Learn About Part D Plans With Original Medicare

What Are Part D Plans and How They Work With Original Medicare

Part D is a prescription drug coverage program that works alongside Original Medicare (Parts A and B). Original Medicare covers hospital stays and doctor visits, but it does not cover most prescription medications. Part D plans are offered by private insurance companies approved by Medicare, and they help pay for prescription drugs at pharmacies.

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When you have Original Medicare, you can choose to add Part D coverage by enrolling in a standalone prescription drug plan. This is different from Medicare Advantage plans (Part C), which combine hospital, doctor, and drug coverage into one plan. With Original Medicare plus Part D, you maintain your current Medicare coverage and add prescription drug benefits on top of it.

Part D plans vary in cost, coverage, and which medications they include. Each plan has its own list of covered drugs, called a formulary. Some medications may be covered with no cost-sharing, while others may require you to pay a copay or coinsurance. Plans may also require prior authorization before covering certain high-cost drugs, meaning your doctor must request permission from the insurance company first.

The way Part D works involves several stages of costs during the calendar year. You pay a monthly premium to the insurance company. Once you reach a certain amount in out-of-pocket spending, you enter a phase called the coverage gap. Understanding these cost stages helps you budget for your medications throughout the year.

Part D plans must cover drugs in six categories: anticonvulsants, antidepressants, antipsychotics, antiretrovirals, immunosuppressants, and statins. Beyond these required medications, individual plans decide which other drugs they cover. This is why comparing different Part D plans matters—two plans may cover the same medications at different costs, or one plan may cover a drug that another plan does not.

Takeaway: Part D is optional prescription drug coverage that pairs with Original Medicare. Because plans differ in premiums, covered drugs, and out-of-pocket costs, reviewing multiple plans during open enrollment periods helps you find coverage that matches your medications and budget.

Understanding Part D Costs and Coverage Stages

Part D plans have five distinct cost phases that repeat each calendar year from January 1 through December 31. Knowing how each phase works helps you understand what you will pay for medications throughout the year.

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The first phase is the deductible phase. Many Part D plans have an annual deductible, which is the amount you must pay out of your own pocket before the plan starts to help pay for drugs. In 2024, the maximum deductible for most Part D plans is $545, though some plans have lower deductibles or no deductible at all. During this phase, you pay the full cost of medications until you reach your plan's deductible amount. Once you meet the deductible, you move to the initial coverage phase.

The initial coverage phase is when you and your plan share the cost of medications. You typically pay a copay (a set dollar amount) or coinsurance (a percentage of the drug's cost) for each prescription. Your plan pays the remaining cost. This phase continues until your total out-of-pocket spending reaches $5,850 in 2024. The out-of-pocket amount includes what you pay but does not include your monthly premiums.

When your out-of-pocket costs reach the threshold, you enter the coverage gap, sometimes called the "donut hole." In the coverage gap, you pay a higher percentage of drug costs. For generic drugs, you typically pay 25 percent of the cost. For brand-name drugs, you pay 25 percent of the cost as well, though the amount manufacturers contribute also counts toward closing the gap. This phase can be confusing because you still pay out of pocket, but your out-of-pocket spending counts toward closing the gap.

The catastrophic coverage phase begins once your out-of-pocket spending reaches $8,550 in 2024. After this point, you pay a small copay or coinsurance for the rest of the year, and your plan covers the rest. This phase protects people with very high medication costs from unlimited expenses.

Some plans offer additional benefits beyond these standard phases. For example, many plans cover certain medications at no cost during the initial coverage phase as an incentive to use preventive drugs like statins or blood pressure medications. Other plans may offer supplemental benefits such as over-the-counter medication allowances or transportation services.

Takeaway: Part D costs move through predictable phases during each calendar year. Your costs change as you progress from meeting your deductible through initial coverage, the coverage gap, and catastrophic coverage. Reviewing your medications and their costs helps you estimate which phase you may reach and choose a plan that fits your needs.

How to Compare Part D Plans During Open Enrollment

Every fall, Medicare holds an annual open enrollment period when you can enroll in a new Part D plan, switch to a different plan, or drop coverage. The 2024 open enrollment period runs from October 15 through December 7. During this window, you can make changes that take effect on January 1 of the following year.

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The first step in comparing plans is to gather information about your current medications. Write down the name, strength, and dosage of each prescription drug you take regularly. If you have recently started new medications or expect to change your regimen, include those as well. This list is essential because plan costs vary significantly based on which drugs you use.

Next, visit Medicare.gov and use the Plan Finder tool. This online resource lets you enter your medications and compare how different Part D plans cover them. The tool shows you the estimated costs for each medication under various plans, including copays, coinsurance, and whether prior authorization is needed. You can also see monthly premiums and annual deductibles for each plan.

When reviewing plan options, consider several factors beyond just the lowest premium. A plan with a low monthly cost might have higher copays for your specific medications, resulting in higher total costs. Conversely, a plan with a higher premium might cover your drugs with lower out-of-pocket costs, making it less expensive overall. The Plan Finder tool can help you calculate total estimated costs across plans.

Check whether your doctors and pharmacies participate in your chosen plan's network. Some plans work with specific pharmacy chains, while others have broader networks. If you use a specialty pharmacy for certain medications, confirm that it is in-network. Using out-of-network pharmacies often means you pay more or the plan may not cover the drug at all.

Review the plan's formulary—the list of covered medications—especially if you take brand-name drugs. Some plans may not cover certain medications, or they may require you to try a generic alternative first. Plans can also change their formularies each year, so even if a medication was covered last year, you should verify it is still covered for the upcoming year.

Consider your expected medication costs throughout the year. If you take only a few inexpensive medications, a plan with no deductible and low copays might be best. If you take multiple medications or expect to reach the coverage gap, you may want a plan that minimizes costs in the gap phase or offers coverage gap discounts.

Takeaway: Comparing Part D plans requires gathering your medication list and using Medicare's Plan Finder tool to see estimated costs under different plans. Look beyond just the premium and consider copays, deductibles, formulary coverage, and pharmacy networks to find the plan with the lowest total costs for your specific situation.

Special Situations and Additional Part D Protections

Medicare provides extra protections and options for people in certain situations who need Part D coverage. Understanding these programs can help reduce medication costs and ensure continuous access to necessary drugs.

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The Low-Income Subsidy (LIS), also called "Extra Help," is a federal program that helps people with limited income and resources pay Part D premiums, deductibles, and cost-sharing. People with monthly income up to 150 percent of the federal poverty level may be eligible for this program. In 2024, that means individuals with monthly income up to about $1,868 and couples with income up to about $3,822 could be eligible. Those enrolled in LIS pay minimal or no premiums and typically have much lower copays than regular Part D plans. The Social Security Administration determines LIS eligibility and can provide more information.

The Part D coverage gap discount program helps reduce the cost of brand-name medications when you are in the coverage gap phase. Pharmaceutical manufacturers provide discounts that lower what