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Medicare Prescription Drug Plans, or PDPs, are sold through private health insurance companies approved by the federal government. They cover Medicare-approved prescription drugs.
Medicare is the federal health insurance program primarily for Americans 65 and older. It comes in four parts: A, B, C and D. Each Medicare part is responsible for covering certain health care expenses. Medicare Part D plans cover prescription drugs. Here’s what you need to know about Medicare Part D.
Medicare Prescription Drug Plans, or PDPs, are sold through private health insurance companies approved by the federal government. They cover Medicare-approved prescription drugs, which are not covered by Original Medicare.
Original Medicare is comprised of Medicare Part A, which covers inpatient (hospital) services and Medicare Part B, which covers outpatient (doctor) services. Medicare Part C, also known as Medicare Advantage, is a private alternative to Original Medicare.
If you’re on federal retirement benefits, you are automatically enrolled in Original Medicare on the first day of the month you turn 65. You can then buy a Medicare Part D plan and/or Medicare Plan C plan.
Our partner Via Benefits can help you compare and buy Medicare plans in your area.
The drugs covered by any given plan vary. You can tell what prescriptions one will pay for by viewing its formulary. The formulary groups covered drugs into tiers. The higher the tier, the higher your copay, though your health care provider can sometimes negotiate a lower copay, if they feel you need a more expensive medication.
Insurers can make changes to their formularies, but they must provide written notice 60-days before it effects you.
Original Medicare beneficiaries receive most of their vaccine coverage through their Medicare Part D prescription drug plan. Medicare Part C beneficiaries get their vaccine coverage through their Medicare Advantage Prescription Drug plans (MAPD).
All Medicare prescription drug plans must cover commercially available vaccines when medically necessary. But the rules regarding administration and payment for each immunization varies across plans, along with your copays, coinsurance, premiums or deductibles. Check your formulary to see if a specific vaccine is covered and how much it will cost you. Vaccinations commonly covered by Medicare Part D plans include:
Medicare Part B does cover a few vaccines, including a seasonal flu shot, a pneumococcal (pneumonia) vaccine, Hepatitis B shots for high-risk beneficiaries and certain shots when they’re related to a doctor’s treatment of an injury or illness.
Learn more about Medicare vaccine coverage.
Medicare Part D beneficiaries are subject to a monthly premium, annual deductible and copays, but prices vary by plan, state and income. Many beneficiaries enter a coverage gap — also known as the Medicare donut hole — where they’ll temporarily pay higher prices for meds. Finally, there is a late enrollment penalty associated with foregoing prescription drug coverage for an extended period of time. Let’s break each expense down further.
The average basic monthly premium for a 2019 Medicare Part D plan is around $32.50, per the Centers for Medicare and Medicaid Services (CMS). That's a small decline from the average $33.60 premium beneficiaries paid for Medicare Part D in 2018.
However, costs vary by plan, state and income. If you make over a certain amount, you’re subject to what’s known as an income-related monthly adjustment amount (IRMAA). In basic terms, if you make more, you’ll pay more. Here’s how your income as of 2016 tax returns sets your 2018 premiums.
|Individual tax filers||Married filing jointly||Married filing separately||Premium|
|$85,000 or less||$170,000 or less||$85,000 or less||Your plan premium|
|$85,001 to $107,000||$170,001 to $214,000||N/A||$12.40, plus plan premium|
|$107,001 to $133,500||$214,001 to $267,000||N/A||$31.90, plus plan premium|
|$133,501 to $160,000||$267,001 to $320,000||N/A||$51.40, plus plan premium|
|$160,001 to $499,000||$320,001 to $749,999||$85,001 to $414,999||$70.90, plus plan premium|
|$500,000 and over||$750,000 and over||$415,000 and over||$77.40, plus plan premium|
Keep in mind, you have to enroll in Original Medicare to buy a Medicare Part D plan, so you’ll also pay the premium associated with Medicare Part B. Plus, if you go long enough without prescription drug coverage, you’ll face the late enrollment penalty, which gets tacked on to your monthly premium.
