What is Medicare Part D prescription drug coverage?

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:

  1. 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.
  2. 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):

  • Level or Tier 1: Preferred, low-cost generic drugs
  • Level or Tier 2: Nonpreferred and low-cost generic drugs
  • Level or Tier 3: Preferred brand-name and some higher-cost generic drugs
  • Level or Tier 4: Nonpreferred brand-name drugs and some nonpreferred, highest-cost generic drugs
  • Level or Tier 5: Highest-cost drugs including most specialty medications

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 will 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 2022, no Medicare drug plan may have a deductible higher than $480.

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 2022, once you and your insurance spend a combined total of $4,430 (including your 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 $7,050.

Understanding the “donut hole” coverage gap

For most Medicare prescription plans, there is a temporary limit on what the plan covers. This is called the coverage gap, or the donut hole. In 2022, this coverage gap will be triggered once you and your plan spend a combined $4,430 on covered medications. Once you’re in the coverage gap, you will pay a maximum of 25% of the cost for brand-name drugs in your plan. Although you pay only a fraction of the cost of your prescriptions, almost the full price of the drugs count toward your out-of-pocket costs.

Catastrophic coverage

After you’ve spent $7,050 in out-of-pocket costs in 2022, you are out of the coverage gap. This means that you automatically qualify for catastrophic coverage. Catastrophic coverage ensures that you’ll pay only a small coinsurance percentage or copayment for drugs covered by your plan until the end of the 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

Even if you don’t automatically qualify, you can apply for Extra Help any time.

How to enroll in Medicare Part D

Typically, if you qualify for Medicare, you qualify for Part D prescription drug coverage. But it’s important to keep in mind that you may enroll in Part D coverage only in a few specific periods:

  • Your Medicare Initial Enrollment Period (IEP): You can enroll in a Part D plan in the 3 months you turn 65, the month of your 65th birthday or 3 months after.
  • The Medicare Annual Enrollment Period (AEP): This runs from Oct. 15 to Dec. 7 every year. During the AEP, you may make changes to your Medicare Part C and Part D coverage. They will take effect on Jan. 1 of the following year.
  • The Medicare Advantage Open Enrollment Period (OEP): This lasts from Jan. 1 to March 31 each year. You may add, drop or change your Part D coverage during this time.
  • Special Enrollment Period (SEP): You may be able to enroll in a new Part D plan if you’re eligible for an SEP. You may qualify for an SEP under certain circumstances, such as if you make changes to a job-based drug coverage plan, or if you have or lose Extra Help.

What is the Part D late enrollment penalty?

The Part D late enrollment penalty is an amount that’s permanently added to your Part D premium. You might have to pay this penalty if after your IEP, there are 63 days in a row where you don’t have Medicare drug coverage or other creditable drug coverage. “Creditable drug coverage” refers to a drug plan that pays at least as much as Medicare Part D on average.

To avoid paying the late enrollment penalty, it’s important to enroll in Medicare Part D or have other creditable drug coverage during your IEP. Make sure to enroll in Part D if you lose your creditable drug coverage. If you keep your creditable drug coverage, it’s a good idea to keep records proving that you are enrolled.

How does Medicare Part D work with other Insurance?

If you already have prescription drug coverage through another plan, there will usually be some coordination of benefits between Medicare and your current drug coverage provider. Depending on your current coverage, Medicare will be either your primary or secondary payer for prescription drug coverage.

See Medicare’s explanation on how Part D interacts with other plans to see coverage options that may apply to you.

How to find the right Medicare Part D plan

There are many Medicare Part D plans to choose from, so it’s important to find the 1 that works best for you. Be sure to check the plan’s formulary, or list of approved drugs, as well as the pharmacy network. Medicare.gov has a simple tool to compare Part D plans.

Many Medicare Advantage plans include Part D prescription drug coverage. Check out Humana’s Medicare Advantage plans to see if you may be eligible to enroll and find coverage that meets your needs.

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