What Medicare drug coverage is and who needs it

Medicare has a separate drug benefit called Part D, and it works differently from the hospital and doctor coverage you get with Parts A and B. Part D is run by private insurance companies that contract with Medicare, not by Medicare itself. You choose which plan to join during your enrollment period, and the plan you pick determines which drugs cost you less, which pharmacies you can use, and how much you pay out of pocket.

You do not have to take Part D if you have drug coverage from another source — an employer plan, a union plan, or Medicaid — but if you go without coverage when you are first may be able to access, you will pay a penalty for each month you delay. The penalty is added to your Part D premium for as long as you have Medicare, so it pays to enroll on time even if you do not take many medications right now.

Part D is optional, but the enrollment important date is firm. If you turn 65 or become may be able to access for Medicare, you have a seven-month window to sign up without penalty. That window starts three months before the month you turn 65 and ends three months after. If you miss it, you can only join during the general enrollment period from January 1 to March 31 each year, and you will owe the penalty retroactively.

Key Takeaways

  • Part D is a separate Medicare benefit run by private insurance companies, and you must choose and enroll in a plan — it does not happen automatically.
  • Each Part D plan covers a different list of drugs at different costs, so comparing plans before you enroll can save you hundreds of dollars per year.
  • You pay a monthly premium, a yearly deductible, copays or coinsurance at the pharmacy, and potentially a coverage gap cost before catastrophic coverage kicks in.
  • If you miss your initial enrollment window, you pay a permanent penalty on top of your premium, so enrolling on time matters even if you take no medications.
  • Your plan's drug list and costs change every year, so you should review your coverage each fall during the annual enrollment period.

How the four stages of Part D costs work

Part D has a four-stage cost structure that most people do not understand until they hit each stage. The stages are deductible, initial coverage, coverage gap, and catastrophic coverage. Not every plan has a deductible — some plans start you in initial coverage right away — but all plans have the other three stages.

In the deductible stage, you pay the full price of your drugs until you reach your plan's deductible amount. The deductible varies by plan and can be anywhere from zero to several hundred dollars per year. Once you hit the deductible, you move to initial coverage.

In initial coverage, you pay a copay or coinsurance (a percentage of the drug cost) for each prescription. Your plan pays the rest. This stage lasts until your total drug costs — what you paid plus what your plan paid — reach a certain threshold. That threshold changes each year but is usually around $5,000 to $6,000.

Once you cross that threshold, you enter the coverage gap, sometimes called the "donut hole." In this stage, you pay a larger share of the cost. The gap ends when your out-of-pocket spending reaches a second threshold, usually around $8,000 to $9,000. The exact amounts change yearly, so check your plan's materials.

After the coverage gap, you reach catastrophic coverage. Your plan pays most of the cost from that point forward, and you pay only a small copay or coinsurance. Catastrophic coverage continues for the rest of the calendar year.

How to compare Part D plans before you enroll

Comparing plans is the single most important step you can take, because two plans can cost you $1,000 or more differently per year for the same medications. Medicare provides a free tool called the Plan Finder on Medicare.gov. You enter your medications, your pharmacy, and your location, and the tool shows you every Part D plan available in your area with the estimated cost for your specific drugs.

When you use Plan Finder, pay attention to three numbers: the monthly premium, the yearly deductible, and your estimated annual out-of-pocket cost for the drugs you actually take. The plan with the lowest premium is not always the cheapest overall. A plan with a higher premium might have lower copays and save you money if you take expensive medications regularly.

You should also check whether your preferred pharmacy is in the plan's network. Some plans have preferred pharmacies where your copays are lower. If your regular pharmacy is not preferred, you might pay more or have to switch. Call your pharmacy and ask which Part D plans they participate in, or check the plan's website for a pharmacy locator.

Run the Plan Finder comparison every year in the fall, even if you have been happy with your current plan. Drug prices change, plans add and drop medications, and new plans enter the market. What was the cheapest plan last year might not be this year.

What happens if your drug is not covered or costs too much

Every Part D plan has a formulary, which is the official list of drugs the plan covers. If your doctor prescribes a drug that is not on your plan's formulary, you have options. You can pay the full price out of pocket, ask your doctor to prescribe a different drug that is on the formulary, or request an exception from your plan.

To request an exception, contact your Part D plan and ask for a formulary exception or coverage information. Your doctor will need to write a letter explaining why the non-covered drug is medically necessary for you — for example, because you have tried other drugs on the formulary and they did not work. The plan has 72 hours to respond to urgent requests and 14 days for standard requests. If the plan denies your request, you can appeal.

If a drug is on your plan's formulary but the copay is very high, you can also request a coverage information to ask the plan to lower your cost. This is less common than formulary exceptions, but it is worth asking if you are facing a copay that makes the medication unaffordable.

Some drugs require prior authorization, meaning your doctor must get approval from the plan before the pharmacy will fill the prescription. Others are subject to quantity limits, meaning the plan will only pay for a certain amount per month. If you run into these restrictions, your doctor can request an exception or prior authorization override, and the plan must respond within the same timeframes as a formulary exception.

