,” and it’s a period of time where you pay out-of-pocket for your medications. However, you don’t pay the full amount, and once your out-of-pocket costs hit a specific level Medicare will resume coverage. What is the Medicare donut hole? This page will help you understand the donut hole and how to navigate it. How Does the Donut Hole Work in Medicare? The Medicare donut hole is a period of time where you’ve reached the limit of your Medicare Part D coverage, but haven’t hit the “catastrophic coverage” level where Medicare resumes assisting you with your prescription drug coverage. With Medicare Part D, the first portion of the year you’ll be paying toward your deductible. The deductible varies but can be up to $445 in 2021. Once you reach your deductible, your drug plan will kick in and you’ll pay your copayment or coinsurance for your medication. If the amount you and your plan pay toward prescription drugs reaches a certain level, you’ll enter the donut hole. Keep in mind that not everyone gets to the prescription donut hole — the gap was designed to encourage Medicare recipients to seek out lower-cost drugs and generics. The Medicare donut hole in 2021 starts at $4,130. When Does the Medicare Donut Hole End? The coverage gap ends when you reach the catastrophic coverage limit for the year. In 2021, this amount is $6,550. The good news is that the donut hole essentially closed in 2020, so that even when you hit the coverage gap, you won’t pay more than 25% of the cost of prescription drugs. However, around 95% of the cost will count toward moving you out of the hole. Do Medicare Advantage Plans Cover the Donut Hole? Medicare drug coverage — Part D — works the same in a Medicare Advantage plan as it does with a "Stand-alone” Part D plan. However, some Medicare Advantage plans offer more generous benefits during the donut hole than a stand-alone Part D plan does. Understanding your prescription drug coverage is essential so that you know if you’re likely to approach a coverage gap based on the price of your medication. If so, make sure you know what the costs will be during the donut hole period. Medicare Part D Plans Without the Donut Hole There are no Medicare Part D plans — including Medicare Advantage plans — without a coverage gap. However, some prescription plans have additional coverage options during the donut hole. For instance, your Medicare Advantage plan might include coverage for some generic medications even in the gap. Or, they may offer some drugs at a lower cost than 25%. It all depends on your plan and provider. The best way to avoid the donut hole is to work with your doctor to keep the cost of your medication low. If that’s not possible, the fact that you will pay no more than 25% of the full cost even in the coverage gap will help ease your mind. How Do I Get Out of the Medicare Donut Hole? If you’re in the Medicare Part D donut hole, the only way to get out is to spend enough to reach the catastrophic coverage threshold. The good news is that while you’re paying no more than 25% of the cost of the medication, close to 95% of the cost of the drugs is going toward your spending total. One way to manage the coverage gap “donut hole” is to work with your doctor to find effective low-cost and generic medications that will help you maintain your physical health. Here are some tips that can help: Use a generic or find a similar drug that has a generic Talk to your doctor about drug costs and whether specific prescriptions are really needed Shop around — different pharmacies offer different drug prices Compare Medicare plans each year to make sure you have affordable drug coverage Learn More About Medicare Costs and Plans Medicare costs can be confusing, especially when there is the possibility of a coverage gap in the middle of the year. Fortunately, even during the Medicare donut hole, you don’t have to pay more than 25% of a prescription drug price, and you may even pay less. If you’re interested in comparing Medicare plans to make sure your drug coverage meets your needs, talking to a licensed insurance agent can help. Learn more about your options and compare Medicare plans today!
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Medicare enrollment periods

Everyone can enroll in Medicare in the seven-month period around their 65th birthday through the Medicare Initial Enrollment Period (IEP). It starts three months before your birth month, includes your birth month, and ends three months afterward. If you don’t enroll in Medicare (either Medicare Part A or Part B) during your IEP, you can enroll enroll in either during the General Enrollment Period that occurs annual from January 1 through March 31 of each year. After you enroll in Medicare when can you change your Medicare coverage options? There are three main enrollment periods that allow you to make changes to your coverage. Everyone with Medicare can make changes during the annual enrollment period (AEP). If you have certain qualifying events happen in your life, you may also have a special enrollment period (SEP) to allow changes. And if you are enrolled in a Medicare Advantage (MA) plan, you will also have an opportunity to make changes during the MA open enrollment period (OEP) that happens at the beginning of the year. . This article will cover these enrollment periods in more detail so you know exactly when you can make changes to your Medicare plan. Special Enrollment Period SEP for those enrolled in Medicare Advantage or Prescription Drug Plans If you have special circumstances in your life, , you may qualify for a Medicare SEP to change your Medicare Advantage or Part D plan coverage. The special enrollment period options and length will be different for each circumstance. For example, you could qualify for an SEP if you: Retire from a job after age 65 Move Become eligible for Medicaid Have your Medicare plan terminated by the insurer Lose other medical or drug coverage To learn more about Medicare SEPs, check out our guide on special enrollment periods. Medicare Advantage Open Enrollment (MA OEP) vs. Annual Enrollment (AEP) Both Medicare annual enrollment period (AEP) and Medicare Advantage Open Enrollment period (MA OEP) happen each year. However, there are some important differences. This will help you understand Medicare AEP vs Medicare Advantage OEP. The Medicare annual enrollment