What You Should
Know About
Medicare Part D

What You Need to Know about Medicare Part D

What does Medicare Part D cover?

Every plan must cover the wide array of prescription drugs people with Medicare take (including most drugs in certain “protected classes,” like drugs for cancer or HIV/AIDS treatments). Each plan has its’ own “formulary,” or list of covered drugs. Many plans classify drugs into different tiers in their formularies, and each tier has a different cost. For example, a lower-tier drug will most likely cost less than a higher-tier drug.

Covered Prescription Drug List (Formulary)

Most Medicare drug plans (and Medicare Advantage Plans with prescription drug coverage) have their own lists of covered drugs, or “formulary.” Plans can include both name-brand prescription drugs and generic drug coverage, and each formulary will consist of at least two drugs per drug category. However, each plan decides which drugs covered by Part D they will offer.

While your specific drug may not be offered in the formulary, a similar drug should be available in most cases. If you or your prescriber (your doctor or other healthcare provider legally allowed to write prescriptions) finds that none of the drugs on your plan’s formulary will work for you, an exception may be allowed.

Your plan may make changes to its formulary during the year because drug therapies change, new drugs are released, or new medical information becomes available. Your plan may also raise the copayment or coinsurance on a particular drug when the manufacturer raises their price or when an alternative generic form of a drug is offered, and you continue taking the name-brand drug.

If the Food and Drug Administration (FDA) considers a drug unsafe or their manufacturer removes them from the market, a plan offering Medicare drug coverage under Part D may immediately remove it from their formularies. If you are currently taking any of the affected drugs, you will get notified of any specific changes afterward.

For other changes that may occur during the year currently taking, your plan must do one of the following:
  • Provide you with written notice at least 30 days before the date the change becomes effective.
  • When you request a refill, provide you with a written notice and at least a month’s supply of your prescriptions under the same plan rules stated before the change.

You may need to change the drugs you are using, pay more for them, or ask for an exemption in response to changes. If you use a drug, not on your plan’s formulary, you will have to pay full price for it unless you claim a formulary exception. Medicare drug plans negotiate to get lower prices for the drugs on their formularies. So using those drugs will generally save you money. Also, using generic drugs instead of name brand drugs may save you money

Generic Drugs

According to the Food and Drug Administration (FDA), generic drugs are copies of name-brand drugs and are the same concerning:

  • dosage form
  • strength
  • safety
  • route of administration
  • quality
  • performance characteristics
  • intended use

The active ingredients in generic drugs and name-brand prescription drugs are the same, and they have been proven to work the same way. There may be an alternative if there is no generic drug the same as the name-brand drug you take. Talk to your doctor or prescriber about options concerning your generic drug coverage.

Tiers

Drugs are placed into different tiers in their formularies in order to lower costs. Each plan can form its tiers in different ways, and each tier costs a different amount. In most cases, a lower-tier drug will cost less than a higher-tier drug.

This is an example of Medicare drug plan’s tiers (your plan may be different):

  • Tier 1 – Lowest copayment; most generic prescription drugs
  • Tier 2 – Medium copayment; preferred name-brand prescription drugs
  • Tier 3 – Higher copayment; non-preferred name-brand prescription drugs
  • Specialty Tier – Highest copayment; very high-cost prescription drugs

In special cases, you can request an exemption if your drug is in a higher tier. Your prescriber (your doctor or healthcare provider who’s legally allowed to write prescriptions) thinks you need that drug instead of one found in a lower tier. An exemption will get you a lower coinsurance or copayment for the higher tier drug.

Plans can make changes to their formularies at any time. Your may be notified of any formulary changes that affect the drugs you’re currently taking.

Medicare drug coverage includes drugs for medication-assisted treatment for opioid use disorders and drugs like methadone and buprenorphine when prescribed for pain. (Medicare Part A will cover methadone when used to treat opioid use disorder as an inpatient in a hospital, and Medicare Part B will now covered methadone when received through an opioid treatment program. Contact or visit the plan’s website for its current formulary.

