How to Choose a Medicare Part D Plan: Prices and Coverage

How to Choose a Medicare Part D Plan

Medicare Part D provides prescription drug coverage. It is available as either a standalone plan or through a Medicare Advantage Prescription Drug plan.

Medicare Part D is how you get a prescription drug plan (PDP) to help cover the cost of prescription medications. If you do not have creditable drug coverage (coverage considered equal to a Medicare Part D plan) it is a good idea to sign up for Part D when you first enroll in Medicare. Otherwise, you run the risk of late enrollment fees or coverage gaps.

How do I sign up for Medicare Part D?

You can get Medicare Part D prescription drug coverage by either joining a standalone Medicare PDP or a Medicare Advantage Prescription Drug Plan (MA-PD).

When you sign up for a standalone PDP, you continue to receive your Part A and Part B coverage through Original Medicare. Hospital and medical benefits stay the same, but your prescription coverage comes entirely from the PDP. Standalone plans are also an option if you purchase a Medicare Advantage plan with no prescription drug coverage.

Medicare Part C plans, or Medicare Advantage, offer all the same things as Original Medicare. Around 90% of the plans also provide additional benefits, such as prescription drug coverage. When you sign up for an MA-PD plan, you get your Part A, Part B, and Part coverage all through that one plan.

Since Medicare Advantage plans are offered by private insurance companies, benefits and costs will vary. However, the plans also usually include additional coverage like dental, hearing, and vision.

What does Medicare Part D cover?

To see exactly which drugs are covered by a plan, you need to check its formulary. The formulary lists all the prescription medications covered by the plan, both brand-name and generic. Generally, you can expect plans to cover the following drug classes:

  • Anticonvulsants
  • Antidepressants
  • Antipsychotics
  • Cancer medications
  • HIV/AIDS medications
  • Immunosuppressants

Though a plan's formulary may not have the exact drug you need, you can usually find a similar drug available. You can also work with your doctor or pharmacist to see if another covered medication is available for you, or have your doctor submit a request to have your prescription covered.

You may find a plan with coverage rules to make sure drugs are used only when medically necessary and correctly. Possible coverage rules include:

  • Prior authorization: Some plans require that you meet specific criteria before covering a drug. If your physician believes it medically necessary for you to take a particular medication, they can work with your plan to get it covered.
  • Quantity limits: A Part D plan might limit the amount of medication they cover over a certain period of time, for both cost and safety purposes. But your prescriber can work with your plan to get an exception if necessary.
  • Step therapy: You may be required to try a less expensive drug on the formulary before taking a step up to a more expensive medication. This helps to keep costs low, but your prescriber can contact your plan for an exception if they deem the more expensive drug medically necessary.

Always be sure to check not just what the plan covers, but the rules for that coverage.

When can I apply for Medicare Part D?

There are multiple times during the year you can sign up for Medicare Part D:

  • Initial Enrollment Period (IEP): This starts three months before the month of your 65th birthday and lasts for the three months after.
  • Annual Enrollment Period (AEP): From October 15 to December 7, you can use this time to sign up for Medicare Part D, enroll in Medicare for the first time, switch from Original Medicare to Medicare Advantage, switch between Medicare Advantage plans, or switch between Part D plans.
  • Special Enrollment Period (SEP): There are certain factors that may qualify you for a Special Enrollment Period, such as leaving your plan's area or losing drug coverage.
  • General Enrollment Period (GEP): If you didn't sign up for Medicare during your IEP and don't qualify for an SEP, you have from January 1 through March 31 to take advantage of the General Enrollment Period. Once it ends, you have from April 1 through June 30 to choose a Part D and/or Medicare Advantage plan.

There is a Medicare Advantage Open Enrollment Period as well, from January 1 through March 31. During this time, you can switch to a new Medicare Advantage plan or return to Original Medicare if you already have Part C. If changing plans results in a loss of prescription drug coverage, you can also use this time to join a standalone Part D plan.

How much does Medicare Part D cost?

