Medicare Part D Prescription Drug Coverage: The Basics

Medicare Part D covers some of the costs of prescription drugs you take at home.

Medicare covers some of the costs of prescription medications through "Part D." This Medicare Part D prescription drug benefit is administered through private insurance companies and replaces drug coverage previously provided through medigap plans, many managed care plans, Medicare drug discount cards, and most Medicaid coverage.

Medicare Part D, however, does not make medication free. Most beneficiaries must pay a small monthly premium, a yearly deductible, and a copayment or coinsurance for each prescription.

Who Is Eligible for Medicare Part D?

Anyone entitled to Medicare Part A (whether actually enrolled or not), or anyone currently enrolled in Medicare Part B, may join Medicare Part D. (To learn more about Medicare Part A and Medicare Part B, read Nolo's article Medicare FAQ.)

Enrollment is voluntary, except for people who also receive benefits from Medicaid. If you qualify for Medicaid, the government automatically enrolls you in a Medicare Part D plan, through which you will receive your prescription drug coverage.

Medicare Part D does not replace drug coverage through Veterans Affairs, TRICARE, the Federal Employee Health Benefits program, or employer-sponsored drug coverage if that coverage is equal to what is offered by a basic Medicare Part D plan.

Stand-Alone Part D vs Medicare Advantage With Part D

Part D drug coverage is available through a stand-alone prescription drug plan (PDP), for those who use traditional Medicare, or as the prescription drug component (called an MA-PD) of a Medicare Advantage managed care plan, which is like an HMO. Medicare Advantage plans don't charge a separate monthly premium for Part D, and some waive the Part D deductible.

Part D Costs

Most beneficiaries pay a monthly premium, a yearly deductible, and a copayment for each prescription. However, some plans waive the deductible and some low-income Medicare beneficiaries can get help with Part D costs. (Some Medicare beneficiaries may qualify for a low-income subsidy (LIS), called Extra Help, to help pay costs associated with Part D plans.)

Premiums

A premium is the monthly amount you pay directly to your prescription drug or managed care plan to maintain enrollment in Part D coverage. Amounts vary from about $0-$90 per month.

Deductibles

The deductible is the amount you must pay out-of-pocket for covered medications before your Part D plan begins contributing. With most plans, the 2019 deductible is $415 per year. However, some plans offer "first dollar" (no-deductible) coverage, which means the plan begins paying its share for an enrollee's first covered prescription of the year.

Initial Copayments

After you pay the deductible, your Part D plan pays most of the cost of covered drugs. You are personally responsible for the remainder, known as a copayment, or coinsurance. Under Medicare's minimum standards, people without a low-income subsidy pay no more than 25% of the prescription cost and the plan pays no less than 75% (after the deductible is met). This split continues until total covered expenditures have reached the year's coverage gap (see below).

Under several circumstances, a Part D plan enrollee may not have to pay the normal copayment for a covered drug. For example:

  • People who live in a long-term care nursing facility and who are enrolled in both Medicare Part D and Medicaid have no copayments.
  • Some plans waive or reduce copayments for certain drugs, particularly generic versions, to coax people to join that particular plan, but the plan can change this copayment waiver at any time.
  • Pharmacies may waive copayments for any drug for an enrollee with a low-income subsidy. The waiver is not automatic; you have to ask for it.

Gaps in Part D Coverage

In addition to the costs discussed above, there are restrictions on prescriptions, as well as a coverage gap.

Coverage Gap

A notorious part of the Part D program is the coverage gap, popularly referred to as the "donut hole." After you and your plan together pay a certain amount for covered prescription drugs ($3,820 in 2019), your plan may charge more for your prescriptions. The plan begins to pay again—and pays 95% of all further costs—when total expenditures reach a "catastrophic" level ($5,100 in 2019). Low-income Medicare beneficiaries with a subsidy do not have a coverage gap.

Certain Drugs Excluded by Law

Medicare prohibits Part D plans from covering most medicines within certain drug categories, even if lawfully prescribed by a physician. These include:

  • barbiturates (certain sedatives)
  • benzodiazepines (certain tranquilizers)
  • drugs used for weight loss or weight gain, and
  • over-the-counter medications.

Some state Medicaid programs, however, continue covering some of these drugs for people who are also enrolled in a Medicare Part D plan.

Enrolling in Part D

You enroll in a Part D plan by signing up directly with the plan you want to join. If you don't enroll in a plan when you are first eligible for it, your premiums will be higher when you do finally enroll. (Medicare charges an additional 1% premium for each month you delay enrolling). So carefully consider when you will enroll in a Part D plan. Before you choose a specific plan, research several. (For help choosing a plan, read Nolo's article Medicare Part D: Choosing a Prescription Drug Plan.)

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