Prescription Drug Plans
What is a Prescription Drug Plan?
You can sign up for a Prescription Drug Plan, also known as Part D, starting three months before your 65th birthday. Part D plans help cover prescription costs, along with other components of Medicare.
It’s important to do this on time because there’s a permanent premium surcharge for enrolling more than three months after your 65th birthday if you don’t have equivalent drug coverage from another source, such as a retiree plan.
How do they work?
Here is important information you need to know about owning a prescription drug plan:
- Annual Deductible — There is a deductible you must pay for a Part D plan. Your deductible may be different, or waived entirely, but the maximum amount you can be charged is $505 in 2023. You will pay a discounted price for your medications until you have satisfied the deductible. After that, you begin initial coverage.
- Initial Coverage — During initial coverage, you pay a copay for your medications based on your plan’s formulary. Each prescription drug plan separates its medications into tiers. Each tier has a copay amount for which you are responsible. It is typically separated by generic drugs, preferred name brands, even more specialized medications, and etc. In 2023, the initial coverage cap is $4,660. After you and the insurance company together have paid this amount, then you enter the coverage gap.
- The Coverage Gap – During the coverage gap, you will still generally have significant discounts for generic medications. Typically, you will pay 25% for name brand medications and 37% for generics. Your gap spending will continue until you have paid $7,400 out of your own pocket in 2023.
- Catastrophic Coverage – If you should spend past the coverage gap, your plan will begin to pay 95% of the costs of your formulary medications for the rest of the year.
When choosing a plan
If you are already enrolled in a Part D “standalone” plan or a Medicare Advantage plan that incorporates drug coverage, you can switch plans during the open-enrollment period, which runs from Oct. 15 to Dec. 7 every year.
It pays to review your Part D coverage every year, especially if you have started taking new drugs.
- Start at Medicare.gov, where you can find the basics about the benefit and Part D plans. There’s a link to Medicare Part D Plan Finder, which allows you to compare offerings and coverage options in your area and includes a helpful formulary finder that allows you to compare plans based on their coverage of your personalized list of drugs. It will even show you your monthly out-of-pocket drug cost for the year.
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