Costs for Medicare Part D vary depending on the type of plan and whether you qualify for Extra Help. The following factors contribute to your Part D costs:

  • Annual deductible: Your deductible is the amount you pay before your plan will pay its share of the cost. Some plans have no deductible, with the maximum deductible being $545 in 2024.
  • Monthly premium: The premium you pay depends on your plan, but also your income. A higher income means you may have to pay more. This is called the Income-Related Monthly Adjustment Amount (IRMAA). The average monthly premium for standalone Medicare Part D plans is $30 to $50 in 2024.

Your co-pay or co-insurance contributes to costs as well, with prices varying depending on the plan you choose. The majority of PDPs have different levels called tiers when it comes to co-payments. Tiers are based on the type of drugs and, though your plan may have different tiers, you can generally expect:

  • Tier 1: The lowest co-payment option, this includes preferred generic prescription drugs.
  • Tier 2: A higher co-payment, tier 2 includes non-preferred generic drugs and preferred brand-name prescription drugs.
  • Tier 3: This tier includes non-preferred, brand-name prescription drugs for a higher co-pay.
  • Tier 4: The highest co-payment option, this covers high-cost prescription drugs.

Because Part D and Medicare Advantage costs change from year to year, it is recommended that you compare plans each enrollment period to ensure you get the best price for your needs.

Comparing Medicare Part D plans

The easiest way to compare Part D drug plans is with our Find a Plan tool. Simply enter your zip code and any prescriptions you're on to see plans in your area. You can also call us toll-free to have a licensed, knowledgeable Medicare agent answer all your questions and explain the different options. Important things to consider when comparing plans:

  • Cost. The actual cost of prescriptions varies depending on whether you get Extra Help, the tier the drug falls under, and whether your prescriptions are on your plan's formulary. Make sure your co-pays, deductible, and premium costs are manageable.
  • Formulary. Always look at a plan's drug formulary to make sure any medication you currently take is covered at an affordable tier. Be sure to talk to your doctor about any drugs you might need in the future (such as you might for chronic conditions) to ensure those are also covered.
  • In-network pharmacies. Getting prescriptions filled at an in-network pharmacy is always cheaper than going out-of-network. Make sure your current pharmacy is in-network, or that a nearby pharmacy is. It is always a good idea to see if mail-order prescriptions are available.
  • Multi-state coverage. If you live in more than one place throughout the year, your plan needs to offer coverage for each place.
  • Ratings. You should always look through customer service options, plan ratings, and any reviews available.
  • Standalone or Medicare Advantage. A standalone PDP means your Part A and Part B coverage come from Original Medicare. A Medicare Advantage plan gives you all of that coverage solely through the Medicare Advantage plan. Thoroughly compare benefits to ensure your needs are met.

Specific things to look out for include plans with little to no deductible, tiers with little to no co-payment for generic prescriptions, and plans that offer coverage in the coverage gap, or donut hole.

What is the donut hole?

Medicare Part D has something called the donut hole, which is a coverage gap that temporarily limits how much the plan covers for prescriptions. Not everyone enters the gap, but it is still important to understand the limits and what your plan, and you, will pay.

In 2024, once you and your plan have spent $5,030 on covered prescription drugs, you enter the donut hole. When you hit this gap, you pay no higher than 25% of the cost for the prescription medications your plan covers. Some plans may have lower costs. The discount is taken off the price your plan sets for the prescription.

However, though you don't pay more than 25% of the price, almost the entire cost of the medication counts as an out-of-pocket cost. This helps you to leave the coverage gap.

Items that count towards the coverage gap:

  • Discounts on brand-name prescription drugs while in the coverage gap
  • What you pay during the coverage gap
  • Your annual deductible, co-insurance, and co-pay

Items that do not count:

  • Pharmacy dispensing fees
  • What you pay for non-covered drugs
  • Your plan's premium

You must spend $8,000 in out-of-pocket costs to leave the coverage gap in 2024. To better understand your plan's coverage, review your Explanation of Benefits (EOB).

Additional resources

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