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Everything You Should Know About Medicare Part D

Understanding Your Plan and Part D Eligibility

Reviewed by: Brett Braithwaite, Licensed Insurance Agent.

Key Takeaways

  • The Plan

    Medicare Part D covers prescription drugs. It’s a standalone plan you can add to Original Medicare (Part A and Part B),Original Medicare (Parts A and B) is fee-for-service health insurance available to all Americans aged 65 and older and some individuals with disabilities. Original Medicare is provided by the federal government and is made up of two parts: Part A (hospital insurance) and Part B (medical insurance). or you can enroll into a Medicare Advantage plan Part CMedicare Advantage is health insurance for Americans aged 65 and older that blends Medicare benefits with private health insurance. This typically includes a bundle of Original Medicare (Parts A and B) and Medicare Prescription Drug Plan (Part D)., which would include Medicare Parts A, B and D.

  • How it Works

    Anyone enrolled in Original Medicare (Part A and Part B) is eligible for Part D prescription drug coverage.

  • The Value

    Part D plans offer a wide range of coverage to fit your prescription needs.

  • How to Enroll

    You can enroll in a Part D plan through Marketplaces like GoHealth, a private insurance group, or the government.

Older couple holding hands and walking in the countryside.

What's Medicare Part D?

Medicare Part D is a Federal medication insurance program administered through private insurance companies. More simply put, it’s insurance for your Rx needs. You can enroll in a standalone Part D plan to supplement your Part A and Part B benefits, or you can choose a Medicare Advantage (Part C) plan with Parts A, B and D included. You can purchase a Part D plan from a private insurance company. You get access to the company’s pharmacy network and pay a copay for prescriptions.

  1. Once you have your Medicare (Part A and Part B) plan, you can select your Part D coverage from a private carrier.
  2. After enrolling in Part D, you have access to your carrier’s network of pharmacies.
  3. You can switch from Original Medicare to Medicare Advantage and keep Part D coverage.

What's Covered?

Medicare Part D covers your prescription drugs. Each private plan offered through Part D must provide a standard level of coverage set by Medicare. The requirements mean most plans have sizable formulariesA Prescription Drug Formulary is a list of all the prescription drugs covered by your health insurance. These drugs can be name brand or generic and are broken up into four categories for pricing. with the capability to prescribe medications for many illnesses. Private insurance carriers have control over the drugs they cover and the “tiers,” which affect the cost. Take a look at our Medicare Part D coverage guide for more information.

What Costs Should I Consider?

Medicare Part D plans have an annual deductibleA deductible is the amount you pay out of pocket before your insurance company covers its portion of your medical bills. For example: If your deductible is $1,000, your insurance company will not cover any costs until you pay the first $1,000 yourself., premiumsA premium is a fee you pay to your insurance company for a health plan coverage. This is usually a monthly cost. and copaysA copayment (copay) is the fixed amount you pay directly to your provider for medical services or prescription drugs covered in your plan. For example: If your plan includes a copayment of $20 for office visits, you'll pay $20 to your doctor whenever you have an appointment.. Your plan may require you to pay all, some, or none of the deductible. After you reach the deductible, you will begin to pay a copay for your medication. Each plan offered through Part D has numbered drug “tiers.”

Tier one is the least expensive, each tier progressively costs more along with the complexity of the drug and the illness it treats. Once you spend a specific dollar amount from copays (determined annually by Medicare), you move into the coverage gap.The Medicare Part D coverage gap, also known as donut hole, is the payment stage between the initial coverage limit and the catastrophic coverage. The portion you pay for prescriptions is usually higher in this phase until you reach $6,350 for covered drugs in 2020 and enter the catastrophic level. Learn more about Medicare Part D costs.

What is the Donut Hole?

The coverage gap is the “donut hole.” The donut hole is not an official term. Before 2006, Medicare beneficiaries were responsible for 100% of their drug costs after reaching their initial coverage limit. Beneficiaries paid out-of-pocket until they reached catastrophic coverage. The gap in financial assistance was like a “donut hole”.

Currently, you pay 25% of the retail cost of your medications. The coverage gap applies until your out-of-pocket costs reach a specific dollar amount (determined by Medicare). 

