Understanding Medicare Part D: Prescription Drug Coverage

Medicare Part D is the part of Medicare that helps cover the cost of prescription drugs. Unlike Part A and Part B, Part D is optional and is offered by private insurance companies approved by Medicare.

How to Get Part D Coverage

You have two main ways to get prescription drug coverage:

1. Standalone Prescription Drug Plan (PDP): You can add a Part D plan to Original Medicare. You might also add one to a Medicare Cost Plan, some Private Fee-for-Service (PFFS) plans, or a Medical Savings Account (MSA) plan.
2. Medicare Advantage Plan with Drug Coverage (MA-PD): You can join a Medicare Advantage (Part C) plan that includes prescription drug coverage as part of its benefits package.

How Part D Works

Each Part D plan has its own list of covered drugs, called a formulary. These formularies often place drugs into different "tiers," with drugs in lower tiers typically costing less out-of-pocket than drugs in higher tiers.

Key Costs Associated with Part D:

• Monthly Premium: A fixed amount you pay each month for the plan.
• Annual Deductible: The amount you must pay for your prescriptions before your plan starts to pay.
• Copayments or Coinsurance: The amount you pay for each prescription after you've met your deductible.

The Part D "Donut Hole" (Coverage Gap)

Most Part D plans have a coverage gap, often called the "donut hole." This means that after you and your plan have spent a certain amount on covered drugs, you have to pay more out-of-pocket for your prescriptions for a while. Once you've spent enough to get out of the coverage gap, you'll enter "catastrophic coverage," where your out-of-pocket costs are significantly reduced for the rest of the year.

Late Enrollment Penalty

If you don't sign up for a Part D plan when you're first eligible for Medicare, you may have to pay a late enrollment penalty if you decide to join later. This penalty is added to your monthly premium for as long as you have Part D coverage.