Navigating Medicare can be tricky and confusing. There are several different parts to Medicare, each with its own costs and enrollment periods. Medicare Part D covers your drug costs. If you take any medications, it’s important to know what you can expect to pay and when you can sign up.
What Is Medicare Part D?
Medicare Part D is an optional add-on plan to your Medicare coverage (Medicare Part A or Part B) that helps pay for the cost of prescription drugs as well as many vaccines. You can also get Medicare Part D as part of your Medicare Advantage Plan if you choose a plan with drug coverage.
Medicare Part D plans are offered by private insurance companies, and these companies must follow the rules outlined by Medicare. To join a separate Medicare drug plan, you must have Medicare Part A and/or Medicare Part B.
What Does Medicare Part D Provide?
Medicare Part D provides help in paying for prescription drugs and commonly recommended shots and vaccines.
All Medicare Part D plans have to cover a range of prescription drugs, including drugs for conditions categorized as a protected class, like drugs for cancer and HIV/AIDS. Every plan has a formulary, a list of prescription and generic drugs it covers.
Generic drugs are copies of brand-name drugs that use the same active ingredient as their brand-name counterpart. In order to be approved by the FDA, manufacturers have to prove that these drugs work the same as brand-name drugs. They need to have the same dosage, perform as well, and be as safe as the brand name.
The formularies for Medicare Part D plans must include at least two drug options for each of the most prescribed categories and classes. Plans can choose which drugs they want to cover in each category. If the healthcare provider who writes your prescriptions doesn’t think any of the drugs in your plan will work for you, you can ask your insurance provider for an exception.
How Much Is Medicare Part D?
Your Medicare Part D cost will depend on which of the Medicare Part D plans you choose and can change each year.
Medicare Part D premiums. Your premium is the monthly payment you make to your insurance company. The average national premium for Medicare Part D is $33.37 in 2022 and will drop to $32.74 in 2023. If your income is above a certain level, you may have to pay a Medicare Income-Related Monthly Adjustment Amount (IRMAA).
While costs can change each year, the current annual income guidelines are as follows:
- Individuals earning $91,000 or below and couples earning $182,000 or below pay nothing additional
- Individuals earning between $91,001-$114,00 or couples earning $182,001 – $228,000 pay an additional $12.40 per month
- Individuals earning $114,001 – $142,000 or couples earning $228,001 – $284,000 pay an additional $32.10 per month
- Individuals earning $142,001 – $170,000 or couples earning $284,001 – $340,000 pay an additional $51.70 per month
- Individuals earning $170,001 – $499,999 or couples earning $340,001 – $749,999 pay an additional $71.30 per month
- Individuals earning $500,000 and above or couples earning $750,000 and above per month will pay an additional $77.90 per month
Medicare Part D annual deductible. The cost of your annual deductible will depend on your plan. Currently, the deductible cannot be more than $480 per year. If you qualify for the Extra Help program, also called the Part D Low-Income Subsidy, you may not pay anything at all.
To qualify for the Extra Help Program, your monthly income needs to be at or below $1,170 per month or $2,309 as a couple. Your assets also must be below certain limits, but not all types of assets and income are counted. If you are currently enrolled in Medicaid, a Medicare Savings Program, or Supplemental Security Income, you automatically qualify, whether or not you meet the other criteria.
Medicare Part D copayment/coinsurance. The amount you pay out of pocket for your medication will depend on many factors, such as what pharmacy you use, if the drug is on your plan’s formulary, and what tier the drug is in.
Many plans divide their drug plans into tiers based on how much you pay for the plan each month, and how much you pay for each prescription. While the tiers will depend on your specific plan, lower tiers will have lower monthly costs and higher costs per prescription, while higher tiers will have higher monthly costs and a lower cost per prescription.
If you have Medicaid and your income is below the federal poverty level or if you have Extra Help, your copays are $1.35 for generics and $4.00 for brand-name prescriptions. If you have Partial Extra Help, you pay either 15% of the prescription cost or your plan’s coinsurance cost, whichever is lower. If you have Medicaid, Extra Help, or Partial Extra Help and $10,012.50 in out-of-pocket drug costs, you reach catastrophic coverage.
Coverage gap. Your costs may increase if you reach your plan’s coverage gap. The coverage gap is a temporary limit on what your plan will cover. In 2022, that limit is $4,430. In 2023, will go up to $4,660. If you are part of the Extra Help program, you will not have a coverage gap.
While in the coverage gap, you’ll pay up to 25% of the cost for brand-name drugs and 25% of the cost for generic drugs. For brand-name drugs, the amount you pay plus the price the manufacturer pays count toward your out-of-pocket costs. For generic drugs, only the amount you pay counts toward your out-of-pocket costs.
In 2022, once you’ve paid $7,050, you leave the coverage gap and enter catastrophic coverage. In 2023, that amount will increase to $7,400.
Catastrophic coverage. Once you reach catastrophic coverage, you will only pay a small coinsurance or copay for the remainder of the year. Catastrophic coverage is usually $3.95 for generics and $9.85 for brand-name prescriptions or 5% of the cost, whichever is greater.
If you qualify for Medicaid or Extra Help, once you hit catastrophic coverage you'll pay nothing for each medication for the rest of the calendar year. If you have partial Extra Help, you'll pay $3.95 for generics and $9.85 for brand-name prescriptions or 5% of the cost, whichever is greater.
Medicare Part D Enrollment
Enrollment into a Part D plan is only available at certain times of the year.
Initial Enrollment Period. The Initial Enrollment Period is usually the first chance you have to sign up for Medicare. It begins three months before you turn 65 and ends three months after the month you turn 65. If you qualify for Medicare due to a disability but are under 65, this 7-month period starts three months before your 25th month of getting Social Security or Railroad Retirement Board (RRB) disability benefits and ends three months after the 25th month you got your benefits.
Open Enrollment Period. The Open Enrollment Period for Medicare Part D is from October 15-December 7 each year. Your coverage will then start on January first. During this time, you can:
- Join a Medicare Part D plan
- Switch from one Medicare Part D plan to another
- Drop Medicare Part D coverage
If you have special circumstances, such as losing your employer-sponsored health insurance, you may qualify for a Special Enrollment Period.