Starting January 1, 2021, you may be able to get coverage that offers savings on your insulin. You could end up paying no more than $35 for a 30-day supply of insulin. 

What are the costs of Medicare Part D?

The payments you will make throughout the year in a Medicare drug plan:
  • Copayments and Coinsurance
  • Yearly deductible
  • Premium
  • Costs if you pay a late enrollment penalty
  • Costs in the coverage gap
  • Costs if you get Extra Help
Your actual drug coverage costs will vary according to:
  • What drug benefit phases you’re in (like if you’ve met your deductible or if you’re in this catastrophic phase)
  • Your prescriptions and if  they are on your plan’s formulary (list of covered drugs)
  • Whether you get Extra Help paying your drug coverage costs
  • The tier the drug is in
  • Which pharmacy you use (does it offer standard or preferred cost-sharing, is it out of network, or is it mail order) Out-of-pocket drug costs may be less at a preferred pharmacy because they’ve agreed with your plan to charge less

Starting January 1, 2021, you may be able to get coverage that offers savings on your insulin. You could end up paying no more than $35 for a 30-day supply of insulin.

Speak with your doctor if your drug costs are higher than last year. There may be lower-cost drug options you could be using. You could save on out-of-pocket costs throughout the year by finding alternatives for you. You can look at dashboards for more information on drug prices where they highlight which manufacturers have been increasing their pricing and show other year-to-year drug price data. (These are general or total drug prices, and increases may not reflect changes in what you’ll pay.)

How does Part D work with other insurance?

  • Union or Employer Health Coverage

Health coverage from your, your spouse’s, or other family member’s current or former employer or union. If you have drug coverage through a current or previous employer or union, they will notify you annually to let you know if your drug coverage is creditable. You will need to keep any information you get.

Call your benefits administrator for information before making any changes to your current coverage or signing up for other coverage. Signing up for other coverage could cause you to lose your employer or union health and drug coverage for you and your dependents. You may not be able to get your union or employer coverage back if this happens.

  • COBRA

It may be in your best interest to take Medicare drug coverage instead of, or additionally to, COBRA coverage. If you take COBRA coverage and it includes creditable prescription drug coverage, you will have a special enrollment period to join a Medicare drug plan without penalty when your COBRA coverage ends. Contact your State Health Insurance Assistance Program (SHIP) to see if COBRA is the right fit for you.

  • Medicare Supplement Insurance (Medigap) policy with prescription drug coverage

It may be beneficial to join a Medicare drug plan because most Medigap drug coverage isn’t creditable. If you join a plan later, you may end up paying more in the end.

While policies can no longer be sold with prescription drug coverage, if your current Medigap policy has drug coverage, you can keep it. If you were to join a Medicare drug plan, your Medigap insurance company would have to remove the prescription drug coverage under your Medigap policy and adjust your premiums. Contact your Medigap insurance company for more information.

  • Medicaid 

Medicare takes care of drug costs. You will have to join a Medicare drug plan for Medicare to pay for your drug coverage.

Generally, your covered drugs will cost a small amount. If you have full coverage from Medicaid and also live in a nursing home, you will pay nothing for your covered prescription drugs.

If you have full coverage from Medicaid and live in an assisted or adult living facility, or a residential home, you will pay a small copayment for each drug.

If you don’t join a drug plan, Medicare will automatically enroll you so you don’t miss a day of coverage/ You can decide to switch plans at any time.

  • Supplement Security Income Benefits

You will need to join a Medicare drug plan if you get benefits or help from your state Medicaid program to pay your Medicare premiums. You will automatically be qualified for Extra Help to assist with your prescription drug costs.

If you don’t join a drug plan, Medicare will automatically enroll you, so you don’t miss a day of coverage. You can decide to switch plans at any time.

  • State Pharmaceutical Assistance Program (SPAP)

Each state’s State Pharmaceutical Assistance Program (SPAP) chooses individually how to work with Medicare prescription drug coverage. Some states will afford you extra coverage when joining a Medicare drug plan. Some states will have a separate state program to help with prescriptions. Contact your state’s SPAP for more information.

