Medicare Part D Coverage: Are My Drugs Covered?
Medicare Part D is a prescription drug program offered by private insurance plans. Medicare Advantage (Part C) plans also provide medication coverage.
According to the Kaiser Family Foundation, 50.5 million eligible Medicare recipients are enrolled in Part D plans. Most of those enrolled in Part D plans choose drug plans as part of Medicare Advantage.
In 2023, there are fewer premium-free options for Part D plans. There are only three benchmark companies providing premium-free coverage to nearly 60% of Part D enrollees.
Read on to discover what Medicare Part D is, what it covers, and how to know what you will pay in 2024.
What is Medicare Part D?
Medicare has several parts, each offering different benefits to help pay for healthcare-related costs, including prescription drugs. While Medicare parts A and B both offer some prescription drug coverage, they don’t cover the medications you take at home.
Medicare Part D provides the most comprehensive prescription medication coverage for outpatient needs. Part D covers medications you get at your local pharmacy, mail order, or other pharmacies.
You must be enrolled in either Medicare Part A or Part B to join a Part D plan, and individual Part D plans offer different levels of coverage.
The plan you choose will determine how much you pay. Fees such as copays, coinsurance, and deductibles are based on things like where you live, your income, and the medications you take.
What medications are covered by Medicare Part D?
Medication coverage differs from plan to plan. All plans have a list of covered drugs called a formulary.
This is a grouping of all the medications the plan covers. When selecting a plan, be sure to list the medications you take or review the formulary to make sure your medications are there.
Medicare also requires all plans to cover some specific types of medications and to cover at least two medications from the most prescribed drug categories.
All Part D plans must cover the following classes of drugs:
HIV medications
cancer treatment medications
anticonvulsants
antipsychotics
Medicare does not cover certain medications like:
weight loss or weight gain medications
hair loss treatments
fertility medications
over-the-counter medications
dietary supplements
Medicare drug costs have been steadily increasing over the past decade. In the past few years, some of the most popular medications had price increases above the rate of inflation.
This matters because your coinsurance is a percentage of the list price of the drug you are purchasing, so if you take certain medications, your costs may be higher year to year as drug prices increase.
Also, if you live in different locations during the year, it’s important to choose a plan that allows you to fill your medications at any pharmacy. Some plans may restrict you to one pharmacy.
Medicare has a tool to help you choose a Part D plan based on your ZIP code and the medications you take. The tool helps you compare the coverage and costs of different plans in your area. You’ll be asked several questions, including your ZIP code, the type of coverage you are researching, and the prescription medications you take.
What is the tier system for Medicare Part D?
Every Part D plan formulary has a tier or step system. Think of it as a pyramid. The medications at the bottom of the pyramid are less expensive, and the ones at the very top are the most expensive. Most plans have four to six tiers.
Here’s how a formulary tier system works:
Medications on the tiers can be different for each plan, so it’s good to know where your medications fall within the tier system of the specific plan you are considering. Copays and coinsurance can vary based on tier level as well.
Can you appeal if your drug isn’t covered?
In some cases, if your medication isn’t covered or if coverage is dropped for your medication, you can appeal to the plan for an exception. You can either call the number on your card for your plan or use Medicare’s list of contacts who may help you.
Your doctor may have to write a letter explaining the need for you to take the medication. There are five levels of appeal. Each time you file an appeal, be sure to keep records for yourself. Add any additional information the plan may find helpful in making the decision to cover the medication.
Decisions about covering medications that aren’t on a plan’s formulary are made on an individual basis.
Does Medicare Part D cover generic drugs?
All Part D plans cover generic and brand name medications using the formulary tier system. Tier 1 generics are generally preferred since the plan and copays are usually the lowest.
Keep in mind each plan has different generics on its tier formulary, so it’s important to be sure the medications you take are on the list. If a medication isn’t on the formulary list, ask your pharmacy how much it would cost to buy that medication without Part D.
Also, plans can change the medications they offer in their tiers. It’s important to check every year during annual open enrollment before you sign up for a Part D plan to be sure your plan still covers the medications you take.
How much does Medicare Part D cost?
Several factors determine how Part D costs are calculated, including out-of-pocket costs such as deductibles, premiums, coinsurance, and copayments.
In addition to these costs, Part D has a premium in addition to the premiums you pay for your Original Medicare parts.
Factors that determine how much you’ll pay for Medicare Part D and for your prescription drugs include:
Deductible
In 2024, guidelines say the deductible can’t be more than $545 for any Part D plan.
