Medicare prescription drug plans are offered by private insurance companies approved by Medicare (plan sponsors). Each plan can vary in premium cost, cost sharing, and drugs covered. If an individual does not take prescriptions now, they should still consider enrolling in a Medicare drug plan or other creditable prescription drug coverage. If an individual decides not to join a Medicare drug plan when first eligible, and they don't have other creditable prescription drug coverage, they may pay a late enrollment penalty if later they enroll in a Medicare Prescription Drug Plan.
Each standalone Part D plan and Medicare Advantage plan with prescription drug coverage varies in cost and the formulary of the medications covered. Plans change from year to year. A plan that covers certain prescriptions this year may change and not cover the same prescription drugs the following year. The only effective tool to determine an "estimate" of a person’s drug costs is using the Medicare Plan Finder found on Medicare.gov.
Types of Medicare Prescription Drug Coverage
There are two ways to obtain 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."
Medicare beneficiaries cannot have both a Medicare Advantage plan and a stand along Medicare Part D plan. If a beneficiary is enrolled in a Medicare Advantage Plan and enrolles in a stand along Part D Plan they will be disenrolled from tehir Medicare Advantage Plan.
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Medicare Part D Plan Enrollment
Before enrolling in a Medicare Part D plan an individual should learn how Medicare prescription drug coverage works with their other drug coverage they 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 enrollment. It’s important to consider all coverage options. If an individual has (or are eligible for) other types of drug coverage, they should verify information from the insurer or plan provider. An individual should speak with their benefits administrator, insurer, or plan provider before making any changes to current coverage.
To enroll in Medicare Part D an individual must first be enrolled in Medicare Parts A and/or B. Typically, beneficiaries are enrolled in both Medicare Part A, B, and some kind of supplemental health insurance (ex. medicare supplement policy) then choose to enroll in a Medicare Part D plan for prescription drug coverage. Medicare beneficiaries cannot have both a Medicare Advantage plan and a stand along Medicare Part D plan. If a beneficiary is enrolled in a Medicare Advantage Plan and enrolles in a stand along Part D Plan they will be disenrolled from tehir Medicare Advantage Plan.
Medicare Part D Plan Enrollment Periods:
Initial Enrollment Period:
A beneficiaries first chance to sign up for Medicare is called their Initial Enrollment Period. It lasts for
7 months. If you’re eligible for Medicare because of your age, the Initial Enrollment Period
starts 3 months before you turn 65, and ends 3 months after the month you turn 65. During this time a beneficiary can enroll in a Medicare Part D Plan.
Annual Enrollment Period (Open Enrollment Period):
The annual enrollment period takes place from October 15 to December 7 each year. During this time, Medicare beneficiaries can join, drop, or switch to another Medicare Advantage Plan (or add or drop drug coverage), join a Medicare Advantage Plan or switch from a Medicare Advantage Plan to Original Medicare, or join, drop, or switch to another Medicare drug plan if in Original Medicare.
Special Enrollment Period (SEP): Beneficicaries can make changes to their Medicare Advantage and Medicare drug coverage
when certain events happen in your life, like if you move or you lose other coverage.
These chances to make changes are called Special Enrollment Periods. There are
many events that may qualify you for a Special Enrollment Period. Contact the Medigap Helpline with quesitons about possible SPecial Enrollment Periods.
To Enroll in a Medicare Part D Plan:
- Contact the Medicare Part D Plan Sponsor (insurance company) directly.
- Contact Medicare at 1-800-633-4227.
- Enroll online at Medicare.Gov.
Medicare Prescription Drug Plan Coverage PhasesThe below coverage phases are no longer an aspect of the Medicare Prescription Drug Program effective January 1, 2025.
The cost of Medicare Part D-covered drugs may change throughout the year. If you notice that prices have changed, it may be because you are in a different phase of Part D coverage.
There are four different phases of Medicare Prescription Drug coverage:
Deductible Phase: Until an individual meets their Part D deductible, they will pay the full negotiated price for their covered prescription drugs. Once an individual meets the deductible, the plan will begin to cover the cost of their drugs. While deductibles can vary from plan to plan, no plan’s deductible can be higher than $545 in 2024, and some plans have no deductible.
Initial Coverage Period: After an individual meets their deductible, their plan will help pay for their covered prescription drugs. The plan will pay some of the cost, and the beneficiary will pay a copayment or coinsurance. How long someone stays in the initial coverage period depends on their drug costs and their plan’s benefit structure. For plans in 2024, the initial coverage period ends after a beneficiary has accumulated $5,030 in total drug costs (plan and beneficiary payment combined).
Coverage Gap: After your total drug costs reach a certain amount ($5,030 in 2024), you enter the coverage gap, also known as the donut hole. When an individual enters the coverage gap they are responsible for 25% of the cost of their drugs.
Catastrophic Coverage: In all Part D plans, beneficiaries enter catastrophic coverage after you reach $8,000 in out-of-pocket costs for covered drugs. This amount is made up of what a beneficiary pay and the prescription drug plan pays. During this period, there is no cost-sharing for the cost of covered drugs for the remainder of the year.
Medicare Prescription Drug Plan Changes - 2025
Changes to Medicare Prescription Drug Plans in 2025 include a new $2,000 out-of-pocket spending cap, elimination of the coverage gap phase, a higher share of drug costs paid by Part D plans in the catastrophic phase, and changes to plan costs and the manufacturer price discount in the initial coverage phase.
$2,000 Out-of-Pocket Maximum: this only includes pre-deductible spending, co-pays, and coinsurance. The new maximum out-of-pocket does not include premiums.
Medicare Part D Late Enrollment Penalty
The Medicare Part D late enrollment penalty (LEP) is an amount that is added to an individual's Part D monthly plan premium. An invididual 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, an individual will have to pay the penalty for as long as they have Medicare drug coverage. The cost of the penalty depends on how long the individual went without Part D or other creditable prescription drug coverage.
Note: Individuals who recieve the Social Security Adminstration's Low Income Subsidy “Extra Help” program do not pay the late enrollment penalty.
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