  • Long-term care facility

In order to provide drug coverage to their residents, long-term care pharmacies form contracts with Medicare drug plans. You’ll have the ability to choose or switch your Medicare drug plan if you are entering, currently living in, or leaving a nursing home. This allows you to choose a plan contracted with your nursing home’s pharmacy.

  • HUD housing Assistance

You may want to enroll in a Medicare drug plan if you receive housing assistance from the Department of Housing and Urban Development (HUD). You won’t lose your housing assistance if you qualify for Extra Help; however, as your prescription drug spending decreases, your housing assistance may be reduced. The value Extra Help pays toward your prescription drug costs will make up for any housing assistance decrease.

  • Food Stamps

You may want to join a Medicare drug plan if you receive food stamps. If you qualify for Extra Help, your food stamps may decline, but your Extra Help will offset the difference.

You could lose your minimum food stamp benefits if you are near the cutoff for food stamp eligibility because you’ll be paying less for your prescription drugs. Any decrease in food stamp benefits will be offset by the value of Extra Help paying for your prescription drugs.

  • Health Insurance Marketplace

The Health Insurance Marketplace, “Marketplace” or “exchange” for short, acts as a service to help people shop for and enroll in affordable health insurance. The federal government operates the marketplace in most states and is available at Healthcare.gov. Some states operate their own marketplace.

The marketplace provides health plan shopping and enrollment services through the web, call centers, and in-person help.

Below are the types of insurance considered creditable prescription drug coverage. It may be in your best interest to keep your current coverage If you have one of these types of insurance. 

  • Federal Employee Health Benefits (FEHB) Program

This is health coverage for current or retired federal employees and covered family members. Prescription drug coverage is included in these plans, so you don’t need to get Medicare drug coverage. In the event you want to get Medicare drug coverage as well, you will be able to keep your Federal Employee Health Benefits Plan, and generally, your Medicare plan will pay first. Contact your plan if you have any further questions.

  • Veteran’s Benefits

Veteran’s Benefits is healthcare coverage for those who have served in the U.S. Department of Veterans Affairs (VA) program. If you also enroll in a Medicare drug plan, you cannot use both coverage types for the same drug at the same time. Contact the VA for more information.

  • TRICARE (military health benefits)

TRICARE is a healthcare plan for active-duty service members, military retirees, and their families. If you are entitled to Medicare Part A, you must have Medicare Part B to keep TRICARE drug benefits. You don’t need to join a Medicare drug plan if you have TRICARE, but if you do, your Medicare drug plan will pay first, and TRICARE will pay second.

If you join a Medicare Advantage plan with drug coverage, the Medicare Advantage plan, and TRICARE plan could coordinate their benefit if your pharmacy is both in your Medicare Advantage Plan network and in the TRICARE network. Otherwise, you can file a claim to get repaid for your out-of-pocket costs. For more information, contact the TRICARE Pharmacy Program.

  • Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA)

CHAMPVA is a comprehensive healthcare program where the Department of Veterans Affairs shares the cost of covered healthcare services and supplies with eligible beneficiaries. You can enroll in a Medicare drug plan, but be aware, you won’t be able to use the “Meds by Mail” program (which can give your maintenance drugs to you at no charge, meaning no premiums, deductibles, or copayments). For more information, contact CHAMPVA.

  • Indian Health Services

Indian Health Services (IHS) is the primary healthcare provider to the American Indian and Alaska Native Medicare population. Made up of tribal, urban, and federally operated health programs, the IHS offers a range of clinical and preventative health services through a network of hospitals, clinics, and other entities. Several Indian health facilities participate in the Medicare drug program. If you join a Medicare drug program, you can still get your drugs through an Indian health facility at no cost to you without interruption to your coverage. Join a Medicare drug plan or Medicare Advantage Plan with drug coverage may help your Indian health facility because the plan pays the Indian health for the cost of the drugs.

