What Is Medicare Part D? | Full Guide To Medicare Drug Plans

A doctor looking at a pill bottle while writing a prescription.

You’ve probably seen all the Medicare commercials on television before discussing the different parts of Medicare. There is Medicare Part A, Medicare Part B, Medicare Part C, and Medicare Part D. There are even Medicare supplement plans or Medigap policies. This is all extremely confusing to most people! In this article, we will look specifically at Medicare Part D. If you are wondering what Medicare Part D is, then keep reading! We’ll tell you everything you need to know about prescription drug coverage with Medicare, including how it works, how much it costs, and how to get enrolled.


What Is Medicare Part D?

Medicare Part D is prescription drug coverage that complements the coverage provided by Original Medicare. Part D plans are managed and sold by private insurance companies that contract with Medicare to offer these benefits. These prescription drug plans (PDPs) are optional, and you are not required to purchase one. Since the plans are managed and maintained by private companies, those companies get to set their own rules when it comes to coverage details and costs. Since Plan D is optional, you should carefully examine your options before choosing to enroll in a plan.

It also helps to remember that Original Medicare coverage does not include prescription medications, except in a few limited circumstances during inpatient care. Medicare Part A is hospital insurance that covers hospital stays, inpatient services, hospice care, and care in a skilled nursing facility. Medicare Part B is your medical insurance that covers doctor visits, preventive services, lab tests, and outpatient services. If you are prescribed medication, then you will need to pay for that medicine on your own. Part D plans exist to help cover the costs of prescription drugs since Original Medicare does not provide coverage for them.

Medicare Part D Basics

A spilled pill bottle and pills.

So, just how does Medicare Part D work? Although it might seem confusing, the basics of Part D plans are pretty simple. Here are the details you need to know.


— Part D Eligibility

You might be wondering, “Who can enroll in a Part D plan?” The answer is simple. Anyone who is eligible for Medicare can enroll in Medicare Part D. You are also eligible for Part D coverage even if you are enrolled in a Medicare Advantage plan or Medigap plan. In fact, many Medicare Advantage plans include prescription drug coverage as part of their benefits. You should also pay close attention to your enrollment time. If you initially decline Part D coverage but later decide to enroll, you might need to pay a late enrollment penalty. We will discuss this in more detail in the next section of this article.


— Medicare Part D Premiums

There is a monthly premium associated with Part D coverage. The amount you pay depends on your total income for the year. The more money you make, the higher your premium will be. This is similar to the way your Medicare Part B premium works as well. An individual who earns less than $91,000 each year will only need to pay their plan’s premium amount each month. This amount is set by your plan provider and can range anywhere from $25 to $75 per month. As your income increases, you will need to pay your plan premium plus a monthly adjustment. There are several tiers to the adjustment amount according to your income, but it can be as high as $77.90 for those who earn more than $500,000 per year. This means that those individuals would pay their plan premium plus an additional $77.90 each month for Part D coverage.


— Other Medicare Part D Costs

In addition to the monthly premium, there are other out-of-pocket costs that will be associated with your Part D coverage. Since these plans typically follow a cost-sharing model, this means you will be responsible for paying a portion of your prescription drug costs. This may be in the form of deductibles, copays, coinsurance amounts, or all of the above. When you purchase prescription medicine, you will likely need to pay a copay or coinsurance amount depending on the specific coverage details for your plan.


— Medicare Part D Plan Coverage Details

So, just what does Medicare Part D cover? The specific coverage details will vary from plan to plan. Typically, each plan will have a formulary or a list of medications that are covered under the plan. Part D plans include coverage for both brand-name drugs and generic drugs. Likewise, Part D plans usually include at least two drugs in all the common categories and classes of medications. However, the specific drug that you take might not be covered by your plan. You should check the plan’s formulary to make sure that your medication is covered before signing up.


Enrollment In Medicare Prescription Drug Coverage

A man enrolling in Medicare prescription coverage.

So, how do you get enrolled in prescription drug coverage? The enrollment process is straightforward, although there are some timing issues that you should be aware of. Failure to enroll during the proper enrollment period could lead to higher premiums and late penalties. If you are interested in a Medicare prescription drug plan, here is how to get signed up.


— When To Enroll In Part D

It is usually best to go through Medicare Part D enrollment when you first become eligible for Medicare. Remember that your initial enrollment period begins three months before your 65th birthday and runs until three months after your 65th birthday. If you sign up during this time, you will pay the lowest premiums and not have to worry about a late enrollment fee. You can also avoid potential coverage gaps by signing up on time. If you have other creditable prescription drug coverage, you might be entitled to a waiver of the late penalty. This could qualify you for a special enrollment period that allows you to sign up later without incurring penalties. If you wait until an annual open enrollment period, you will likely be forced to pay the penalty.


— Original Medicare With Part D

If you have Original Medicare, then you can sign up for a Medicare drug plan. You can even add drug plans to some Medicare Cost plans, Private Fee for Service plans, and Medical Savings account plans. You can use Medicare’s plan finder tool to look for available plans in your area. Once you find a plan that meets your needs, you will contact the insurance company that administers the plan to get signed up. They will provide you with your coverage details and a prescription drug card to use at the pharmacy when you purchase medications.


