Overview

A Medicare Prescription Drug Plan (PDP), or Part D, is the part of Medicare that provides coverage for prescription medications. Anyone who is eligible for Original Medicare (Parts A & B) can sign up for one of these plans, which are offered by private companies approved by Medicare.

If you don't get a PDP when you first become eligible and you don't have what's called creditable coverage from another source, you may be subject to a late enrollment penalty when you do eventually enroll.

Many Medicare Advantage (Part C) plans include prescription drug coverage, and these plans are known as MAPDs.

 

    Benefit Period

    is the way the Original Medicare program measures your use of inpatient hospital and skilled nursing facility (SNF) services. It begins the day that you enter a hospital or SNF and ends when you have not received inpatient hospital or Medicare-covered skilled care in a SNF for 60 days in a row.
    View Full Glossary
  • What is the monthly premium for a Medicare Prescription Drug Plan?

    Short Answer:

    Premiums vary by plan. The national average monthly premium for a Prescription Drug Plan (PDP) in 2018 is $35.02, though you may pay more or less depending on your plan, your income, and where you live.

    More Info

    If your modified adjusted gross income is over a certain threshold, you may have to pay a higher premium for your PDP, or what's known as a Part D income-related monthly adjustment amount (Part D-IRMAA). This calculation is based on what you reported on your tax return two years earlier. If you are subject to this adjustment, Social Security will contact you.

    You can choose to have your PDP premiums, as well as any extra amounts, deducted from your monthly Social Security benefit check. Contact your plan to set up these deductions.

     

  • Can you have a Medicare Prescription Drug Plan and private insurance?

    Short Answer:

    Sometimes. It depends on what type of your private insurance you have.

    More Info

    Many private insurance plans can't be paired with Medicare Part D. That means that if your private health plan covers prescription drugs, you could lose that coverage if you enroll in Medicare Part D.

    If you're eligible for Medicare and still have private health insurance, check with your insurer to see whether your coverage is comparable to Medicare Part D. When you have insurance through a current or former job or a union, your plan must report each year whether your drug coverage is creditable.

    If the coverage isn't as good, find out whether you can keep your private insurance for medical care while enrolling in Part D for prescription drugs.

    In some cases, even with a creditable drug plan you can keep your coverage while also enrolling in Part D. These plans include the Federal Employee Health Benefits (FEHB) program, veterans’ benefits, TRICARE (health benefits for uniformed members of the military, retirees, and their families), and Indian Health Services.

    For more information on how Part D works with other insurance plans, see here.

  • What is creditable coverage?

    Short Answer:

    Creditable coverage meets a minimum set standards. As it relates to Prescription Drug Plans (Part D), creditable coverage must be at least as good as the standard Medicare Prescription Drug Plan (PDP). As long as you have creditable coverage, you can delay signing up for a PDP without the risk of incurring a penalty.

    More Info

    You can receive creditable drug coverage from an employer, union, or other source.

    Under the Medicare Modernization Act (MMA), insurers must tell Medicare-eligible policyholders whether their prescription drug coverage is creditable.

  • What is the coverage gap or donut hole?

    Short Answer:

    Medicare Prescription Drug Plans (Part D) have a coverage gap, also known as the “donut hole.” Once you have received a certain level of benefits from your plan, you enter a coverage reduction period, where you will face higher out-of-pocket costs until you qualify for catastrophic coverage.

    More Info

    To better understand the donut hole, consider this illustration of how your Prescription Drug Plan (PDP) coverage changes as your drug spending increases.

    Phase 1: Meeting your deductible

    Many PDPs have a deductible. You'll pay 100% of the costs of your drugs until you hit yours. The maximum PDP deductible in 2018 is $405, but yours could be lower.

    Phase 2: Initial coverage

    Once you meet your deductible, you are only responsible for copayments until your total drug costs reach $3,750 for 2018. Total drug costs include what you pay out-of-pocket and the amount your PDP covers.

