Medicare Part D
What is Medicare Part D?
Medicare Part D coverage helps cover the costs of prescription drugs. Enrolling in a plan with Part D benefits will help in reducing your out-of-pocket expenses for your medications.
Medicare Part D Terms You Should Know
A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Also called a drug list.
The amount you pay each year before coverage kicks in.
Different levels of copays, ranging from least expensive (usually generic drugs), through medium cost (usually “preferred” brand-name drugs) and higher cost (“non-preferred” brand names) to highest cost (rare and very expensive drugs). Charges for each tier vary among plans. Your copay or coinsurance depends on which tier your drug is placed in by your plan.
A dollar amount, set each year by law, that releases you from the coverage gap and qualifies you for low-cost catastrophic coverage, if your drug costs reach that level in any one year. Any payments you’ve made for your drugs out of pocket since the beginning of the year count toward the limit, and are known as true out-of-pocket costs.
The payments that count toward the out-of-pocket limit that gets you out of the coverage gap and triggers catastrophic coverage, if your drug costs run that high in a year. These payments include your deductible, copays in the initial coverage period and anything you’ve paid for your drugs in the gap — but not your premiums — since the beginning of the year. It also includes discounts on brand-name drugs that are provided by the manufacturers in the coverage gap.
When the plan must approve a drug before it can be prescribed to you. This can often happen under two scenarios. First, when a drug is considered very powerful or could have safety concerns if you are on it for an extended period of time. Second, if a drug can be covered under Part D, Part B or Part A. If the drug is approved under Part D, the plan will cover the drug. However, if denied under Part D, you should ask your doctor to file a claim under either Medicare Part A or Part B.
A plan’s ability to restrict the maximum amount of a drug to be prescribed at one time because of safety or cost concerns. For example, if your doctor prescribed a 60-day quantity for a medication, your plan can intervene and provide only a 30-day supply based on their policies regarding quantity limits.
A type of prior authorization. It is a feature of Part D plans where the plan requires you to accept a less expensive drug before a more expensive one. This can occur when a brand-name drug is prescribed, but a cheaper generic brand may be available. The plan would direct you to accept the cheaper drug, but if your condition fails to improve, they then would provide you the more expensive drug.
If you want to avoid step therapy, your physician must provide proof to the plan of your failed attempts to use a lower-cost drug(s).
The extra amount you pay in premiums if you do not sign up for Medicare drug coverage when you first become eligible, unless you already have creditable coverage from elsewhere.
How To Get Part D Coverage
There are two ways to get Part D coverage:
If you are enrolled in Original Medicare (Parts A and B):
You should enroll in a stand-alone prescription drug (PDP).
If you are enrolled in a Medicare Advantage (Part C plan):
You should enroll in a Medicare Advantage prescription drug plan (MAPD). These are all-in-one plans that include your medical and prescription drug benefits.
We understand that Part D is confusing.
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A Closer Look at Part D
To be eligible for Part D:
✓ you must be enrolled in Medicare Part A and/ or Part B.
✓ you must reside in the plan’s service area.
A formulary is a plan’s list of covered medications.
✓ All formularies will include both brand-name and generic drugs.
✓ Every formulary must include at least two drugs found in the most commonly prescribed categories and classes.
✓ All plans can choose which drugs they will offer to their members. Regardless of your plan selection, Part D covered insulin is capped at $35 copay per month. This is also exempt from any prescription drug deductible your plan may have.
✓ If your medication is not on your plan’s formulary, you may ask for a formulary exception.
To lower costs, plans will place drugs in to different tiers within their formulary.
✓ Each plan can divide its tier in their own unique way and will establish a different cost for each tier.
✓ As a general rule, a drug in a lower tier will cost you less than a drug in a higher tier.
✓ Most plans will have either 5 or 6 tiers.
Example of a plan tier structure:
Tier 1: Preferred generic drugs
Tier 2: Generic drugs
Tier 3: Preferred brand-named drugs
Tier 4: Non-preferred drugs
Tier 5: Specialty tier
All Part D plans will have four stages. Throughout the year, your prescription drug costs will change as you move through the stages.
Part D stages:
Deductible
You pay the full cost of your prescriptions until you reach your plan’s deductible. Lower tier drugs are often exempt from your plan’s deductible. Some deductibles may apply only to drugs on specific tiers. If your plan has a zero deductible, you begin at the initial coverage stage.
The maximum deductible for 2025 is $590.
Initial Coverage
During this stage, your plan will pay a portion of each covered prescription drug (formulary) you purchase. The tier assigned to your prescription will dictate your out-of-pocket expenses for your medications. You remain in this stage until what you spend, plus what your plan spends, has reached $2,000.
Catastrophic Coverage
This stage begins when your out-of-pocket costs reaches $2,000 for covered drugs. When entering in this stage, you will have zero copays for the balance of your plan year.
✓ While Part D benefits will be consistent across all plans, the out-of-pocket expenses, including copays, deductibles, coinsurance, and premiums will vary.
✓ If your plan has a premium, you must pay it to receive your benefits.
✓ If Medicare assesses you a Part D Income Related Monthly Adjustment Amount (IRMAA) surcharge, you must pay this, or risk disenrollment from your plan.
✓ When entering the Coverage Gap, you will pay 25% of the retail cost for all medications.
✓ When entering the Catastrophic stage, you will pay nothing for your medications for the remainder of the plan year.
✓ Preferred pharmacies are in-network pharmacies that have agreed to provide medications at a lower cost for increased volume of clients.
✓ Using preferred pharmacies will help you reduce your total out-of-pocket costs.
✓ Each plan will have their own network of preferred pharmacies.
✓ All prescription drug plans will provide mail order.
Part D Enrollment Periods
While there multiple enrollment periods when you can enroll in Part D, these are the most common:
Turning 65 – Initial Enrollment Period (IEP)
This enrollment period is the 7-month period that surrounds your 65th birthday, and for most, the first time you are eligible to enroll in Medicare. Enrolling during your IEP will avoid any LEP.
Working Past 65 – Special Enrollment Period (SEP)
This enrollment period provides a period of time to enroll in Parts B and D penalty-free at a later date should you decide to remain on your employer plan.
If you work past 65, you would be eligible for a Special Enrollment Period. You must enroll in a Part D benefits within 63 days of your loss of employer coverage. Failure to do so can result in delayed coverage and lifetime penalties.
Part D Late Enrollment Penalty
Enrolling when you are first eligible is required to avoid any late enrollment penalties. It is important to understand when Medicare determines your initial enrollment eligibility for Part D coverage. If you miss your enrollment and are assessed a penalty, you are responsible for paying this as long as you have Medicare prescription drug coverage.
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