period is between October 15th and December 7th of each year. During this time everyone with Medicare can join, switch, or drop any Medicare Advantage or Prescription Drug plan (“Part D). Your coverage will begin on January 1st, as long as you make your choice by December 7th. The Medicare Advantage open enrollment period applies only to those enrolled in Medicare Advantage plans. From January 1st to March 31st each year, you can switch to a different Medicare Advantage plan, or switch from Medicare Advantage to Original Medicare and join a separate drug plan. To summarize the Medicare annual enrollment period vs Medicare Advantage open enrollment period: Dates: Oct 15 - Dec 7 for AEP, Jan 1 - March 31 for Medicare Advantage OEP Costs: None beyond your plan’s monthly premiums Eligibility to Enroll: AEP — any Medicare beneficiary; OEP — Medicare Advantage enrollees only Form of Medicare Available: AEP — any; MA OEP — Change Medicare Advantage plans or Medicare Advantage to Original Medicare Medicare Enrollment Periods Chart This chart can help you understand Medicare open enrollment vs annual enrollment, along with special enrollment periods. Medicare Annual Enrollment (AEP) Medicare Advantage Open Enrollment (OEP) Medicare Advantage & Part D Special Enrollment (SEP) Start Date October 15th January 1st When a qualifying even occurs End Date December 7th March 31st Varies Notes Any Medicare beneficiary can make any changes Medicare Advantage enrollees only, limited changes Details depend on the qualifying event Learn More About Medicare Enrollment Periods Now that you understand the different enrollment periods, you might decide you want to make a change. Making the right choice for your needs is easier when you talk to a licensed insurance agent. Contact us today for any questions about enrollment periods or comparing Medicare plans!
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Medicare Part D offers important prescription drug coverage and is part of both Original Medicare and Medicare Advantage. As a result, it’s important to understand the Medicare Part D phases that occur each year. There are four Medicare Part D stages. Depending on your drug costs, you may not reach all four in a given year. However, it’s still vital to know what to expect in case your prescription drug needs increase over time. Here’s what you need to know. What are the 4 Stages of Medicare Part D? What are the Medicare Part D stages of coverage? As we mentioned, there are four of them. They start with the deductible period, then initial coverage, followed by the donut hole, and then catastrophic coverage. We’ll go in-depth into each stage so that you can fully understand how they work for you. Deductible Period During the deductible period, you pay the full price of your prescription drugs until you meet your Medicare Part D deductible. The deductible may vary from one plan to another, but Medicare does set a maximum limit. Medicare Part D Deductible 2021 In 2021 the deductible limit for Medicare Part D is $445. Some plans have a $0 deductible, meaning that you skip the first of the Medicare Part D payment stages and move straight into initial coverage. Other plans have a deductible that only applies to certain tiers of medications, while other medications are covered right away. For instance, generic medications may be covered immediately while name-brand medications have a deductible. Make sure you review the Medicare Part D deductible when you compare plans each year so you can choose the plan that’s best for your needs. Initial Coverage Once your deductible is met, you move into initial coverage. This is where your Medicare Part D plan covers your medication, and you only pay a copayment or coinsurance each time. Each plan will have a different list of covered medications and different out-of-pocket costs, so be sure to carefully review the details of your plan. The initial coverage period lasts until you hit $4,130 in total drug costs, which includes both the amount you have paid during the year and the amount your plan paid. Depending on your medical needs, you may not hit the limit, but if you do, you enter the coverage gap known as the Medicare donut hole. Medicare Part D Donut Hole Once you hit the Medicare Part D initial coverage limit, you enter a gap in coverage known as the donut hole. In the past, you had to pay a significant amount of your drug costs during this gap. The coverage gap for all drugs essentially closed in 2020, meaning your share of costs in the “donut hole” is limited to 25% of the drug cost (both brand-name and generic). This percentage will replace the copayment or coinsurance you were paying during the initial coverage period. S For a generic drug that costs $100, you would pay $25 for that drug during the donut hole. For brand-name drugs, even though you only pay 25% of the cost, around 95% of the cost will count toward your out-of-pocket total to move you out of the coverage gap. Once you have paid $6,550 in out-of-pocket costs for prescription drugs, you’ll exit the donut hole and enter catastrophic coverage. Medicare Part D Catastrophic Coverage The final stage of Medicare Part D is catastrophic coverage. What is catastrophic coverage in Medicare Part D? It’s a phase designed to help those who have especially high prescription drug costs. During catastrophic coverage, you’ll pay significantly lower copayments or coinsurance for your remaining prescriptions for the year. For Medicare Part D catastrophic coverage in 2021, you’ll pay 5% of the cost of drugs, and the plan pays for the remainder. Does Medicare Part D Have an Out-of-Pocket Maximum? There is no out-of-pocket maximum for Medicare Part D, but once you hit catastrophic coverage, your out-of-pocket costs drop significantly. Generally, you’ll pay a a minimum of $9.20 for brand-name medication and $3.70 for generic drugs, or 5% of retail costs, whichever is higher. Learn More About Medicare Part D Coverage Stages Medicare Part D is important coverage for many Medicare beneficiaries. That’s why it’s vital to understand the various Part D phases and whether you will enter them in a specific year. Comparing plans is easier with a licensed insurance agent by your side. Contact us to learn more or use our plan comparison tool to learn about plans in your area.
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