    Phase 3: Coverage gap (the donut hole)

    During this period of reduced coverage, you're responsible for a significant portion of your drug expenses. You're stuck in the donut hole until your total out-of-pocket drug costs for the year reach $5,000 (see below for what counts toward that threshold).

    While you're in the coverage gap, you qualify for discounts, which are funded by drug companies and the federal government. In 2018, you'll pay no more than 35% of the cost of covered brand-name drugs (drug companies cover 50%), and no more than 44% of the cost of generics.

    Starting in 2019, there will no longer be a coverage gap for brand-name drugs, but the gap will remain for generics until 2020.

    Most people avoid reaching the coverage gap, since their annual drug costs are less than $3,750. You can also avoid it if:

    • You qualify for Extra Help, a federal program that helps cover out-of-pocket prescription drug costs; eligibility is based on income and assets.
    • Your plan offers enhanced coverage during the donut hole. In exchange, though, you may face higher premiums.

    Phase 4: Catastrophic Coverage

    You're responsible for 5% of your drug costs for the rest of the year, with no maximum out of pocket.

    The prescription drug expenses that count towards the $5,000 threshold that ends the coverage gap include:

    • Your deductible, coinsurance, and copayments
    • Your out-of-pocket costs during the coverage gap (35% of the cost of brand-name drugs and 44% of generic drugs)
    • The manufacturer-funded 50% discount you get on covered brand-name drugs during the coverage gap

    The expenses that don’t count include:

    • Your Prescription Drug Plan premiums
    • What you pay for drugs that aren’t covered by your plan
    • Pharmacy dispensing fee
    • Drugs purchased outside the U.S.
  • What is catastrophic coverage?

    Short Answer:

    After your total prescription drug costs reach $5,000 in 2018, you enter catastrophic coverage, and your insurer will cover 95% of your costs.

    More Info

    Once you've spent enough to enter and get through the Prescription Drug Plan (PDP) coverage gap (the donut hole), you'll pay only a small coinsurance amount or copayment for covered drugs for the remainder of the year.

  • What are the Part D drug tiers?

    Short Answer:

    Each Medicare Prescription Drug Plan (Part D) has a list of covered drugs, divided into different tiers. Typically there are four or five tiers, depending on the plan.

    More Info

    This list of covered drugs is called a formulary, and the tiers are based on the costs of the drugs. In general, Tier 1 drugs, often the plan's preferred generics, are less expensive than higher-tier medications. Very expensive specialty drugs, for example, typically fall into Tier 5. Your copayments will also go up as you move into higher tiers.

    Drug plans can change formularies during the year, including shifting drugs into different tiers. If a drug you take is moved into a higher tier, your plan must notify you 60 days in advance.

    When this happens, you may need to switch to a different drug or pay more for your prescription. In some cases, if your doctor believes you need the higher-tier drug, your plan may grant you an exception that will lower your costs.

  • What is a prior authorization for a Medicare Prescription Drug Plan?

    Short Answer:

    Some Medicare Prescription Drug Plans (Part D) have a coverage rule called prior authorization. Before you can fill a prescription, you or your healthcare provider must get approval from your drug plan, and your doctor may need to show that the drug is medically necessary.

    More Info

    A plan may require prior authorization when a drug is a powerful one that can pose safety concerns.

    Drug plans may impose other coverage restrictions, including quantity limits and step therapy.

  • What is step therapy?

    Short Answer:

    Step therapy is a coverage rule that some Medicare Prescription Drug Plans (Part D) impose. Under step therapy, your plan will require you to try similar but less expensive drugs before it will cover the medication your doctor originally prescribed.

    More Info

    Prescription Drug Plans use step therapy to reduce costs by compelling you to take the most reasonably priced drug that's safe and effective. For the plan to approve a more expensive drug, your doctor may have to show that the less expensive alternatives didn't work for you.

    For example, with allergies you might have to start out using an over-the-counter medication. When that doesn't work, you can try a Tier 1 medicine (the least expensive drug in the plan's formulary). If that doesn't work either, your plan may cover a Tier 3 medication. Even though it's a more expensive drug, your plan approves it because the less expensive options were ineffective.

