Medicare has specific plans, such as Part D, that cover prescription medication. However, out-of-pocket costs may vary.
Medicare Part D plans are also known as prescription drug plans. These plans cover take-home prescription medications and, usually, the most common outpatient prescription drugs.
Medicare-approved private insurance companies administer all Part D plans.
Some Part C (Medicare Advantage) plans include coverage for prescription drugs automatically, while others require a person to choose it.
This article describes how Medicare covers prescription medications and what out-of-pocket expenses an individual can expect.
Glossary of Medicare terms
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare covers prescribed drugs in the following ways:
Medicare-approved private insurers administer Part D plans, which can be stand-alone plans with Original Medicare or part of a Medicare Advantage policy.
However, Part D does not cover all medications that a person may want or need. In some cases, an individual’s plan may cover an alternative medication. In most cases, Medicare coverage does not include:
- medications for weight management, whether for weight loss or gain
- over-the-counter (OTC) medications
- fertility medications
- medications for cosmetic purposes
- medications to treat erectile dysfunction
Read about Original Medicare vs. Medicare Advantage.
A person has different ways to get prescription drug coverage through Medicare.
The individual can purchase a Part D plan on its own, as long as they already have Original Medicare (parts A and B). Someone can also use prescription drug coverage, if they select it, alongside:
- certain Private Fee-for-Service (PFFS) plans
- some Medical Savings Account (MSA) plans
- Medicare Cost plans
Medicare Advantage plans
Alternatively, a person can get Part D as part of a Medicare Advantage (Part C) policy. Medicare Advantage typically bundles parts A, B, and D together in one plan. It is important to note that an individual must have Medicare parts A and B to be eligible for Medicare Advantage.
Some types of Medicare Advantage plans may not offer Part D coverage, so a person should compare plans before enrolling. In those cases, an individual may be able to add Part D coverage.
However, in this case, someone may be disenrolled from Medicare Advantage and returned to Original Medicare coverage. Examples of plans that this policy could affect include:
- Health Maintenance Organization (HMO) plans
- HMO Point-of-Service (POS) plans
- Preferred Provider Organization (PPO) plans
A person who wishes to add Part D coverage without losing their Medicare Advantage coverage can do so in only:
- PFFS plans
- MSA plans
- Cost plans
- some employer-sponsored Medicare health plans
Enrolling in a plan
In some cases, a person may wish to compare the costs of Part D coverage with private insurance they may have through work or other agencies.
Once an individual has decided on a plan suitable for their needs, they can enroll in several ways, including:
- registering online, either by using the Medicare plan finder tool or via the insurance provider’s website
- completing and mailing a paper enrollment form
- calling the insurance provider directly
- calling Medicare at 800-633-4227
It may be beneficial for a person to have their Medicare card on hand. The insurance company may need information from it, such as a membership number and the date the policy began.
Late enrollment penalty
An individual should register for Part D when they first enroll with Medicare. Otherwise, they may experience a gap in coverage and may have to pay a late enrollment penalty.
Medicare calculates a late enrollment penalty by taking 1% of the national base beneficiary premium — which is $34.70 in 2024 — and multiplying it by the number of months a person was not enrolled.
As long as the Part D policy is active, the monthly premium will include the calculated penalty.
Learn more about the Part D late enrollment penalty.
Medicare coverage gap
Most Medicare prescription drug plans have a coverage gap, also known as a donut hole. This is where a person can reach a temporary limit on what their plan will cover for prescription drugs.
In 2024, this gap occurs when a person and their plan have spent $5,030. When this amount is reached, the person may incur higher out-of-pocket costs for their prescriptions. When a person is in this coverage gap, they will pay no more than 25% for brand-name drugs and 25% for generic drugs.
When a person’s out-of-pocket spending reaches $8,000 they enter catastrophic coverage. This means they will pay $0 for their prescriptions for the rest of the year.
Most people never enter the coverage gap. Individuals with Extra Help never enter the coverage gap, either.
In 2025, the annual out-of-pocket costs for individuals with Part D plans will be capped at $2,000.
Read more about the Medicare donut hole.
Extra Help
Medicare offers the Extra Help program to those with limited resources and income.
The Extra Help program can help individuals pay for the costs associated with Part D, including coinsurance, copayments, annual deductibles, and monthly premiums.
Medicare requires that each Part D plan provides a standard level of coverage.
Different insurers provide lists of covered medications that a person can view. They may refer to the list as a formulary.
Insurance companies have different formularies. Each provider can decide which medications it covers, the tiers a medication falls under, and the categories that a medication belongs to.
Part D plans include both brand-name and generic prescription medications. A formulary must consist of at least two common prescription medications from each category. The insurer can decide which two medications to offer.
If a particular prescription medication is not included in the formulary, a similar medication may be available. Individuals may wish to discuss options with their prescribing healthcare professional.
If a physician prescribes a medication that is not on the formulary or believes that the available medications may not be suitable, an individual can:
- request an exception
- pay for the drug out of pocket
- file an appeal with the plan provider or insurer
Formulary changes
Drug plans may change their formulary at any time, as long as they follow Medicare guidelines.
A drug plan’s formulary may change because of:
- a change in drug therapy
- the release of a new drug
- new medical information becoming available
Sometimes, a person is notified of a change after it has already happened, but notice is generally in writing and provided a minimum of 30 days before a change occurs.
If the change has already happened, the insurer must either provide written notice when an individual requests a refill of their prescription or the plan must offer at least a month’s supply of the drug based on rules in place before the change.
Part D plans may immediately remove drugs from their formulary if the Food and Drug Administration (FDA) declares the drug unsafe or if the manufacturer removes them from the market.
Medicare drug price negotiation
In August 2022, President Biden signed the Inflation Reduction Act of 2022 into law. This allows Medicare to now negotiate with drug companies on the price of prescription medications.
There are currently 10 specific medications that Medicare is in price negotiations about. The prices they agree on will become applicable in 2026. These initial drugs include:
Medicare resources
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
Medicare Part A offers limited coverage for prescribed medication while in a hospital setting, while Medicare Part D offers a more comprehensive level of coverage.
Private insurance companies administer Part D plans, which cover most medication that healthcare professionals prescribe on an outpatient basis. Part D can be either a stand-alone policy or included within Medicare Advantage plans.
A person may wish to compare the formularies of different insurers and decide which has the most appropriate medications to fit their needs.
For those who need financial support, the Medicare Extra Help program may assist in covering some of the costs.