Medicare Prescription Drug Plans
If you have Medicare, you can receive coverage for outpatient prescription drugs through Medicare Part D. You don’t automatically get Part D with Medicare — you need to sign up for it. While private insurance companies sell Medicare Prescription Drug Plans, they must comply with federal regulations.
What is Medicare Part D?
Medicare Part D is the part of Medicare that typically covers the majority of prescription drugs used on an outpatient basis. This prescription drug benefit is made available by private companies either as a standalone plan for Original Medicare beneficiaries or as a package of benefits included in Medicare Advantage Plans.
It is recommended that you enroll in Part D when you first become eligible for Medicare, unless you have credible drug coverage and will qualify for a Special Enrollment Period. Failing to enroll on time could lead to gaps in coverage and enrollment penalties.
Part D prescription drug plans available in Oregon in 2023.
lowest 2023 Part D prescription drug plan monthly premium in OregonExpert Staff
There are two ways to get this Medicare prescription drug coverage. How it works depends on your other Medicare coverage.
Medicare Part D and Original Medicare
To obtain prescription drug coverage with Original Medicare (Part A and/or Part B), you need to purchase a separate Medicare Part D plan from a private insurance company. You can browse through a variety of stand-alone plans that differ in terms of coverage and cost. A separate premium is required for the Part D plan.
Medicare Part D and Medicare Advantage
Medicare Advantage, also known as Medicare Part C, is an all-inclusive substitute for Original Medicare offered by private insurance companies. In addition to covering all the benefits of Part A and Part B, most Medicare Advantage plans also include prescription drug coverage. If you have Medicare Advantage, you typically cannot buy a separate stand-alone Medicare Part D plan. However, certain types of Medicare Advantage plans that do not provide their own prescription drug coverage may have exceptions.
What does Medicare Part D cover?
The extent of coverage and associated costs varies depending on the specific policy. However, even the most affordable prescription drug plans are required to cover the majority of generic and brand name drugs, as well as insulin preparations that are generally needed by individuals enrolled in Medicare. Additionally, these plans must provide coverage for all or most drugs in the following categories:
- Anticancer drugs (unless already covered by Medicare Part B)
- Antidepressants
- Antipsychotic medications
- Anticonvulsive treatments for seizure disorders
- HIV/AIDS treatments
- Immunosuppressant medication
Part D plans must also include coverage for vaccines, such as the shingles shot, which is not covered by Medicare Part B. However, the annual flu shot, pneumococcal vaccine, and COVID-19 vaccines are covered by Medicare Part B. Starting in 2023, the Medicare Part D insulin savings program will offer insulin medication for a maximum copayment of $35.”
What does Medicare Part D not cover?
Typically, Medicare Part D plans do not provide coverage for medications used for the following purposes:
- Anorexia, weight loss, or weight gain
- Symptomatic relief for coughs and colds
- Cosmetic reasons
- Fertility treatment
- Hair growth
- Over-the-counter drugs
- Sexual or erectile dysfunction
- Vitamins and minerals, except for prenatal vitamins, niacin when medically necessary, and fluoride
However, certain plans with “enhanced alternative coverage” may include some of the drugs mentioned above.
What Does Medicare Part D cost?
Medicare Part D plans usually have premiums along with a combination of deductibles, copays, and coinsurance, which vary depending on the plan and coverage phase.
Premiums
The average premium for basic coverage of stand-alone Medicare Part D plans is $31.50 per month in 2023.
However, Medicare Advantage plans include prescription drug coverage in their bundle, so there is no separate premium for Part D. People with high incomes will have to pay an additional amount called Income-Related Monthly Adjustment Amount (IRMAA), on top of their monthly premiums.
Those with 2021 income exceeding $97,000 for an individual return or $194,000 for a joint return will have to pay an additional amount on top of the plan’s premiums ranging from $12.20 to $76.40 per month in 2023.
The four phases of Medicare Prescription Drug Plans
The four phases of Medicare Part D coverage include Deductible, Initial Coverage, Doughnut Hole, and Catastrophic Coverage, which are based on how much the patient spends out-of-pocket for covered prescription drugs annually.