Speak with your local Indian health benefit coordinator, who can help you choose a plan that meets your needs and to find out more about how Medicare works with the Indian health care system.

If you are getting care through an IHS or tribal health facility or program without being charged, you can continue to do so for some or all of your care. Enrolling in Medicare does not affect your ability to get services through the IHS and tribal health facilities.

Keep any information you get from your plan concerning creditable prescription drug coverage. You may need it if you decide to join a Medicare drug plan. Do not send creditable coverage letters/certificates to Medicare.

What is the Part D coverage gap?

Most Medicare drug plans will have a coverage gap (or the “donut hole”); a temporary limit on what the drug plan will cover for drugs.

The coverage gap will begin after you and your plan spends a certain amount on covered drugs. In 2021, after you spend $4,130 on covered drugs, you are in the coverage gap. The amount can change each year. And, those with Medicare who get Extra Help paying for Part D costs won’t enter the coverage gap.

How are name-brand prescription drugs affected?

You will pay no more than 25% of the cost of your plan’s covered name-brand prescription drugs if you buy them at a pharmacy or order them through the mail. Some plans may offer even lower costs in the coverage gap. The discount will come off the price your plan set with the pharmacy for that drug.

Even though you will only pay up to 25% of the piece for your name-brand drug, nearly the full price listed will count as out-of-pocket costs to help you get out of the coverage gap.

Here is a breakdown:
  • The manufacturer pays 70% of the total drug cost to discount the price for you. Your plan will pay 5% of the cost. Together they pay 75% of the cost, leaving you to pay 25% of the drug cost.
  • There is a dispensing fee. Your plan pays 75% of the fee, and you pay 25% of the fee.

The 5% toward drug cost and 75% toward the dispensing fee paid by the drug plan aren’t counted toward your out-of-pocket spending.

If your Medicare drug plan includes coverage in the gap, you could get a discount after your plan’s coverage has been applied to the drug’s price. The discount will be applied to the remaining amount you owe for your name-brand drugs.

How are Generic Drugs affected?

During the coverage gap, Medicare will pay75% of the price for generic drugs, and you will pay the remaining 25%. The coverage for generic drugs is different from the discount for name-brand drugs. The amount you pay for generic drugs will count towards getting you out of the coverage gap.

If your Medicare drug plan includes coverage in the gap, you could get a discount after your plan’s coverage has been applied to the drug’s price.

Items that count towards the coverage gap:
  • The discount you get on name-brand drugs in the coverage gap
  • What you pay in the coverage gap
  • What you pay for drugs that aren’t covered
  • Your yearly deductible, coinsurance, and copayments
  • Pharmacy dispensing fees
  • The drug plan premium
If you think you should get a discount

If you don’t get a discount on your name-brand prescription after you think you’ve reached the coverage gap, review your next “Explanation of Benefit” (EOB). Contact EOB to make sure your prescriptions are up-to-date.

What is Catastrophic coverage?

In 2021, you’re out of the coverage gap when you’ve spent $6,550 out-of-pocket. You automatically get “catastrophic coverage” when you get out of the coverage gap (Medicare prescription drug coverage). This assures you only pay a small coinsurance percentage or copayment the rest of the year for covered drugs.

What is the Part D late enrollment period?

Any time after your initial enrollment period is over, you have 63 or more days in a row without Medicare drug coverage or other creditable prescription drug coverage, you may owe a late enrollment penalty. This is a permanent addition to your Medicare drug coverage (Part D) premium. If you get Extra Help, you will not have to pay the late enrollment penalty.

How much is the Part D penalty?

The cost of the Part D penalty is determined by how long you were without Part D or creditable prescription drug coverage.

The penalty is calculated by multiplying 1% of the “national base beneficiary premium” ($33.06 in 2021) by the number of full uncovered months you were without Part D or creditable prescription drug coverage. The monthly premium is rounded to the nearest $0.10 and added to your monthly Part D premium.

Keep in mind, if the base beneficiary premium changes, your penalty amount may also change.