— Medicare Advantage Plans

Medicare Advantage, or Medicare Part C, allows you to combine all your Medicare coverage into a single plan that can be easier to maintain. These plans can also lead to lower overall health care expenses. Most Medicare Advantage plans include prescription drug benefits. You might hear these called MA-PD plans. So, most people who have these plans do not need to enroll in separate drug coverage. Just like with Medicare drug coverage, you must enroll in a Medicare Advantage plan during certain enrollment periods. Medicare Advantage plans are not standardized across the country, so the plans available to you will depend on the area in which you live.


The Donut Hole Coverage Gap

The “donut hole” coverage gap is an important piece of information you need to know about Medicare prescription drug plans. You might have heard about this gap before, but maybe you weren’t quite sure what it was. Here is what Medicare beneficiaries need to know about the gap in their Medicare Part D coverage. Part D prescription drug plans have a monetary limit that some enrollees might reach that will limit what the drug plan will cover. This means that once your plan has paid a certain amount during the year, your coverage will decrease dramatically.

Once you hit this limit, you enter the “hole” or the gap in your Part D program coverage. During this period, you might be forced to pay as much as 25% of the costs of your medication out of pocket. However, the Medicare program has a maximum out-of-pocket amount or catastrophic coverage limit. Once you hit your annual maximum out-of-pocket limit, your Medicare Part D drug plan coverage starts up like usual again. So, now you can see why it is called the donut hole. Your initial coverage pays for items according to your plan terms up to the annual limit. Then, you lose some coverage benefits while you are in the “donut hole.” Once you hit your yearly maximum contribution limit, your plan starts to cover your prescription drugs like usual.


Medicare Extra Help For Prescription Drug Plans

Medicare Extra Help is a Federal government subsidy program that helps low-income individuals with the cost of their prescription drugs. Some Medicare beneficiaries rely solely on Social Security for their retirement income, so the Extra Help program can be a huge benefit. In fact, the Social Security Administration estimates that this program is worth about $5,100 per year to program participants.

The Extra Help assistance program can be used to pay for many types of expenses associated with your Part D insurance plan. It can be used for deductibles, premiums, copays, and other out-of-pocket expenses. Even if you already receive Medicaid services, you might still qualify for the Extra Help program. However, the income limits for recipients of both Medicare and Medicaid are lower than the requirements for enrollees of Medicare alone.


How To Decide On Part D Coverage

So, how can you decide which Part D coverage is right for you? Most people start with the plan finder tool at Medicare.gov. This will let you see all the available Medicare health insurance plans in your area. This includes both Part D plans and Medicare Advantage plans. You should closely examine all your options when choosing the right coverage. You might find that Original Medicare with an added Part D plan is the best solution for your needs. However, some people will find that a Medicare Advantage plan with prescription drug coverage works best for them.

It can also be helpful to find a trusted insurance agent who can help you with the process. Your agent can help explain all the coverage details of the different plans. You will want to find the one that minimizes your overall health care expenses based on your personal health situation. Things like how often you visit the doctor, how many medications you take, and other factors can have an effect on which type of plan will work best for you.


The Bottom Line

Medicare Part D provides prescription drug benefits to Medicare enrollees. This coverage is optional, and you may choose to add it in a few different ways. You might decide to add Part D coverage to your Original Medicare coverage. You could also opt for a Medicare Advantage plan that includes drug benefits. Remember that the coverage details and costs of each plan vary since the insurance company offering the plan gets to set its own rules. You should carefully examine the details of the plan, including the formulary and total costs, before signing up for a Part D plan.


Frequently Asked Questions


What is the main problem with Medicare Part D?

Many people believe that one of the biggest problems with Medicare Part D is that the plans were set up to benefit pharmacies instead of the seniors enrolled in the plan. It has been found that the copay associated with many generic drugs is often higher than the cost of the drug itself. This means that pharmacies are making more money through your Part D plan than they would if you did not have Part D coverage at all. The other drawback is that plans are not standardized, so the medicines they cover are different from one plan to the next. Your medication might be covered under one plan but not covered under another plan. This can make it difficult to switch plans in some cases.


What is the difference between Part B and Part D drugs?

The drug coverage provided by Medicare Part B is much more limited than Part D coverage. Part B only covers certain medicines that are administered by your healthcare provider or through in-home equipment. This usually includes vaccines, injections, infusions, and other items. For more regular prescription drugs, you will need Part D coverage. This typically includes medications that are taken on a daily basis, like blood pressure medicine, cholesterol medication, or other routine medications.


Do you need Part D Medicare?

Whether or not you need Part D Medicare depends on your personal situation. Part D coverage is not required, so you do not have to sign up for it if you don’t need it. If you rarely visit the doctor and do not take regular medications, then you might decide that you do not need Part D coverage. However, many people find that Part D coverage does provide a benefit to them, so they choose to enroll in a Part D plan.


What are the benefits of Medicare Part D?

The biggest benefit of Medicare Part D is the fact that it helps pay for the cost of prescription drugs. This can be especially beneficial if you take regular medication. Remember that Original Medicare has very limited coverage for prescription drugs, so you might be stuck paying out of your pocket for medication costs if you do not have Part D coverage.