What Is Medicare Part D? A Guide to Prescription Drug Coverage

How to Get Prescription Drug Coverage

When getting Medicare coverage for prescription drugs, you have two options: a stand-alone Part D plan or a Medicare Advantage plan with Part D coverage.

A stand-alone Part D plan will work in addition to your Original Medicare coverage, while a Medicare Advantage plan with Part D coverage will replace your Original Medicare coverage. Despite the difference, the way these two options function regarding medications is similar.

They’re offered through private insurers, but Medicare Part C and D must follow the coverage guidelines set forth by the Centers for Medicare and Medicaid Services. Both plans must have coverage as good or better than the Medicare standard model and include the same coverage phases.

What Does Medicare Part D Cover?

Medicare Part D plans are required to cover at least one drug type from each therapeutic class, which ensures that all plans cover a prescription drug to help with medical conditions. Each program, however, has its own formulary, or list of covered medications.

The formulary will show all the prescription medications covered, which drug tier the drug falls under, and any authorization rules, such as step therapy and quantity limits.

Most plans follow a five-tier system in which the Tier 1 prescriptions are the cheapest — often generic — drugs and Tier 5 drugs are the most expensive specialty medications.

Which Drugs Are Not Covered?

Original Medicare offers coverage for medically necessary procedures and conditions, and drug coverage falls in line with this. With a Medicare Part D plan, there will be at least one option for every drug type for medical conditions.

A Medicare prescription drug plan will not cover medications for items not covered by Medicare, such as cosmetic surgery.

The following drug types won’t be covered by Medicare prescription drug coverage unless the drug is used for another medically necessary health condition.

• Medications used only for cold or cough symptom relief.
• Medications for the treatment of erectile dysfunction.
• Prescription vitamins and minerals.
• Medications for the treatment of weight gain, weight loss, or anorexia.
  • Part D could cover medicines used for the treatment of physical wasting caused by cancer, AIDS, or other diseases.
• Nonprescription drugs such as aspirin and over-the-counter drugs.
• Medications for hair growth or cosmetic purposes.
  • Drugs used to treat medical conditions such as vitiligo, psoriasis, acne, or rosacea aren’t considered cosmetic drugs. Part D may cover these medications.
• Fertility medications.

Restrictions and Limitations

The formulary will cover any medication restrictions that need additional authorization. These plans can use these tactics to help keep costs low and ensure that more expensive drugs are used only when necessary.

These tools include:

• Step therapy: Requires trying less expensive drug options before the more expensive drug is covered.
• Prior authorization: Requires authorization from your healthcare provider before medication coverage begins.
• Quantity limits: Limits the amount of a particular drug you can get between refills.

What to Do If Your Drug Isn’t Covered

If you or your doctor feel it’s necessary to use a medication not covered by your plan, you can file for an appeal or formulary exception. To file for an exception, you or your doctor must submit proof to the drug plan to support the exception request.

The drug plan is required to notify you of the decision within 72 hours of receiving the supporting information. If your case is expedited because of an urgent health need, the plan must notify you within 24 hours.

The Costs of Medicare Part D

As with other Medicare costs, Medicare Part D comes with some costs you’ll want to account for.

Monthly Premiums

Medicare Part D plan premiums vary depending on your chosen program and where you live. The average cost of a Part D plan is approximately $30, but there are some plans under $10 per month. You may be required to pay copays, deductibles, and coinsurance in addition to your monthly premium.

Monthly Adjustments

If you're a higher-income Medicare beneficiary, you may be subject to an Income Related Monthly Adjustment Amount, or IRMAA. If that’s the case, your monthly premium will have an additional amount added.

Yearly Deductibles

The Medicare standard model allows prescription drug plans to implement a deductible if it's not more than the outlined deductible. Some plans will have a deductible that applies to all tiers, while others may not have a deductible at all or may not apply to all drug tiers.

Copayments or Coinsurance

You’ll be responsible for a copay or coinsurance when picking up your prescriptions from the pharmacy. The amount is determined by which tier the medication falls in according to your plan's formulary. If your plan has a deductible, you may have to meet the deductible before the copay or coinsurance begins.

Donut Hole (Coverage Gap)

Once the retail costs of your prescriptions reach a set amount, you’ll fall into the coverage gap. In this phase, you’ll be responsible for a 25 percent coinsurance of the cost of the prescription. You will stay in the coverage gap until your out-of-pocket prescription costs reach the catastrophic amount.

Catastrophic Coverage

Once you reach your true out-of-pocket max for the year, you’ll pay the greater of a small copay or up to a 5 percent coinsurance. You’ll remain in this catastrophic coverage phase until the end of the calendar year. Once the new year begins, your coverage phases reset.

Extra Help

For Medicare beneficiaries with lower incomes, there is a low-income subsidy program to help cover the costs of drug plan premiums and costs. The level of extra help will depend on your income. If a beneficiary receives extra help, their monthly premium and deductible will be lowered or eliminated. In addition, their copayments and coinsurance are significantly reduced.

How to Enroll In Medicare Part D

Enrolling in Medicare Part D is one of the most confusing parts of Medicare. It’s best to find an insurance agent who works with the plans in your area. They will have the tools to verify your prescriptions and pharmacies, and ensure they are covered and fit your needs.

If you prefer to go at it alone, you can use the Medicare plan finder on Medicare’s website. Using both methods, you can see your options and enroll in your chosen plan.

Late-Enrollment Penalties

Medicare will penalize you for each month you’re eligible for Part D drug coverage and elect not to enroll. If you have creditable drug coverage, such as Veterans Affairs or employer group coverage, the penalty will not apply.

If you don’t maintain creditable drug coverage, however, you’ll pay a 1 percent penalty for each month you were eligible and didn't enroll. The penalty amount is based on the average drug plan premium and will continue perpetually.

Can You Have Part D and Other Insurance?

There are some situations in which you can have Medicare Part D coverage and other drug coverage. Some examples are VA coverage or Tricare for Life. In these cases, the coverage doesn’t stack. You’ll use one coverage or the other to fill your prescriptions.

Some group coverages will allow you to keep your prescription coverage and enroll in a Medicare drug plan. You’ll need to check with your group benefits administrator to see how it would affect the group coverage.

How to Choose the Best Part D Plan

Choosing the best Part D plan is a personal experience. Everyone's needs are different, so it’s wise to get help and look at a few factors. First, using the Medicare plan finder or with the assistance of a licensed agent, verify which plans will cover all your current prescriptions and your preferred pharmacy.

From there, you can enroll in the program that covers these items the best and provides the lowest total costs for the year. These costs include the monthly premium, copays, coinsurance, and applicable deductibles.

Once you’ve decided on a plan, the agent who assisted you can help enroll you in the program you choose, making the process quick and easy. You can also enroll directly on Medicare.gov.

If you’re considering a Medicare Advantage plan with part D coverage, read our guide to the best free Medicare Advantage plans.