Example:

Mrs. Smith is currently eligible for Medicare but missed her Initial Enrollment period, which ended on March 31, 2018. Instead, she enrolled during the open enrollment period that ended December 7, 2019. Her drug coverage was effective January 1, 2020

Because Mrs. Smith was without a creditable prescription drug coverage from April 2018 through December 2019, her penalty in 2021 was 21% (1% for each of the 21 months without coverage) of $33.06 (The 2021 national base beneficiary premium) or $6.94 each month. Since the monthly penalty is rounded to the nearest $0.10, she will pay an additional $6.90 each month on to[ of her plan’s monthly premium.

Math:

0.21 (21% penalty) x $33.06 (2021 base beneficiary premium) = $6.94

$6.94 rounded to the nearest $0.10 = $6.90

$6.90 = Mrs. Smith’s monthly late enrollment penalty for 2021

How do I know if I owe a penalty?

When you join a Medicare drug plan, it will tell you if you owe a penalty and what your premium will be. In most cases, you will pay this penalty as long as you have a Medicare drug plan.

What if I disagree with the late enrollment penalty?

You may be able to request a “reconsideration” through your plan. Your plan will provide information on how to request a reconsideration.

Within 60 days from the date on the letter telling you about your late enrollment penalty, you must complete the form and return it to the address or fax number listed on the form. It would also help to send any proof to support your case (like a copy ,from an employer or union plan, of your notice of creditable prescription drug coverage.)

Do I still have to pay the penalty if I disagree with it?

The late enrollment penalty is included in the plan’s monthly premium. You must pay the penalty regardless of whether you’ve asked for a reconsideration. If you don’t pay your premium, including the late enrollment penalty portion, you risk being disenrolled from your Medicare drug plan.

When will I get a reconsideration decision?

Typically, reconsideration decisions will happen within 90 days. The decision will be made as quickly as possible. Or, for good cause, Medicare’s contractor may take an additional 14 days to resolve your case. You may also request an extension.

What if Medicare’s contractor decides the penalty is incorrect?

If Medicare’s contractor decides that your late enrollment penalty is incorrect, you and your drug plan will receive a letter explaining the ruling. Your Medicare drug plan will then either remove or reduce your penalty and send you a letter showing the corrected premium amount and tell you if you are going to get a refund.

What happens if Medicare’s contractor decides your late enrollment penalty is correct?

If Medicare’s contractor decides your late enrollment penalty is correct, you will receive a letter explaining the ruling, and you must pay the penalty.

What is Extra Help?

Extra Help is a program to assist those with limited income and resources in paying Medicare prescription drug costs (like premiums, deductibles, and coinsurance). Call your drug plan if you get Extra Help but don’t know if you are paying the correct amount. Your plan will ask you to provide documentation so they can check the level of Extra Help you should receive.

Documentation you can send your plan:
  • An Extra Help “Notice of Award” from Social Security.
  • A yellow automatic enrollment notice from Medicare.
  • An orange notice from Medicare saying your copayment amount will change next year.
  • A purple notice from Medicare saying you automatically qualify for Extra Help.
  • If you have Supplemental Security Income (SSI), your award letter from Social Security can be used as confirmation you have SSI.
Proof you have Medicaid and live in an institution or get home- and community-based services such as:
  • A bill from an institution (like a nursing home) or a copy of the state document showing where Medicaid paid for your stay for at least a month.
  • A printout from your state Medicaid system showing you lived in the institution for at least a month.
  • A document showing you have Medicaid and are getting home- and community-based services from your state.
Proof you have Medicaid:
  • A copy of a state document that shows you have Medicaid.
  • A copy of your Medicare card.
  • A printout from a state electronic enrollment file showing you have Medicaid.
  • A printout from your state Medicaid system showing you have Medicaid.
  • Any other documentation showing that you have Medicaid from your state.
After receiving this information, your plan must:
  • Make it so you will not pay more than the LIS drug coverage cost limit (for 2021, prescription costs are at most $3.70 for each generic drug and $9.20 for each name-brand covered drug for most people enrolled in the program).
  • Contact Medicare to provide confirmation, if available, that you qualify. Depending on the circumstances, your request could take up to 2 weeks for processing.