If you reach the max out-of-pocket costs for the coverage gap, your coverage is considered catastrophic. When you reach catastrophic coverage, your Part D plan will cover 95% of your drug costs for the remainder of the year.

  • Tier 1 has the lowest copay for generic drugs. To receive approval from the Food and Drug Administration, generic drug makers must prove that their product performs the same way as the corresponding brand name drug. Generic drugs use the same active ingredients as brand name drugs to achieve desired results.
  • Tier 2 has a medium copay for preferred brand name drugs. Preferred brand name drugs are medications manufactured by one manufacturer that are typically lower-cost among all brand name drugs. This is partly because these medications have been in the market for some time and are widely accepted).
  • Tier 3 has a higher copay for preferred brand and non-preferred brand name drugs. Non-preferred brand name drugs, on the other hand, tend to cost more because they are new to the market. You may have heard the term “designer drugs.” These high-cost drugs fall into the same category.
  • Tier 4 has a higher copay for non-preferred brand drugs and non-preferred generic drugs.
  • Tier 5, or the Specialty Tier, has the highest copay. It contains very high cost brand and generic drugs, which may require special handling and/or close monitoring.

Do you have more questions about the “donut hole?” Here’s everything you should know about Medicare Part D Donut Hole coverage.

Who’s Eligible for Part D Insurance?

You are eligible for a Medicare Part D plan if:

  • You are 65 years of age or older.
  • You have a qualifying disability for which you have been receiving Social Security Disability Insurance (SSDI) for more than 24 months.
  • You have been diagnosed with End-Stage Renal Disease (permanent kidney failure requiring a kidney transplant or dialysis).
  • You are entitled to Medicare Part A or Part B.

You should consider Part D if you enroll in Original Medicare and you:

  • Have a regular prescription drug need.
  • Will have a prescription drug need in the future.
  • Have trouble paying for your current prescription drug needs.
  • Do not have prescription drug coverage.
  • Want to avoid a penalty. [1]

How Do I Enroll in Part D?

The Open Enrollment PeriodOpen Enrollment is the annual time period when individuals enrolled in Medicare Advantage plans can make a one-time plan change to any other Medicare Advantage, Medicare Advantage Part D, Part D plan or switch to Original Medicare. Medicare Open Enrollment is from January 1 to March 31. for Medicare and Part D is October 15 to December 7. If you don’t purchase a plan then, you may qualify for a Special Enrollment Period (SEP).The Special Enrollment Period is a 60-day period outside the Open Enrollment Period when you can enroll or change your coverage. Special Enrollment Periods are only granted if you experience a Qualifying Life Event. These are special circumstances that may change your health insurance needs.

New to Medicare and Part D?

If you’re preparing to enroll for the first time, the initial Medicare enrollment period is open for seven months. We think it’s easiest to explain initial enrollment when you slice it three ways: 

  • You can enroll in the three months before your 65th birthday month. Coverage begins the first day of your birthday month.
  • You can enroll the month of your birthday. Coverage begins the first day of the month after your birthday.
  • You can enroll in the three months after your birthday month. Coverage begins the first day of the month after enrollment.

For example: Let’s say you turn 65 on July 10. Your Initial Enrollment Period begins April 1 and ends October 31. 

What if the drug I need isn’t covered?

Each Part D plan has a formulary. Simply, it’s a list of the drugs covered. If the drug you need is not on a formulary, you can request an exception. You can contact the carrier to ask if your drug has a different name you don’t recognize. Part D offers at least two types of drugs in most categories, and is required by Medicare to cover all drugs in the six most essential categories. 

Learn more about how to navigate Medicare Part D enrollment.


What different types of prescription drugs are covered?

Medicare standard levels of coverage require every Part D plan to provide a basic coverage level for prescription drugs. If you still have questions about prescription drug coverage, contact us.

Do I need Medicare Part D if I’m enrolled in Medicare Advantage?

Most likely, no. Medicare Advantage provides Part A, Part B and usually Part D benefits. If the plan you are considering or your welcome packet does not clearly outline your coverage, we recommend you contact your carrier or you can contact us.

Do I already have Part D if I enrolled in Original Medicare?

No. Original Medicare includes Part A and Part B only. Part D is prescription drug plans provided through Medicare by private insurance companies. Part D is a standalone plan that must be added to your existing Original Medicare coverage.

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