Medicare Part D is an optional prescription drug coverage program available to anyone who’s eligible for Medicare benefits. It was created through the Medicare Prescription Drug, Improvement, and Modernization Act, which was passed by Congress in December 2003. It took effect in 2006.
Part D is sold by individual companies on the private market. This means benefits and costs will vary based on the kind of plan you buy and where you live. You have to have Part A or Part B (or both) to get Part D coverage. But there aren’t any restrictions as far as health history goes. You can get Part D regardless of the number of medications you take or your current health status.
Note that while Part D isn’t required, there is a time limit for enrolling without a penalty. If you don’t sign up when you’re first eligible, you may have a penalty fee added to your monthly premium if you decide to sign up later. This penalty lasts for as long as you have Part D coverage.
Types of Medicare Part D Coverage
Medicare Part D is sold by private companies in two ways:
- Standalone Part D. Standalone Part D drug plans are sold individually, apart from any medical plan. They’re available to people with Original Medicare (Parts A and B together), though you don’t have to have both parts to get a Part D plan.
- Medicare Advantage Prescription Drug Plans (MA-PD plans). Medicare Advantage plans, which are private plans that cover Medicare benefits, usually (but not always) include prescription drug coverage. MA-PD plans combine the convenience of medical benefits with drug benefits.
In 2024, there’s an average of 123 Medicare Advantage plans per state, many of which include prescription drug coverage. But “average” here can hide some real figures worth noting. For example, there are 465 MA plans in California but just 15 in Wyoming.
By contrast, there’s an average of 21 standalone Part D drug plans per state in 2024, and the average here is closer to the actual numbers for each state. Bottom line? Your access to Part D or MA-PD plans depends on where you live.
Part D Standard Cost Changes from 2023 to 2024
As with any insurance plan, standard benefits may change from year to year. Here’s how the out-of-pocket costs under Medicare Part D are changing from 2023 to 2024:
|Initial deductible max||$505||$545|
|Initial coverage limit||$4,660||$5,030|
|Catastrophic coverage coinsurance*||5%||Eliminated|
|Average monthly premium (projected)||$31.50||$34.50|
|* The cost of prescriptions once you exit the coverage gap and enter “catastrophic coverage” varies. You’ll pay a percentage or flat rate for certain drugs depending on category. Not every enrollee hits the catastrophic limits. In 2024, cost-sharing in the catastrophic phase is eliminated.|
Medicare Part D plans don’t have to have a deductible or a monthly premium, but they typically have both. Federal law sets a maximum yearly deductible for Part D. Individual drug plans can have a lower deductible, but they can’t set a higher one than the federal limit. Out-of-pocket costs also vary with private drug plans.
As of 2020, the Medicare Part D “donut hole,” or coverage gap, no longer exists in spirit. Technically, there is still a gap between your initial coverage limit and the point at which you reach catastrophic coverage. Most enrollees never reach the coverage gap, but if you do, you’ll pay 25% of the cost of both brand name and generic drugs until you reach your plan’s catastrophic coverage limit. This then triggers lower cost sharing for the rest of the year.
Other Important Part D Changes
In 2021, a voluntary program launched for Part D drug plans called the Senior Savings Model. This program will run for five years (through December 31, 2025). It’s designed to test whether Medicare enrollees benefit from enhanced Part D plans that offer lower insulin costs, since, according to the Centers for Medicare and Medicaid Services (CMS), about a third of Medicare beneficiaries have diabetes and over 3.3 million of them use one of the common forms of insulin. Under this enhanced model, Part D plans that participate will cap a 1-month supply of insulin at $35.
The model also allows Part D plans to offer supplemental benefits during the coverage gap phase of a prescription drug plan, meaning people could save on insulin costs once the plan hits its initial coverage gap as well.
This is a really technical change to the way Part D plans can offer benefits (for insulin coverage), but suffice it to say, the government is trying to lower insulin costs and this model may help drug plans do that.
The Senior Savings Model is now in its second year. Several major pharmaceutical manufacturers participated in the model for 2022 to help drug plans lower insulin costs for enrollees:
- Eli Lilly and Company
- MannKind Corporation
- Mylan Specialty L.P., a Viatris Company
- Novo Nordisk, Inc. and Novo Nordisk Pharma, Inc.
- Sanofi-Aventis U.S. LLC
In 2022, an average of about 7 standalone Part D drug plans and 42 Medicare Advantage prescription drug plans in each state used this model.
New for 2024, the cost-sharing at the catastrophic drug coverage level has been eliminated. If you reach the catastrophic level ($8,000 in total plan spending in 2024), your Part D plan will cover the remainder of your covered drug costs through the rest of the year. This is a significant change, particularly for people who need high-cost specialty drugs.
Open Enrollment 2024
Each year, current Medicare beneficiaries can use the Medicare Open Enrollment Period to make changes to their coverage for the following year. That includes making changes to Part D coverage, like adding a new plan if you don’t have one or switching from one Part D plan to another.
As you’re shopping and comparing Part D plans for next year, keep a few things in mind:
- Monthly premiums can increase each year.
- Plan benefits may change as well.
- Covered drug lists and formularies can change, but you need to be given 60 days’ notice of these changes.
- If you’re using the OEP to enroll in a drug plan for the first time, you may owe a penalty fee for late enrollment if you’ve gone without creditable drug coverage for 63 days in a row.
If you have a Medicare Advantage plan or standalone Part D plan, you should get an Annual Notice of Change (ANOC) from your insurance company each fall that outlines the changes coming to your plan in January. Take the time to look over this notice. Your medications may no longer be covered, or your costs could go up. Review the ANOC carefully.
According to CMS, which administers Medicare, most people (78.8%) with a current Part D plan will have access to a Part D plan in 2024 that costs less than the one they had in 2023. The OEP runs from October 15th through December 7th. This is a good time to review what you have and make sure it’s still working for you. Any changes you make during this time will take effect on January 1st.