How to enroll in Part D and when to do it

You can enroll in Part D through Medicare.gov, by calling Medicare at 1-800-MEDICARE, or by contacting the insurance company directly. Most people enroll online through Medicare.gov because it is the fastest route. You will need your Medicare card and information about your current coverage (if any).

The best time to enroll is during the Annual Enrollment Period, which runs from October 15 to December 7 each year. Coverage changes take effect on January 1. If you enroll during this window, your new plan starts on the first of the following January.

If you are new to Medicare, your enrollment window is seven months long: three months before the month you turn 65, the month you turn 65, and three months after. If you miss this window and do not have other drug coverage, you can still enroll during the Annual Enrollment Period, but you will owe a late enrollment penalty.

If you lose drug coverage from an employer or union plan, you have 63 days to enroll in Part D without penalty. This is called a Special Enrollment Period. Keep your coverage termination letter as proof of the date you lost coverage, because you will need it if the plan questions your enrollment timing.

How to handle changes to your plan or medications

Your Part D plan's formulary, costs, and pharmacy network change every January 1. Before the new year, your plan will mail you a notice of changes. Read it carefully, because your current medications might move to a higher cost tier or be removed from the formulary entirely. If your plan no longer covers a drug you need, you have time to switch plans during the Annual Enrollment Period.

If your doctor prescribes a new medication during the year and it is not covered by your plan, you can request a formulary exception (as described above) or switch to a different Part D plan if you are outside the Annual Enrollment Period. Switching plans outside the Annual Enrollment Period is normally not allowed, but if you have a may have access to life event — such as a change in your health status that requires a new medication — you may be able to request a Special Enrollment Period.

Keep track of your out-of-pocket spending throughout the year. Once you reach the coverage gap, your costs jump significantly. Knowing when you are about to enter the gap helps you plan for higher expenses and understand why your copays suddenly increase. Your plan will send you a notice when you enter the coverage gap, but you can also track your spending on your plan's website or by calling the plan's customer service number.

How to save money on prescriptions outside Part D

Part D is not the only way to pay for medications. If you are in the coverage gap or facing a high copay, you have other options. Manufacturer coupons and patient information programs can reduce or eliminate your cost for specific brand-name drugs. You can search for these programs on the drug manufacturer's website or through websites like NeedyMeds.org or RxAssist.org.

Some medications have generic versions that cost significantly less than brand-name drugs. Ask your doctor and pharmacist whether a generic is available for your medication and whether it is appropriate for your condition. Generic drugs have the same active ingredient and work the same way as brand-name drugs, but they cost less because the manufacturer does not have to repeat the original research and development.

If you may have access to for Medicaid in addition to Medicare, Medicaid can help pay your Part D costs. Medicaid may be able to access varies by state, but if your income is very low, you may may have access to. Contact your state Medicaid office to learn whether you are may be able to access.

Prescription discount programs like GoodRx or SingleCare let you pay a discounted cash price instead of using your insurance. Sometimes the discount price is lower than your Part D copay, especially for generic drugs. You can compare prices on these websites before you go to the pharmacy.

Frequently Asked Questions

Do I have to enroll in Part D when I turn 65?

Part D is optional, but if you do not have other drug coverage and you do not enroll within seven months of becoming may be able to access, you will pay a permanent penalty. The penalty is about 1% of the national average Part D premium for each month you delay, and it is added to your premium for life. If you have coverage from an employer or union plan, you do not need to enroll in Part D as long as that coverage continues.

What if I cannot afford my Part D copays?

If your income is low, you may may have access to for Extra Help, a federal program that pays most or all of your Part D costs. You can explore through Social Security or at your local Social Security office. You can also ask your plan about copay information programs, manufacturer coupons, or patient information programs for your specific medications. Some nonprofits also offer medication cost information.

Can I switch Part D plans if I am unhappy with mine?

Yes, but only during the Annual Enrollment Period (October 15 to December 7) or if you have a may have access to life event. If you miss the Annual Enrollment Period and do not have a may have access to event, you are locked into your plan until the next enrollment period. may have access to events include losing other drug coverage, moving to a new state, or a significant change in your health or medications.

What if my pharmacy is not in my plan's network?

You can ask your plan to cover an out-of-network pharmacy, but you will likely pay more. Some plans allow you to use any pharmacy but charge higher copays for non-preferred pharmacies. If your preferred pharmacy is not in your plan's network, consider switching to a plan that includes it, or ask your pharmacy which plans they participate in and switch to one of those plans during the Annual Enrollment Period.

How do I know if I am in the coverage gap?

Your Part D plan will send you a notice when you enter the coverage gap, usually in the mail. You can also track your spending on your plan's website or mobile app, or call your plan's customer service number. Keep receipts from your pharmacy so you can calculate your out-of-pocket spending if you want to monitor it yourself.