Medicare Prescription Drug Coverage (Medicare Part D)

Medicare Part D covers your medications.  This covers prescription drugs, as well as shots and vaccinations.  While this plan is optional, it is highly recommended, especially if you have a chronic condition you take medications for.  You can sign up with Medicare Part D through a licensed private insurance company.  What is and is not covered will depend on the plan you choose, as well as your own circumstances. 

What Medicare Part D Covers

As Medicare.gov explains it, each plan that offers prescription drug coverage through Medicare Part D must give at least a standard level of coverage set by Medicare. Plans can vary the list of prescription drugs they cover (called a formulary) and how they place drugs into different “tiers” on their formularies.  

Plans include both brand-name prescription drugs and generic drug coverage. The formulary includes at least 2 drugs in the most commonly prescribed categories and classes.  The formulary might not include your specific drug. However, in most cases, a similar drug should be available.  Plans offering Medicare prescription drug coverage under Part D may immediately remove drugs from their formularies if they are deemed unsafe or if their manufacturer removes them from the market.  Plans may also change the cost or coverage rules for brand name drugs when adding new generic drugs.  If this happens, you will be notified afterward. 

To lower costs, many plans offering prescription drug coverage place drugs into different “tiers” on their formularies. Each plan can divide its tiers in different ways. Each tier costs a different amount. Here’s a brief example of a tier breakdown: 

Tier Type:	Copayment Cost:	Prescription Drug Type:
Tier 1	Lowest	Mostly generic
Tier 2	Medium	Mostly preferred, brand-name
Tier 3	Higher	Mostly non-preferred, brand-name
Tier 4	Highest	Specialty or very high cost drugs

Part D Premium

The Part D monthly premium varies by plan (higher-income consumers may pay more).  Because Medicare Part D strictly covers prescription drugs only, it is sold by private insurance providers.  This means the premiums will vary plan to plan. In order to qualify for Medicare Part D, you will also need to enroll in a Medicare-approved plan.  That being said, all plans come with a standard amount of coverage set by Medicare. It’s also important to note that if you have a Medicare drug plan which includes coverage in the gap, you may get a discount for the amount your plan covers.  This discount on brand-name drugs applies to the remaining amount you owe. 

The Medicare Donut Hole

For most Medicare plans that cover prescription drugs (Medicare Part D), there tends to be a gap in coverage.  This gap is referred to as a “donut hole”. The “donut hole” is the out-of-pocket costs you will need to pay for your prescriptions after your insurance has paid a certain amount, before your yearly limit is reached and Medicare begins to pay your costs again.  

Not everyone will reach this limit, and not everyone will pass the donut hole gap and return to receiving coverage again.  On average, your Medicare Part D plan pays out around $4,020 as of 2020 before the gap begins. If you’re part of the Extra Help program, this gap will not apply to you at all. If you have a Medicare drug plan which includes coverage in the gap, you may get a discount for the amount your plan covers.  Your yearly deductible, coinsurance, and copayments also count towards your coverage gap limit.  

For brand name drugs, If you buy your prescriptions at the pharmacy or order them through the mail, you will only be responsible for a maximum of 25% of the cost of the drug (as long as it’s covered by your plan).  There is also a dispensing fee, which you are also responsible for 25% of.  For generic drugs, Medicare will pay for 75% of the overall cost of generic drugs, with the remaining 25% paid by you. Find out more about this coverage breakdown here. 

To get an idea of what your Medicare expenses might be, the Centers for Medicare & Medicaid Services offers an Out-Of-Pocket Cost Calculator.  While this isn’t a definitive guarantee of your actual cost, it can help you prepare for what you might be looking at paying. 

Enrolling In Medicare Part D

Enrollment in Medicare Part D is not automatic.  To enroll, you must find and join a Medicare plan that offers prescription drug coverage.  Once you choose a Medicare drug plan, you can Enroll on the Medicare Plan Finder, or on the plan’s website, complete a paper enrollment form, or call 1-800-MEDICARE (1-800-633-4227).  Find out more about how to enroll in your Medicare Part D plan here.