Medicare beneficiaries face the Part D late enrollment penalty if they go 63 days or more without prescription drug coverage after their initial enrollment period ends. You don’t necessarily need to buy a Medicare Part D. You can skip the fee if you have one of the following:
The Medicare Part D late enrollment penalty is 1% of the national base beneficiary premium ($35.02 in 2018) times the number of months you were eligible for, but went without prescription drug coverage. That amount gets rounded to the nearest $0.10 and added to your monthly premium.
A deductible represents the amount of money you’re expected to pay before your coverage kicks in. Medicare Part D deductibles vary across plans — and some don’t come with one at all. However, in 2018, Medicare drug plan deductibles are capped at $405.
Copays or coinsurance are a set amount or percentage, respectively, you pay for your prescriptions. Copays/coinsurance vary by plan, tier (drugs are grouped with higher-tier meds costing more than lower-tier ones) and whether you’ve hit the Medicare Part D coverage gap
The Medicare Part D coverage gap, or Medicare Part D “donut hole”, is a temporary limit on how much your plan will pay for your prescription drugs. In 2018, Medicare beneficiaries enter the coverage gap once the insurer has spent $3,750 on prescriptions (copays included). They exit the coverage gap once they’ve spent $5,000 out-of-pocket on prescription drug expenses, including prior copays/coinsurance and your yearly deductible.
Most people enter the Medicare Part D coverage gap at some point during the year. However, once you do, you’ll receive a discount on prescriptions: Medicare pays 56% of the price for generic drugs and pharmacies or mail-order drug companies will charge no more than 35% of the plan's cost for covered brand-name prescriptions. The full price of these prescriptions, however, will cost toward your $5,000 out-of-pocket limit.
Learn more about the total cost of Medicare.
Medicare recipients actually have two major options when it comes to prescription drug coverage. They can purchase a Medicare Part D plan or a Medicare Part C plan. Medicare Part D plans only cover prescription drugs, while Medicare Part C plans must cover everything Original Medicare does, i.e. inpatient and outpatient health care expenses.
Medicare Part C plans, commonly called Medicaid Advantage Plans, often cover services and supplies Original Medicare does not, including dental, vision and hearing insurance. Most of them also cover prescription drugs. If you have a Medicaid Advantage plan, you probably don’t need a Medicare Part D plan. In fact, if you have a Medicaid Advantage plan that offers prescription drugs, you can’t purchase a Medicare Part D plan.
If you’re on Original Medicare and you don’t have prescription drug coverage through another source, you should purchase a Medicare Part D plan. Drugs are expensive and you’ll face a penalty if you enroll after your initial enrollment period.
If you have prescription drug coverage through an employer or trade group, you’ll need to determine whether that coverage surpasses the Medicare Part D plans you can buy in your area. If you are considering switching to a Medicare Part D plan, contact your employer first. Your workplace coverage might terminate for good once you purchase a plan — for you and your dependents.
When to consider Medicare Part D
When you can possibly skip Medicare Part D
Whether you should opt for Original Medicare/Part D over Medicare Part C depends on your health care needs and what plans are offered in your area. You’ll have to compare plans and their major costs — premiums, deductibles, copays or coinsurance — carefully.
You must first enroll in Original Medicare. If you aren’t automatically signed up — meaning you’re 65, but not yet on federal retirement benefits — you can enroll in Medicare by visiting your local Social Security office, calling 1-800-772-1213 or filling out an application online at the Social Security Administration website.
Once you’re enrolled in Original Medicare, you can find Medicare Part D plans in your area on the Medicare website and purchase the one you want directly from the insurer. However, you can only by a Medicare Part D plan during certain times of the year.
Initial enrollment gives new Medicare beneficiaries seven months to buy coverage, starting three months before the month they turn 65.
Open enrollment runs from Oct. 15 to Dec. 7 each year. It’s also called the annual election period (AEP).
Special enrollment occurs after a major life event, like a move or loss of coverage. It’s also known as a special election period (SEP).
Finally, the Medicare Advantage Disenrollment period occurs January 1 to February 14 each year and allows Medicare beneficiaries to drop Medicare Part and revert back to Original Medicare. At that point in time, you can also purchase a Medicare Part D plan.
Learn how to apply for Medicare.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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