Remember to tell your plan how many days of medication you have left so Medicare can attempt to process your request before you run out of medication, if possible.

How do I switch my Medicare drug plan?

You can switch to a new Medicare drug plan during the Medicare Advantage Open Enrollment period or a Special Enrollment period. You won’t need to cancel your old plan if you decide to switch, as its coverage will automatically end when your new plan begins.

If you want to join or switch plans, do it as soon as possible so you will have your Membership card when your coverage begins, and your prescription can be filled without interruption.

After switching, your new plan will send you a letter detailing when coverage begins.

Do not provide personal information to plans that call you unless you are already a member of the plan.

When can I buy a Medicare Part D plan?

You can join a Medicare Part D plan during specific times of the year. Such as:

When you first enroll in Medicare – (Initial Enrollment Periods for Part C &Part D)

 

I’m newly eligible for Medicare due to turning 65.

You can enroll in a Medicare drug plan or Medicare Advantage Plan during your Initial Enrollment Period when you turn 65. (3 months before you turn 65, the month you turn 65, and the 3 months after you turn 65).

I’m newly eligible for Medicare due to disability (under 65).

You can enroll in a Medicare drug plan or Medicare Advantage plan when your Medicare coverage begins 24 months after getting Social Security or Railroad Retirement Board (RRB) disability benefits.

You will have a 7 month enrollment period during the 3 months before the 25th month, the 25th month, and the 3 months after the 25th month of receiving disability benefits.

I’m already eligible for Medicare due to disability and turning 65.

You can enroll, switch, or drop your Medicare drug plan or Medicare Advantage Plan 3 months before you turn 65, the month you turn 65, and the 3 months after you turn 65.

I don’t have Medicare Part A coverage and enrolled in Medicare Part B during the Part B General Enrollment Period (January 1- March 31).

You can sign up for a Medicare drug plan from April 1 to June 30.

I have Medicare Part A coverage and enrolled in Medicare Part B during the Part B General Enrollment Period (January 1- March 31).

You can sign up for a Medicare Advantage Plan with or without drug coverage from April 1 to June 30.


During the yearly enrollment periods for Part C & Part D

There are two different enrollment periods each year you can make changes to your Medicare Advantage or Medicare Drug plan for the next year.

The Open Enrollment Period for Medicare Advantage and Medicare drug coverage (October 15 – December 7)

Changes you can make:

  • Change from Original Medicare to a Medicare Advantage Plan.
  • Change from a Medicare Advantage plan back to Orginal Medicare.
  • Switch from one Medicare Advantage plan to another.
  • Switch from a Medicare Advantage plan without drug coverage to a Medicare Advantage plan with drug coverage.
  • Switch from a Medicare Advantage plan with drug coverage to a Medicare Advantage plan without drug coverage.
  • Enroll in a Medicare drug plan.
  • Switch from one Medicare drug plan to another.
  • Drop your Medicare coverage altogether.
The Medicare Advantage Open Enrollment Period (January 1 – March 31)

Changes you can make:

  • Switch from a Medicare Advantage plan without drug coverage to a Medicare Advantage plan with drug coverage.
  • Switch from a Medicare Advantage plan with drug coverage to a Medicare Advantage plan without drug coverage.
  • Change from a Medicare Advantage plan back to Original Medicare.
  • Enroll in a Medicare drug plan.

You can change to another Medicare Advantage plan or go back to Original Medicare within the first 3 months of having Medicare if you enrolled in a Medicare Advantage plan during your initial enrollment period.

You may also be eligible to make changes during a special enrollment period.


Special Enrollment Periods

When certain events happen in your life, like if you move or lose insurance coverage, you may be granted a special enrollment period (SEP) (a period where you can make changes to your Medicare Advantage and prescription drug coverage). The rules about the types of changes and when you can make them are different depending on the SEP.

Click here to Learn More about Special Enrollment Periods