Medicare Prescription Coverage (Part D)
Original Medicare doesn’t cover most prescription drugs — that’s where a separate plan for prescription drug coverage (Part D) comes in.
Does Original Medicare cover prescriptions?
You might be surprised to learn that Original Medicare doesn’t cover most prescriptions. Original Medicare provides coverage for services at hospitals (Medicare Part A) and the doctor’s office (Medicare Part B). Notably missing is coverage for most prescription drugs. That’s where Part D comes in.
Part D plans help cover some, but not all, prescription drug costs. These plans are provided by private companies (primarily insurance providers) and are approved by the federal government.
How do I sign up for Medicare Part D?
There are two ways you can obtain Medicare prescription drug coverage.
- Medicare Prescription Drug Plans. The first is called a “stand-alone” Prescription Drug Plan” (PDP) which is often purchased to add prescription drug coverage to Original Medicare with a Medicare Supplement Insurance Plan. You can enroll in a Medicare Prescription Drug Plan if you are enrolled in Part A, Part B or both.
- Medicare Advantage Plans with prescription drug coverage. The second way is by joining a Medicare Advantage Plan that includes prescription drug coverage, sometimes called a MA-PD. You must be enrolled in Parts A and B to enroll in a Medicare Advantage Plan that includes prescription drug coverage.
Medicare Part D enrollment periods
Part D IEP
Part D IEP The Initial Enrollment Period (IEP) for Medicare Part D is usually the same period as the Initial Enrollment Period for Medicare Part B. The IEP for Medicare Part D is typically the seven-month window starting three months before you're eligible for Medicare, typically three months before your 65th birthday month. During this time you can sign up for a Medicare prescription drug plan that suits your needs.
Medicare's Annual Election Period Runs from October 15 through December 7 annually and, among other things, allows Medicare beneficiaries to join, switch or drop a Medicare Part D plan. Each September, people with a Medicare Prescription Drug Plan will receive a document from their plan, called the "Annual Notice of Change", which details the changes it will make to your prescription coverage for the following year. This gives you the opportunity to use the Annual Election Period (Oct. 15 to Dec. 7) to review your current coverage and switch to a different Part D plan if you want to. You can join or switch to a Medicare Advantage Plan with prescription drug coverage or switch to Original Medicare, enroll in and purchase Medicare Supplement Insurance and/or a stand-alone prescription drug plan. This is an important time to review your options and choose the Medicare Part D Plan that is right for you.
The late enrollment penalty
One of the most important things to know about Medicare Part D enrollment is the Part D late enrollment penalty. If you don't join a Medicare drug plan when you're first eligible (or have other creditable prescription drug coverage or receive Extra Help) you'll have to pay a Part D late enrollment penalty. The penalty amount is currently 1% of the national base beneficiary premium multiplied by the number of full, uncovered months that you were eligible but didn’t join a Medicare Part D plan.
What are formularies?
The cost of prescription drugs on a Medicare Part D plan are identified on the plan’s "drug formulary," or a list of prescription drugs, including brand name and generic, that help you identify which prescriptions are covered and at what costs, which may change annually.
Formularies typically group drugs into different tiers according to cost. The tier that your medication is in determines your portion of the drug cost.
Overview of drug tiers:
Tier 1 typically includes preferred cost-sharing generic medications.
Tier 2 typically includes non-preferred cost-sharing generic medications.
Tier 3 typically includes preferred cost-sharing brand-name medications.
Tier 4 typically includes non-preferred cost-sharing brand-name medications.
Tier 5 includes specialty medications and biosimilars.
Brand name vs. generic
Medicare Part D plans cover both brand name and generic drugs, but generic alternatives may help you save substantially, and are typically considered just as effective as brand name drugs. Generic drugs must contain the same active ingredient as the brand-name version and must also meet the same quality, strength, purity, and stability standards.
How does Part D work with Medicare Supplement Insurance?
Having a Medicare Supplement Insurance Plan in addition to Original Medicare helps pay some of the costs of certain covered services and supplies that Original Medicare does not. However, Medicare Supplement Insurance plans can no longer be sold with prescription drug coverage. Accordingly, to have prescription drug coverage with Original Medicare, you will need to enroll in a stand-alone Part D plan, regardless of whether you have Medicare Supplement Insurance.