You can choose plans that have $0 deductible based on the medications you take. For example, some Part D plans offer tier 1 and 2 medications with no deductible.
Premiums
A premium is a monthly fee you pay to be included in a specific Part D plan. The 2024 national average monthly premium rate will be about $0 for more than 60% of Medicare recipients with drug plans.
Copays
A copayment or copay is the fee you pay for an individual drug. Copays are set by the plan you choose and the medications you take.
Coinsurance
Coinsurance costs are determined by the specific plan you choose and in which tier your individual medication is placed.
Coinsurance will be a percentage of the cost of a medication. After you have met your deductible, you’ll begin paying this fee if the Part D plan you choose requires it.
Donut hole
The “donut hole” or coverage gap for Part D plans also affects how much you pay each year.
In 2024, you’ll enter the donut hole when you have spent $5,030. While you’re in the gap, you’ll have to pay 25% of the cost of your prescription medications until you reach $8,000 out-of-pocket costs.
The remaining 75% of the cost for brand named medications will count toward your $8000 out-of-pocket costs; however, the remaining 75% cost of generic medications does not count toward your out-of-pocket max.
To find help pay for your prescription drug costs, see if you qualify for Medicare Extra Help by contacting your State Health Insurance Assistance Program (SHIP), your state’s Medicaid office, or calling Medicare at 800-633-4227.
Where you live
Individual Part D plans available to you are based on where you live, and costs vary by plan. Different plans are offered in different locations, and costs can vary greatly.
Medications you take
Medication costs vary depending on the Part D plan you choose, the drug’s tier, and whether there is a generic option.
Your income
If your income is a certain amount, you’ll be required to pay an extra fee called a Part D income-related monthly adjustment amount (Part D IRMAA) directly to Medicare. This fee is in addition to your monthly Part D premium. You’ll be notified if you are required to pay the Part D IRMAA.
Medicare Part D Late enrollment penalty
Although Part D coverage is optional, Medicare requires you to have at least basic prescription drug coverage within 63 days of when you become eligible for Medicare. If you don’t, you will face a late enrollment penalty.
Part D late enrollment penalty: This permanent fee is 1% of the average monthly prescription premium cost, multiplied by the number of months you were late in enrolling. If you enroll late, you will always pay the penalty in addition to Part D premiums and other costs.
Avoid the late enrollment penalty: If you have prescription drug coverage from your employer, union, Veteran’s Administration, or other health plans, you can keep that plan if it offers at least basic required coverage or “creditable coverage” based on Medicare guidelines.
Sign up even if you take no medications: Even if you don’t take any prescription drugs when you become eligible for Part D, it’s important to sign up for a low-cost Part D plan to avoid the penalty in the future.
Who’s eligible for Medicare Part D?
Part D eligibility requirements are the same as those for Original Medicare and include those who:
are age 65 or older
have received Social Security disability payments for at least 24 months
have a diagnosis of amyotrophic lateral sclerosis (ALS)
have a diagnosis of end stage renal disease (ESRD) or kidney failure
have received Social Security disability for at least 24 months
You can buy a standalone Part D drug plan based on your medication needs or get Part D coverage through Medicare Advantage (Part C) plans.
Open enrollment to join a Part D plan starts October 15 and runs through December 7. Every year during this time, you can join a new Part D plan or switch out of your current plan to a different plan.
From January 1 to March 31 of each year, you can change your Medicare Advantage plan with Part D coverage. You can also switch to an Original Medicare plan from an Advantage plan during this time.
Help with paying for your prescription drugs
You can save costs with Original Medicare if you have a Medigap plan to help pay some of your out-of-pocket costs.
Depending on the medications you take, it’s a good idea to compare the costs of Part D with Medigap and a Medicare Advantage plan that includes prescription drug coverage.
Medicare also has a program called Extra Help for people with limited resources or who need help paying their Part D costs. You may qualify if you meet income requirements, are on Medicaid, or meet other eligibility standards.
Some pharmaceutical companies offer medications at a reduced cost for people who qualify. If you’re having trouble paying for your prescription medication, try contacting the manufacturer to see if they have an assistance program.
The takeaway
Medicare Part D prescription drug coverage saves millions of Americans money on prescription drug costs every year.
Plans vary by location, and your costs will depend on the type of plan you choose, its formulary tiers, other out-of-pocket costs, and premiums.
Compare plans including Advantage plans, Medicare Part D stand-alone plans, and Medicare Part D with a Medigap plan to help choose the best option for your needs.
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