  • What is a quantity limit?

    Short Answer:

    Quantity limit is a Prescription Drug Plan coverage rule that puts a cap on how much of a medication you can get at one time.

    More Info

    These quantity limits that Medicare Prescription Drug Plans (Part D) impose usually apply to drugs that tend to be addictive.

  • What is medication therapy management?

    Short Answer:

    Medication Therapy Management (MTM) is a free service that analyzes all of the medications you are taking for harmful interactions, optimum therapeutic outcomes, and potential cost savings. MTM is typically an option if you take drugs for several chronic conditions.

    More Info

    With Medication Therapy Management (MTM), available in all Medicare Prescription Drug Plans, a pharmacist or other healthcare profession will review the medications you are taking (including over-the-counter drugs), create a summary report, and provide counseling regarding how well your medications are working, what side effects and interactions you need to watch for, and potential cost savings. The program may also share recommendations with your doctors.

    To qualify for the MTM program, you must take medications for multiple chronic conditions.

  • Do Medicare Prescription Drug Plans cover mail-order prescriptions?

    Short Answer:

    Yes, many Medicare Prescription Drug Plans (Part D) offer mail-order prescriptions, sometimes at a discount, but the rules vary by plan.

    More Info

    Some plans offer lower copayments or deductibles if you use the plan's mail-order prescription service and buy a 90-day supply of your medication.

    However, if you use your Medicare Prescription Drug Plan's automatic refill service, which authorizes pharmacies to issue a new supply of your medication when you're about to run out, keep in mind that you can't take advantage of that service with a mail-order pharmacy.

    Under a new Medicare policy aimed at cutting down on unnecessary refills and reducing wasteful spending, plans must contact you for your approval before sending out a new supply, or you must request it.

  • Does Medicare Part B cover my prescriptions?

    Short Answer:

    Probably not. While Medicare Part B (medical insurance) covers a limited number of prescription drugs, you need a separate drug plan, such as a Medicare Prescription Drug Plan (Part D), to offset the costs of most prescribed medications.

    More Info

    Think of the limited Part B drug benefit as coverage for those medications that you would not personally order by mail or buy at your local pharmacy.

    Those Part B-covered medications include injections you receive at a doctor’s office or dialysis facility, certain oral anti-cancer drugs (chemotherapy), some drugs used with durable medical equipment (like nebulizers), and immunosuppressant drugs like those prescribed after organ transplants.

    Part B will also cover some drugs provided in a hospital outpatient setting, though on a very limited basis. Drugs you get in an outpatient setting like an emergency room that you would normally take on your own (called "self-administered drugs") are not covered by Part B.

  • Can I use discount coupons with Part D?

    Short Answer:

    In general, you cannot use drug maker discount coupons with your Medicare Prescription Drug Plan (Part D).

    More Info

    Under federal anti-kickback laws, drug manufacturers cannot make offers that persuade you to purchase medications that federal healthcare programs like Medicare pay for.

    With a manufacturer coupon in hand, you can choose to bypass your Prescription Drug Plan (PDP) and pay for your discounted medications out-of-pocket.

    However, these purchases may not count toward your PDP deductible, or figure into when you reach and leave the Part D coverage gap (the so-called "donut hole," the gap after you reach a certain threshold in total prescription drug costs but before catastrophic coverage sets in). Your PDP may accept your receipt from a purchase you made on your own and count the amount as part of your total-out-of-pocket expenses.

    While you're in the coverage gap, however, you qualify for federally funded manufacturer discounts. In 2018, while you're in the coverage gap you pay no more than 35% of the cost of covered brand-name prescription drugs, and no more than 44% of the cost of generics.

    Another money-saving option is to look for pharmacies with low retail drug prices in the first place. Purchases from retailers with “usual and customary” low drug prices are not considered a discount program, so you can use you Medicare Part D coverage.