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Medicare Part D Drug Coverage

Medicare has made prescription drug coverage available to everyone currently on Medicare through its Part D program. Part D drug plans, which are sold by private insurance companies, can vary in cost and by the drugs they cover. This drug coverage is not included in Original Medicare and is typically available in two different ways. Your first option is if you have Original Medicare, typically with a Medicare Supplement Plan, then you can enroll in a stand-alone Part D plan when you are new to Medicare or during another valid enrollment period. The second way you can get drug coverage is built into a Medicare Advantage Plan.

How Do Part D Drug Plans Work?

Each Medicare prescription drug plan sold by a private insurance company must follow the same basic structure that is outlined by Medicare. Additionally, Part D plans are allowed to customize the coverage it offers in several ways including the plan premiums, copays, deductibles, and the formulary (a list of medications the plan covers).  Each of the drugs covered in a formulary will be placed into different “tiers” which refers to the co-pay for the drug. Drugs in lower tiers will typically cost less than those drugs in higher tiers.

Prescription drug plans can make some changes to their formularies during the year as long as they remain within the guidelines set by Medicare.

The 4 Parts to a Part D Drug Plan

#1 | Premiums

Each company can set the monthly premium they would like to charge for their plan. Monthly premiums range from about $7 up to $100+ per month.

#2 | Deductibles

You pay the full price of your medications until your deductible has been met for the year and then you will either pay a specified amount or percentage of the cost of the medication.

#3 | Formulary

This is the list of medications a plan will cover. Although each company is required to cover a certain number and types of medications, each company’s list will vary.

#4 | Tiers

Most companies place drugs into 4 or 5 different “tiers”. Each tier will have a different cost. Common tiers include preferred generic, generic, preferred name brand, name brand, and specialty.

Part D Drug Coverage With Original Medicare

If you have chosen to stay with Original Medicare, which is most common when you enroll in a Medicare Supplement Plan, then you will have the option to sign up for a stand-alone Part D drug plan. The benefit of going this route is that you are able to pick your Drug Plan independently from your Medicare supplement plan. For example, you could take your Medicare Supplement Plan through Aetna and your Part D plan through Humana. This allows you to find the Insurance company that offers you the lowest price for your Medicare Supplement Plan and independently select the company that will cover your RX medications for the lowest price available. This flexibility could end up saving you quite a bit of money!

Part D Drug Coverage With a Medicare Advantage Plan

If you have chosen to take a Medicare Advantage Plan (Also known as Part C of Medicare), then your prescription drug coverage will typically be built into the plan that you select. Medicare Advantage plans look and feel very similar to the health insurance you may have had before you joined Medicare, where your hospital, doctor, and drug coverage were all provided by the same company and you only needed to carry one ID card.

Medicare Part D Costs

Most Medicare Part D plans charge a monthly premium that varies by plan carrier. If you are enrolled in a Medicare Advantage Plan, or a Medicare Cost Plan that includes Medicare prescription drug coverage, your prescription drug coverage will most likely be included in your monthly premium, and in some Part C plans, there will not be a premium.

If you have a high income you may pay an extra amount on top of your standard plan premium. Just like with Part B of Medicare, in 2023, if you make over $97,000 as an individual or over $194,000 if you file your taxes jointly then you will pay an Income Related Monthly Adjustment Amount also called an IRMAA. Below is a chart that will tell you the extra amount you may have to pay based on your income.

How & When to Enroll In a Part D Drug Plan

You are eligible to enroll in a Medicare prescription drug plan if you have Medicare Part A and Part B. Enrollment in into Part D plans are limited to certain times when you have a valid enrollment Period. The (3) different types of enrollment periods include the following:

#1 | Initial Enrollment Period

This is a period when you are new to Medicare for the first time and are able to enroll in either a Medicare Advantage or stand-alone Part D plan regardless of the time of year. This enrollment period lasts for seven months beginning 3 months prior to the month you turn 65 and continues until 3 months after your birth month.

Example: If you turn 65 on June 15th then your Initial enrollment period would be March 1st – September 30th.

#2 | Annual Enrollment Period (October 15 – December 7)

Each year during the Annual enrollment Period you will have the opportunity to switch your Medicare advantage or Part D drug plan to any other plan you wish for the coming year. This is also the time to sign up for a drug plan if you have been on Medicare without drug coverage in the past. The coverage you enroll with will begin on January 1st of the following year.

Note: This does not pertain to Medicare Supplement plans as you can that coverage any time of year.

#3 | Special Election Period

Other then the two previous mention enrollment periods you can only enroll in a Part D drug plan if you qualify for a Special Election Period. The most common examples of situations that would qualify are if you are leaving a group health insurance plan or have moved outside of your current drug plans service area.

How to Avoid Penalties For Not Having Drug Coverage

Medicare Part D plans are available not only to help you pay your current drug expenses but to also protect you from very high drug costs in the future. Medicare strongly encourages you to take out a Part D plan as soon as you are on Medicare by way of a late enrollment penalty if you choose to not enroll. Depending on your circumstances, if you choose to enroll in a Part D program after you first go onto Medicare, you might have to pay a late enrollment penalty of 1% per month for each month you waited to enroll for the rest of the time you have drug coverage.

Many states have low cost Part D plans which you can select to act as a safety net, while helping to avoid the penalties. You might consider this option if you don’t currently take prescription drugs.


Shop Drug Plans Online

The Your Medicare Plan Finder tool allows you to save your medication list online, gives you instant access to the same drug plan comparison that our agents have been using for years, and it even recommends the most cost-effective plan for you. 

If you have a question or need help along the way simply give us a call and we can pull up the information you entered online without ever missing a beat.

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