Medicare Part D: How Prescription Drug Coverage Works
How you can get Medicare Part D
What Part D covers
Every Medicare drug plan has a list of covered drugs called a formulary.
Formularies can include generic drugs, brand-name drugs, biological products and biosimilars. Medicare establishes coverage requirements, but individual plans can have different formularies.
That means a prescription covered by one Part D plan may be handled differently by another.
When comparing plans, check each medication you take rather than assuming all Part D plans cover the same drugs.
Drug tiers and what you may pay
Many Part D plans organize covered drugs into tiers. Drugs on different tiers can have different copayments or coinsurance.
The way tiers are structured varies by plan.
Your costs can also depend on the plan you choose, the medication, the pharmacy you use and the applicable stage of your Part D coverage.
Because Part D dollar amounts and plan designs can change, confirm current costs with Medicare and the specific plan before enrolling.
Pharmacy networks matter
Part D plans use pharmacy networks.
Some plans also identify certain network pharmacies as preferred pharmacies, where covered prescriptions may have lower out-of-pocket costs.
Using an out-of-network pharmacy can result in higher costs and, depending on the circumstances and plan rules, you may have to pay the full cost and request reimbursement.
Before choosing coverage, check the exact pharmacies you expect to use.
Prior authorization, step therapy and quantity limits
A drug being listed on a formulary does not always mean it can be filled without additional requirements.
Part D plans may use coverage rules such as:
- Prior authorization, which may require approval before the plan covers a medication.
- Step therapy, which may require trying another covered medication first.
- Quantity limits, which restrict the amount of a medication covered during a specified period.
Creditable prescription drug coverage
You do not necessarily need to enroll in Part D as soon as you become eligible if you have other prescription coverage that qualifies as creditable coverage.
Creditable prescription drug coverage is coverage expected to pay, on average, at least as much as Medicare drug coverage.
Examples can include qualifying coverage from an employer or union and certain government programs.
Your current plan should tell you whether its prescription coverage is creditable. Keep any creditable-coverage notices you receive.
Before enrolling in Part D, check whether doing so could affect employer, union or other coverage for you or your family.
The Part D late-enrollment penalty
Timing matters.
If, after your Initial Enrollment Period is over, you go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage, you may owe a Part D late-enrollment penalty when you later enroll.
The penalty is generally added to your Part D premium for as long as you have Medicare drug coverage.
The calculation uses the national base beneficiary premium, which can change each year. For that reason, Wise Owl does not use a fixed dollar penalty on this evergreen page.
People who qualify for Extra Help do not pay the Part D late-enrollment penalty.
Extra Help may reduce Part D costs
Medicare’s Extra Help program helps qualifying people with limited income and resources pay Medicare drug-coverage costs.
Eligibility depends on your circumstances. Social Security accepts Extra Help applications, and you can apply before or after enrolling in Part D.
If you think you may qualify, check the current eligibility rules rather than assuming you are or are not eligible.
Compare Part D coverage every year
Part D coverage is not a one-time decision.
Plans can change formularies, pharmacy arrangements, costs and coverage rules. Your prescriptions can change too.
When reviewing coverage, check:
- Every prescription you currently take
- Dosage and quantity
- Formulary status
- Drug tier
- Prior authorization
- Step-therapy requirements
- Quantity limits
- Preferred and in-network pharmacies
- Premium
- Deductible
- Copayments and coinsurance
- Other drug coverage you already have
Frequently asked questions
Is Medicare Part D required?
No. Medicare drug coverage is optional. However, delaying Part D without other creditable prescription drug coverage can create a late-enrollment penalty if you later enroll.
Can I have Part D with Original Medicare?
Yes. If you have Original Medicare, you can join a separate Medicare drug plan.
Does Medicare Advantage include Part D?
Most Medicare Advantage Plans include Medicare drug coverage, but not all do. The rules vary by Medicare Advantage plan type.
Do all Part D plans cover the same prescriptions?
No. Each plan has its own formulary within Medicare’s coverage requirements. Check your exact prescriptions against the current plan formulary.
What is creditable prescription drug coverage?
It is prescription coverage expected to pay, on average, at least as much as Medicare drug coverage. Your existing plan should tell you whether its coverage is creditable.
Can Part D plans require prior authorization?
Yes. Plans may use prior authorization, step therapy, quantity limits and other coverage rules for certain medications.
What happens if I go without drug coverage?
If you go 63 days or more in a row without Medicare drug coverage or other creditable prescription coverage after your Initial Enrollment Period ends, you may owe a Part D late-enrollment penalty if you later enroll.
Can I get help paying Part D costs?
Possibly. Extra Help can reduce Medicare drug-coverage costs for people who meet its eligibility requirements.