Original Medicare doesn’t cover prescription drugs. If you need coverage for prescriptions and you have Medicare, you’ll need to buy Part D coverage. You can do this with a standalone Part D plan or a Medicare Advantage plan that includes coverage for prescription drugs (also called MAPD plans).
Prescription drug coverage was made available to people with Medicare via a 2003 law that took effect in 2006. But you can only buy it from private companies. The federal government doesn’t sell health or drug plans.
Because Part D plans are sold by individual companies, every plan is different in both coverage and cost. You may qualify for financial assistance if you meet the income requirements, or you might even pay more for your coverage if your income is in a higher bracket.
Here’s what you need to know about Medicare Part D, including when to enroll.
Do I need to enroll?
There are three questions to ask when deciding if you need Medicare’s drug coverage:
- Do you have other options for drug coverage, like a job-based health plan or military benefits?
- What’s your monthly income and how much do/can you spend on prescriptions?
- How often do you need medication?
That last question can be hard to guess if you don’t already take regular prescriptions. If you need regular medication, then getting a prescription drug plan is a no-brainer. But if you’re someone who only needs occasional coverage, then it can be a harder decision.
Take some time and add up the numbers. You may need more prescriptions as you get older, and getting a Part D plan could help offset those costs.
As for your other drug coverage options, Medicare’s basic drug benefit uses the term “creditable” when looking at other plans. Creditable plans have benefits that are at least as good as or better than Medicare’s basic drug benefit. If you currently have coverage through your employer or insurance company, they will send a letter each year advising of the plan’s status as creditable. If the coverage is not creditable, you can enroll in Part D coverage without a penalty.
If you have coverage outside of Medicare, always be sure that taking Medicare coverage will not negate your benefits under your private plan. Some plans are not compatible with Part D. Joining a Part D plan can cause you to lose your benefits and not be able to get them back.
Take a look at your current prescriptions and their costs, and compare them to the benefits offered under other plans. Be sure to compare both the drug and the dosage, since these vary by plan, and include the premium when you’re crunching the numbers.
Enrolling in Part D
You can get a Part D plan when you’re first eligible for Medicare or during open enrollment.
- Initial enrollment period (IEP). This is your first and best option for getting a Part D plan. Your IEP runs for 7 months: 3 months before the month you turn 65, the month you turn 65 and the 3 months after that month. So, for example, if your birthday is March 11th, your IEP runs from December 1st through June 30th. This is when you can first enroll in Medicare and when you can choose to buy Part D coverage (or enroll in Medicare Advantage, which may include prescription drug coverage).
- Open Enrollment Period. If you have Medicare already, you can use the annual election period, also called the Open Enrollment Period, to change your health or drug plan. That includes signing up for a Part D plan if you don’t have one or changing plans if you do. The AEP runs from October 15th through December 7th each year. Coverage changes take effect January 1st.
- Special spring enrollment. If you didn’t use your IEP to enroll in Medicare when you were first eligible and instead enrolled in just Part B during the General Enrollment Period (January 1st through March 31st), you can add Part D coverage during a special spring signup window. It runs from April 1st through June 30th, and coverage takes effect July 1st.
For more information about Medicare enrollment, check out our overview of when to enroll.
Part D Costs
Part D drug plans typically charge a monthly fee, aka your premium, which varies based on where you live and the kinds of coverage available in your area.
The average projected Part D premium in 2022 is about $33 according to the Centers for Medicare and Medicaid Services (CMS).
Along with a premium, you might also have a deductible for your drug coverage. In 2022, Part D plans can’t set an annual deductible that’s higher than $480. Your plan may have a lower deductible, but it can’t have a higher one.
Part D also has a cap in place on what the plan will pay for your prescriptions. It’s called the initial coverage limit. In 2022, that limit is $4,430.
Once the plan hits that amount, you’re in the coverage gap of Medicare Part D. It’s also called the “donut hole.” While you’re in this gap in coverage, you’ll pay 25% of the cost of your medications (both brand and generic) until spending reaches the catastrophic limit ($7,050 in 2022). At that point, what you pay out of pocket for your prescriptions drops to 5% or a low set dollar amount.
Most people don’t ever hit the coverage limit and avoid the donut hole scenario entirely. But if you need a lot of medications or several expensive ones, you may be one of the few who end up in the gap. The Affordable Care Act effectively “closed the gap” — people used to pay more for their drugs in the donut hole — by allowing people to pay 25% of the cost instead of the whole thing.
But 25% of some drugs is still a lot of money, especially for those with limited income or a tight budget. If you need help paying for Part D costs, Medicare offers an “Extra Help” program for those who qualify.
This program provides assistance to people with limited income and offers significant savings if you’re eligible. The income limit for Extra Help in 2021 is $19,320 a year for individuals and $26,130 a year for married couples. There’s also a limit on resources ($14,790 for individuals and $29,520 for married couples). These limits don’t necessarily mean you can’t get any help if you earn more (or have more resources). You’ll need to file an application with Social Security so they can determine if you qualify.
People on Medicaid who reside in a skilled nursing facility or are receiving Supplemental Security Income automatically qualify for Extra Help. Other people can apply for and receive some assistance in the form of fixed copays for both generic and brand name prescriptions.
If you don’t qualify for Extra Help, you may qualify for aid under your state health insurance assistance program (SHIP).
Choosing a Part D Plan
Actually choosing a Part D plan can be the most daunting part of the process. Choose wisely, since you’ll have this coverage for a year and likely won’t be able to make any changes before the next open enrollment period.
And on that note, make use of the Medicare Open Enrollment Period (also called the Annual Election Period) each year. It runs from October 15th through December 7th. You can use this period to make any changes you need to your Medicare coverage, including switching from Original Medicare to Medicare Advantage or adding a Part D plan to your Original Medicare benefits.
Whenever you’re enrolling in Part D, keep a few things in mind.
- It’s a good idea to write down every prescription you take, the dosage and its cost. This might seem like a chore, but it’ll help you weed out plans that don’t cover at least what you already need. The out-of-pocket cost of a drug depends on what kind of drug it is (generic or brand name and type), and these costs vary widely.
- Companies that provide Part D coverage change their plans every year. These changes can affect the premium, out-of-pocket costs, copays and the drugs covered. Some plans offer donut hole coverage for a plan year, then remove it during the next year. Your insurer is required to provide an Annual Notice of Change outlining the changes to your plan by September 30th to provide you enough time to look for a new plan. If you don’t get this notice when you should, contact your insurer and ask for a copy.
- You may not find a plan that covers everything. There’s always the chance that you may not find a plan that covers all of your prescriptions, particularly those that are new or extremely expensive. If that’s the case, talk to your doctor before you enroll to find out if there are any alternatives that can work for you. And if this isn’t an option, then your doctor can request an exception in writing to appeal the denial. Companies may make an exception for specific medical conditions.
Enrolling in Part D coverage is voluntary. But consider your health needs, your budget and the likelihood of needing prescriptions as you get older. It may be worth the extra cost to make sure you’re covered for at least the bulk of what you need. Part D standalone plans can be an affordable add-on to Original Medicare, or a Medicare Advantage plan that covers prescription drugs could be a convenient way to get all your benefits at once. Take the time to assess what you need, and make a plan that works for you.