Medicare offers prescription drug coverage to everyone with Medicare. A Part D plan helps pay for both brand-name and generic drugs.
Medicare drug plans are offered by insurance companies and other private companies approved by Medicare. Each plan can vary in cost and drugs covered. Even if a person does not take a lot of prescriptions now, they should consider enrolling in a Medicare drug plan. If a person decides not to join a Medicare drug plan when first eligible, and they don't have other creditable prescription drug coverage, they will likely pay a late enrollment penalty if later enrolls in a Part D plan.
There are two ways to get Medicare prescription drug coverage:
1.) Medicare Prescription Drug Plans. These plans (sometimes called "PDPs") add prescription drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) Plans, and Medicare Medical Savings Account (MSA) Plans.
2.) Medicare Advantage Plans (like an HMO or PPO) or other Medicare health plans that offer Medicare prescription drug coverage. Medicare Advantage Plans with prescription drug coverage are sometimes called "MA-PDs."
To compare Medicare drug plan and advantage plan costs, use the
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To enroll in a Medicare Prescription Drug Plan: a person must have Medicare Part A or Medicare Part B.
To enroll in a Medicare Advantage plan: a person must have Medicare Part A and Medicare Part B. They must also live in the service area of the Medicare drug plan or health plan they want to join.
A person can join a Medicare Drug Plan when they first become eligible for Medicare (Initial Enrollment Period).
A person may be able to join, switch or drop a plan during these times: Annual Election Period – from October 15-December 7 each year (coverage change is effective January 1 as long as plan receives request by December 7).
Medicare Advantage Open Enrollment Period – from January 1-March 31 (for those already enrolled in a Medicare Advantage Plan, can switch to a different Medicare Advantage Plan or return to Original Medicare and join a separate Medicare Drug Plan).
At other times of the year if a person qualifies for a Special Election Period (including those receiving “Extra Help”).
Drug Coverage
Before signing up, a person should learn how Medicare prescription drug coverage works with other drug coverage they may currently have (such as drug coverage from an employer or union, TRICARE, VA, the Indian Health Service). The drug coverage they already have may change because of Medicare drug coverage, so it’s important to consider all coverage options. If they have (or are eligible for) other types of drug coverage, they should read all the materials from the insurer or plan provider. A person should speak with their benefits administrator, insurer, or plan provider before making any changes to current coverage.
The Cost of Coverage
The actual costs with a Medicare prescription drug plan will vary depending on the prescriptions a person takes, the plan chosen, the prescription drugs the plan covers (known as the plan’s formulary), whether a pharmacy is in or out of the plan's network, and if a person qualifies for "Extra Help" in paying for Part D costs. A Medicare drug plan may include the following cost components: monthly premium, yearly deductible, and copayments or coinsurance.
The Coverage Gap
Most Medicare drug plans have a coverage gap (also called the “donut hole”). This means after a beneficiary and their drug plan have spent a certain amount of money for covered drugs the beneficiary will pay no more than 25% of the cost of the plan’s covered brand-name prescription (or generic) drugs. Not everyone will reach the coverage gap.
Catastrophic Coverage
After a beneficiary reaches a certain amount in out-of-pocket drug costs, they enter “catastrophic coverage." During this time, a person only pays a small copayment or coinsurance for their covered drugs for the rest of the year.
Part D Late Enrollment Penalty
The late enrollment penalty (LEP) is an amount that is added to a person’s Part D monthly plan premium. A person may owe a LEP if they did not enroll in a Medicare drug plan when first eligible for Medicare (during their Initial Enrollment Period) and, if at any time after, went 63 days or more in a row without having Medicare drug coverage or other creditable prescription drug coverage. Generally, a person will have to pay the penalty for as long as they have Medicare drug coverage. The cost of the penalty depends on how long a person went without Part D or creditable prescription drug coverage.
Note: a person who is receiving “Extra Help” does not pay the late enrollment penalty.
