Original Medicare does not include prescription drug coverage for self-administered medications.
Generally speaking, Original Medicare, which refers to Parts A and B, does not cover prescription drugs. However, Medicare will usually cover prescription drugs if they are part of a hospital stay, or if they are administered by your healthcare provider.
In addition to this, there is a distinct part of Medicare that specifically covers prescription drugs, and prescription drug coverage is also part of many Medicare Advantage plans. We’ll take a look at all of the details as well as which options you have.
Prescription drugs under Medicare Part A
Medicare Part A covers your health care in a hospital or other inpatient setting, like a skilled nursing facility, and is often referred to as "hospital insurance". Although Medicare Part A doesn’t cover prescription drugs generally, it will cover them if they are a part of your hospital stay. Many hospital stays involve prescription drugs as part of a procedure that you undergo, and these will be covered under Part A as part of your hospital stay, just like the rest of your hospital care.
Does Medicare Part B cover prescription drugs?
Medicare Part B covers your outpatient medical care, like what you receive in a doctor's office. Part B will not cover prescription drugs in most circumstances, unless they are a part of your doctor visit. However, there are several specific exceptions to this. Medicare Part B will cover many drugs that are associated with end-stage renal disease (ESRD). It will also cover some antigens, osteoporosis drugs, blood clotting medication, and some cancer drugs.
The exceptions are very specific, and more information is available here. Make sure that you check with your plan and your provider to see if Part B will cover the medication that you need.
Part D and prescription drug coverage
Most of the types of prescription drugs you're used to, the kind that you pick up at a pharmacy, will be covered by Medicare Part D. Part D is a specific part of Medicare that is dedicated only to medicare prescription drug plans. Part D plans, unlike Original Medicare, are offered by private insurance companies, not by the federal government. Because of this, many features of the plans will vary, but some things will be constant across all plans.
How do Part D plans work?
Medicare Part D plans are offered by private insurance companies. This means that you will need to go out and search for a plan to buy, just like you would with any other private insurance plan. Like other private plans, these will be HMO or PPO plans, although most Part D plans are HMO plans. Because of this, make sure that your preferred pharmacy is in your service area.
What formularies do Part D plans use?
Every insurance plan that covers prescription drugs has something called a formulary, and Part D plans are no different. A formulary is essentially just a drug list that tells you which medications your Medicare prescription drug coverage will apply to. Because Part D plans are private, the formularies will vary from plan to plan. When looking for a Part D plan, it is very important to make sure the medications you need are on the formulary.
Formulary tiers: What you should know
Many Part D plans will divide their formulary into “tiers”. These are basically just levels of payment that you will be responsible for when buying certain drugs. For example, drugs that fall into tier one may be cheap generic drugs that you pay nothing or just a small copayment for. Higher tiers may consist of very costly brand-name drugs, and will probably require a higher copayment or coinsurance from you.
The number of tiers that a plan has will vary, so it’s important to make sure you know which tier the drugs you need will fall under.
Do Medicare drug plans interact with other insurance plans?
Yes, they do. There is a huge amount of variety here, so it’s very important to understand how Part D will interact with your specific plan before you choose Part D.
Examples of situations where this is relevant include purchasing Part D while you still have an employer insurance plan, a COBRA plan, or TRICARE. In some situations, you may retain your main insurance but use Part D for prescription drugs, while your family members lose their prescription drug coverage entirely if they are not Medicare beneficiaries. Medicare has a lot of information about these possibilities here, but you should always double-check the details of your specific plan.
Part D plan pricing
Because Part D plans are offered by private insurance companies, the pricing will vary in addition to the coverage and formularies offered. However, all plans will have an additional pricing structure that will be consistent for all plans. The basic idea is that you will pay an additional amount each month in addition to your premiums.
If you made up to $103,000 of income per year in the relevant tax year, then you won’t pay anything more than your premiums. After this, you will pay varying amounts, up to $81.00 per month for those who made $500,000 in the relevant tax year ($750,000 for married filing jointly). Medicare.gov has full details on the relevant income brackets available here. This additional payment will be made to the government, not to your Part D plan directly. Your income will be based on the tax return information that the IRS provides to social security each year.
How much does Part D cost?
Like all private insurance plans, Part D prescription drug plans will vary in price. However, the average monthly premium for these plans will be around $40 to $50 per month. Note that this does not include the additional income-adjusted cost. It’s also important to remember that Part D plans can vary widely in price and that this is just an average. Your plan could end up costing a lot more (or less!) than $40 per month.
What is the Part D deductible?
The Part D deductible cannot be any higher than $545. Some plans may have lower deductibles, but none will be higher than this in 2024. Additionally, if you qualify for Extra Help, also known as the Low-Income Subsidy, your plan will have no deductible at all.
What is the Part D coverage gap?
Part D plans are notable for having something known as a “coverage gap”, or the donut hole, although this is being slowly phased out.
The coverage gap refers to a temporary limit on what your Part D plans will cover. The limit is temporary because after a certain amount of coverage, your coverage will decrease, and then increase again once you reach another threshold. Once you reach $5,030 total paid (between you and your plan), you will enter the coverage gap.
In the coverage gap, you will pay around 25% of the total price of your prescription drugs. This can be lower and partially depends on whether you are using brand-name or generic drugs. However, the entire cost of the prescription drug will count as an out-of-pocket cost, even though you only pay 25%. This is done in order to help you reach a level of coverage called “catastrophic coverage” faster.
In 2024, once you have paid $8,000 in out-of-pocket costs, you will be out of the donut hole. However, because the full drug price, and not only what you actually pay out-of-pocket will count as an out-of-pocket cost, most people will reach this point without actually paying this amount out-of-pocket directly.
The Part D donut hole can be confusing, but thankfully Medicare has made it much simpler in 2024 than it used to be. For more details, read our article about the Medicare coverage gap.
Medicare Advantage and prescription drug coverage
Medicare Advantage, also known as Part C, offers another way for you to get prescription drug coverage. Part C offers you a way of getting your Original Medicare medical insurance through a private insurance company, and often comes with additional benefits. Although Original Medicare doesn’t cover prescription drugs, and not all Medicare Advantage plans do either, many will offer some level of prescription drug coverage as an additional benefit.
Medicare Advantage plans are a complex topic on their own, and there can be many factors that determine whether or not a plan is right for you. Usually, it won’t be worthwhile to buy a Medicare Advantage plan only for prescription drug coverage. But, if you are looking for Part C plans, make sure to note if they offer it.
If you have a Medicare Advantage plan that offers prescription drug coverage, you won’t be able to buy a Part D plan as well. However, if your Medicare Advantage plan doesn’t cover prescription drugs, then you will be able to buy a Part D plan as usual.
Part D: The key takeaways
Although Part D plans can seem complicated, they are simple to navigate and can be very useful to purchase. Because prescription costs are high, having some prescription drug coverage is always important.
Enrolling in Part D will be familiar to those who have had private health insurance plans in the past, and it’s really just a matter of making sure you’re informed about all of the possible interactions and parts of the plan. Make sure to double-check your plan’s formulary, adjusted monthly cost due to your income, and any possible interactions with other health plans that you are enrolled in.