Kelly Blackwell is a Certified Senior Advisor (CSA)®. She has been a healthcare professional for over 30 years, with experience working as a bedside nurse and as a Clinical Manager. She has a passion for educating, assisting and advising seniors throughout the healthcare process.
Medicare Part D is an optional outpatient prescription drug benefit for people with Medicare. Medicare-approved private insurance companies provide Part D coverage through stand-alone prescription drug plans (PDPs), or Medicare Advantage Plans with drug coverage (MA-PD).
Are You Required to Sign Up for Medicare Part D?
You are not required to enroll in a Medicare Part D plan unless you are dual-eligible for Medicare and Medicaid. If you receive low-income subsidies, you are enrolled automatically in a Part D plan if you don’t choose one on your own.
Suppose you choose not to enroll in a Part D plan when first eligible. If you don’t have creditable drug coverage that is at least as good as standard Part D coverage, you could pay a late enrollment penalty if you enroll later. This penalty will be added to your premium as long as you have Part D coverage.
What Does Medicare Part D Cover?
Medicare Part D plans are regulated by the Centers for Medicare and Medicaid Services (CMS). All Part D plans must cover a wide selection of medications that people with Medicare take. Each plan must include generic and brand-name drugs on its formulary (list of drugs) and cover at least two drugs in every category. There are six “protected classes” of drugs that must be covered:
- Antineoplastics (for cancer treatment)
- Antiretrovirals (HIV and AIDS drugs)
Part D plans must also cover:
- Drugs for medication-assisted treatment for opioid use disorders
- Free Medication Management Therapy (MTM) for people with complex health needs
- All commercially available vaccines, such as the COVID vaccine, when medically necessary to prevent illness, unless they are covered under Medicare Part B.
How Much Does Medicare Part D Cost?
According to the Kaiser Family Foundation, in 2022, PDP monthly premiums range from $5.50 to $207.20, depending on where you live and which type of plan you have. The national standard monthly premium for 2022 is set at approximately $33, but you may pay an income-related surcharge if your income is higher ($91,000/individual; $182,000/couple).
Insurers can offer up to three PDPs, and most have a basic, midrange, and comprehensive plan. The comprehensive plans are the most expensive and typically include the Senior Savings Model, making insulin more affordable. You pay a monthly premium for a PDP. You pay copays or coinsurance after meeting your annual deductible if you access your prescription drug benefits.
Costs for Medicare Part D prescription drug coverage vary depending on these factors:
- The insurance company. Each company sets its own monthly premiums and drug deductibles. The maximum deductible for 2022 is $480.
- Each insurance company has its own formularies, preferred pharmacies, and pricing structure. Your plan will only pay for medications on its formulary. Generic drugs from in-network pharmacies are the least expensive.
- When you enroll. If not during your Initial Enrollment Period (IEP) or within 63 days of losing creditable coverage, you may pay late enrollment penalties. Late enrollment penalties are calculated based on the national base beneficiary monthly premium.
- Stand-alone vs. MA-PD. You will pay a monthly premium for a stand-alone plan, but you should have access to at least one zero-premium MA-PD in your area.
- If you get financial assistance through Extra Help, State Pharmaceutical Assistance Programs (SPAPs), Pharmaceutical Assistance Programs.
Out-of-pocket costs apply if you access your prescription drug benefits:
- Annual deductible up to $480
- Copays/coinsurance. How much you pay for each prescription in the form of a copay or coinsurance varies, depending on which tier your drug is on. Lower-tiered drugs cost less while higher-tiered drugs cost more.
- Once you and your plan spend $4,430 (including your deductible), you’ll exit the initial coverage phase and enter the coverage gap. You then pay no more than 25% of the negotiated cost for prescription drugs until your out-of-pocket spending is $7,050. At that point, you enter the catastrophic coverage phase and pay a minimal copay for generic drugs or a minimal coinsurance for brand-name drugs.
Are There Other Prescription Drug Options Aside from Medicare Part D?
Medicare has a helpful resource on its website about how Part D works with other insurance. If you have creditable insurance through an employer-sponsored group or union plan, for instance, you may choose not to join a Part D plan. In this case, you can delay purchasing Part D until you lose that coverage and not incur a late enrollment penalty. The same is true If you take COBRA and it includes creditable drug coverage.
Prescription drug coverage from these types of insurance programs count as creditable coverage:
- Federal Employee Health Benefits (FEHB) Program for current and retired federal employees and covered family members
- Veteran’s Benefits for veterans and people who have served in the United States military
- TRICARE for active‑duty service members, military retirees, and their families
- Civilian Health and Medical Program of the Department of Veteran Affairs (CHAMPVA) for eligible beneficiaries
- Indian Health Services (IHS) for the American Indian/Alaska Native Medicare population
You can use free drug discount programs to get your prescription drugs and bypass your insurance. Ask your pharmacist to check your drug cost using a discount prescription program such as these:
How Do You Pick the Best Medicare Part D Plan for You?
The first step in choosing the best Medicare Part D plan for you is to compare plans that are offered in your area. On Medicare’s website, you can create a secure account. Save a list of the drugs you currently take, so you won’t have to input your drugs every time you look at a different plan.
The next step is to decide if you will keep Original Medicare and join a stand-alone PDP or choose a Medicare Advantage Plan with drug coverage. Search for Part D plans or Medicare Advantage Plans, depending on your decision.
Consider these things when you compare plans to help narrow down your choices:
- Monthly premium: You may have a low monthly premium but a higher deductible or limited formulary.
- Annual deductible: You will have to spend this amount before your plan pays.
- If your drugs are on the formulary (list of drugs) and which tiers (lowest cost to highest cost) they are on.
- If you use or have access to a plan’s in-network pharmacies (preferred and standard)
- If you aren’t currently taking any prescription drugs, consider a basic plan with a low monthly premium so you can have creditable coverage and avoid late enrollment penalties.
- If you need insulin, find a plan that participates in the Senior Savings Model.
Consider accessing your local resources as well.
- Consult with your doctor and pharmacist. Ask if there are generic equivalents for your higher-cost drugs.
- Contact your State Health Insurance Assistance Program (SHIP) to discuss the best options for your situation.
- Contact a trusted licensed Medicare agent in your area to help you compare plans.
Take advantage of your opportunities at certain times of the year to review your plan and switch to a more cost-effective one.
Learn More From Our Sources
- KFF | An Overview of the Medicare Part D Prescription Drug Benefit | Last accessed February 2023
- Medicare | What Part D Plans Cover | Last accessed February 2023
- Medicare | Costs for Medicare Drug Coverage | Last accessed February 2023
- Medicare | How to Get Prescription Drug Coverage | Last accessed February 2023
- Medicare | How Part D Works with Other Insurance | Last accessed February 2023
- Medicare | Find a Plan | Last accessed February 2023
- Medicare | Six Tips for Choosing Medicare Drug Coverage | Last accessed February 2023
- Medicare | See if You Can Lower Your Prescription Costs | Last accessed February 2023
- SHIP | State Health Insurance Assistance Programs | Last accessed February 2023