Deductibles
A deductible refers to the sum you need to pay out of pocket before your plan begins covering its portion. Certain drug plans may not require deductibles. The annual deductible maximum is $505 in 2023
Initial Coverage
In the initial coverage phase, you’ll be responsible for copays or coinsurance for your covered drugs, which may vary depending on where the drug falls in your plan’s formulary. You’ll move on to the next phase once you and your plan have collectively spent $4,660 in 2023 for covered drugs.
Doughnut Hole
In this phase, instead of paying copays or coinsurance based on the plan’s formulary, you are required to pay up to 25% of the cost of covered drugs. This phase is commonly known as the “coverage gap,” and you advance to the last phase when you have spent $7,400 in 2023 for covered drugs.
Catastrophic coverage
In the Catastrophic Coverage phase, you pay 5% of the cost of your covered prescription drugs or a fixed amount, whichever is higher. This phase will continue until the end of the year. However, starting in 2024, there will be a cap on the out-of-pocket spending in the catastrophic coverage phase, and in 2025, a $2,000 out-of-pocket spending cap for Medicare Part D will be introduced. Note that if you’re part of a Medicare program called Extra Help, your drug costs will be different, and there’s no coverage gap.
Medicare Part D out-of-pocket cap
The current Medicare Part D program does not have an out-of-pocket spending limit, but this will soon change with the passage of the Inflation Reduction Act. Beginning in 2024, once you reach the catastrophic coverage phase, you will no longer have any out-of-pocket expenses. Another significant change will occur in 2025, when a cap of $2,000 on out-of-pocket spending for Medicare Part D goes into effect.
When Can You Enroll in Medicare Part D?
Initial Enrollment Period
The initial enrollment period allows you to enroll in a stand-alone prescription drug plan (Medicare Part D) or a Medicare Advantage plan with Part D prescription drug coverage. This enrollment period starts three months before the month you turn 65, includes your birthday month, and ends three months after your birthday month, spanning seven months in total.
For instance, if you turn 65 in July, you have from April 1 to Oct. 31 to enroll. However, if your birthday is the first day of any month, your initial enrollment period spans four months before you turn 65 and ends two months after your birthday month, for a total of seven months. As an example, a July 1 birthday has an initial enrollment period of March to September.
Special Enrollment Period
A special enrollment period provides an opportunity to enroll in Medicare coverage outside of the open or initial enrollment period. If you lose your existing coverage, like prescription drug coverage from an employer that is creditable, you may be eligible for a special enrollment period.
Special enrollment periods usually span two months, beginning the month after the end of your employment or the month after losing your qualifying employer insurance, whichever comes first. By enrolling during the special enrollment period, you can prevent incurring late enrollment penalties.
Open Enrollment Period
The fall open enrollment period for Medicare and Medicare Advantage takes place annually from Oct. 15 through Dec. 7, during which time you can enroll in or change to a different Medicare Part D or Medicare Advantage plan. Additionally, if you have a Medicare Advantage plan, you have another opportunity during the Medicare Advantage open enrollment period from Jan. 1 to March 31 each year. During this period, you can switch plans or switch to Original Medicare, with the option to purchase a stand-alone Medicare Part D plan.
Learn more about Medicare Enrollment Periods here.
Frequently Asked Questions
Who is eligible for Medicare Part D? All Medicare beneficiaries are eligible for Medicare Part D, regardless of income or health status.
What is the Medicare Part D coverage gap? The coverage gap, also known as the “donut hole,” is a phase of Medicare Part D coverage during which beneficiaries are responsible for a larger share of their prescription drug costs. In 2023, the coverage gap begins when the combined spending on covered drugs by the beneficiary and the plan reaches $4,660, and it ends when the beneficiary has spent $7,400.
Is there a cap on out-of-pocket spending with Medicare Part D? Starting in 2024, there will be a cap on out-of-pocket spending with Medicare Part D, and in 2025, the cap will be set at $2,000.
The Bottom Line
Medicare Part D provides important prescription drug coverage for Medicare beneficiaries. Enrollment in Medicare Part D is voluntary but highly recommended, as it can help to lower out-of-pocket costs for prescription drugs. Beneficiaries have several opportunities to enroll in or switch their Medicare Part D coverage, including during their initial enrollment period and the annual open enrollment period. The coverage gap and lack of a cap on out-of-pocket spending have been challenges for beneficiaries, but changes in legislation will provide greater protection in the future.