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What’s Medicare Part D?

Woman reading prescription bottle label with her laptop in front of her.

As you prepare to enroll in Medicare for the first time, you might be concerned about how you’re going to afford the medications that you need.

You may be surprised to learn that Original Medicare doesn’t cover prescription drugs. Instead, you need to purchase a Medicare Part D plan for prescription drug coverage. Keep reading for important information you need to know about these plans.

What is Medicare Part D?

Medicare Part D is prescription drug coverage for people on Medicare. Unlike Original Medicare, which is managed by the federal government, Medicare Part D plans are sold by private companies. How you get prescription drug coverage depends on if you’re enrolling in Original Medicare or a Medicare Advantage plan:

  • Original Medicare doesn’t include prescription drug coverage and you need to purchase a standalone Medicare Part D plan.
  • Most Medicare Advantage plans include Part D benefits. However, in certain types that don’t, you can join a standalone Part D plan.

What is Covered by Medicare Part D?

Because Medicare Part D plans are offered by numerous private companies, covered drugs vary plan to plan. However, every plan must provide at least a standard level of coverage.

Each Medicare Part D plan has a formulary, which is a list of covered drugs. As you consider a particular plan, it’s important to ensure your medications are included in its formulary.

If you’re later prescribed a drug that’s not on the formulary, then you can request an exception, pay out of pocket or file an appeal.

Can I Use Medicare Part D at Any Pharmacy?

Most Part D plans have networks of approved pharmacies in your area. You’ll typically pay less for prescriptions at in-network pharmacies. If you have a preferred pharmacy that you like to use, then look for plans that include your pharmacy in network.

How do Medicare Part D Plans Work?

In general, Medicare Part D plans can have four stages of coverage each year:

  1. Deductible: Some plans require you to pay an annual deductible, or 100% of the cost of your prescriptions up to a certain limit before your plan pays.
  2. Initial coverage: You pay your share of prescription costs, such as copayments and coinsurance, and your plan pays the rest for your covered drugs.
  3. Medicare Part D coverage gap (aka the “donut hole”): Many Part D plans have a built-in coverage gap that opens after initial plan coverage limits are reached and before catastrophic coverage kicks in. In 2023, the donut hole is limited to 25% for brand-name and generic drugs.
  4. Catastrophic coverage: Starting in 2024, you pay $0 once your plan enters the catastrophic stage.

How Much Does Medicare Part D Cost?

Medicare Part D costs vary plan to plan. In 2023, the average national premium is $32.74 a month, and the annual deductible cannot be more than $505 for the year. Coinsurance and copays vary, but in most plans, you’ll reach the coverage gap after spending $4,660.

Some people with limited income and resources qualify for the Extra Help plan, which helps them cut or lower Part D costs.

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When Can I Join a Medicare Part D Plan?

There are certain times when you can join or switch plans:

  • During your initial enrollment period (IEP)
  • During the Medicare annual enrollment period (AEP)
  • During the Medicare Advantage open enrollment period (OEP)
  • During the general enrollment period (GEP)
  • During a special enrollment period (SEP)

Get more details about when these Medicare enrollment periods happen so you know when to sign up for coverage!

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