Part D is the prescription drug coverage available to a person enrolled in original Medicare. Plans have at least two medications in the commonly prescribed classes.
Out-of-pocket costs include copays, yearly deductibles, and monthly premiums. Someone with limited means may be eligible to receive help in paying the costs through the Extra Help program.
This article discusses the parts of Medicare and describes how Part D fits into the overall picture. Next, it examines the details of Part D coverage, costs, the coverage gap called the donut hole, and the Extra Help program. Lastly, it explains Part D enrollment options and the late enrollment penalty.
Medicare is the federal program that provides health insurance for people over 65 and some individuals with disabilities. Below are some details on each part.
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.
Original Medicare is composed of Part A, hospital insurance, and Part B, medical insurance. Part A covers expenses a person has during a hospital stay, such as surgery, diagnostic tests, and meals.
Part B covers costs someone has as an outpatient, including doctor visits, diagnostic tests, and medical equipment. Original Medicare does not include coverage of most prescription drugs a person takes at home.
Medicare Advantage, or Part C, is the alternative to original Medicare and provides all Parts A and B benefits. Most Advantage plans also offer prescription drug coverage, and many include extra benefits, such as dental and vision care.
Part D is prescription drug coverage available to a person enrolled in original Medicare. It is not available to a person with an Advantage plan.
Each Part D plan has a formulary, which is a list of covered medications. Each formulary includes at least two drugs in each commonly prescribed category to ensure that people with different medical conditions can get the drugs they need.
If a formulary does not offer a specific medication a person needs, it may have a similar one.
According to the Food and Drug Administration (FDA), the effectiveness and safety of approved generic drugs are equal to those of name brand drugs. Based on this stance, Part D plans include both name brand and generic drugs.
Many Part D plans have different tiers. For example, one plan’s tiers may include:
- a tier 1 for generic drugs, which have the lowest copay
- a tier 2 for preferred name-brand drugs, which have a medium copay
- a tier 3 for non-preferred name-brand drugs, which have a higher copay
- a specialty tier for drugs with a very high cost
Out-of-pocket Part D costs include the annual deductible, monthly premiums, and either copays or coinsurance. These costs vary among Part D plans, although the Part D basic premium will average $30.50 in 2021, according to the Centers for Medicare & Medicaid Services (CMS).
A person’s overall costs depend on several factors, such as:
- whether the plan’s formulary includes a person’s drugs
- which tier their drugs are in
- the pharmacy they use
- whether they have met their deductible
Part D had a coverage gap called a ‘donut hole,’ which referred to a temporary limit in what the plans cover. It officially closed in 2020.
In 2021, after a person pays the plan deductible of $445, according to Medicare, they will pay 25% for generic drugs and no more than 25% for brand name medications until they and their plan spend $4,130 on drug costs.
However, according to the CMS, a person’s total out-of-pocket drug costs must reach $6,550 before they reach catastrophic coverage, which in 2021 involves a minimum copay of $3.70 for a preferred/generic multi-source drug and $9.20 for all other drugs.
Extra help is a program that assists people with limited means to pay their Part D costs. It is worth approximately $5,000 per year.
Eligibility criteria include:
- enrollment in Medicare Part A, Medicare Part B, or both
- residency in one of the 50 states or the District of Columbia
An additional eligibility requirement pertains to a person’s resources. According to the U.S. Social Security Administration (SSA), the value of savings, real estate holdings, and investments must not exceed $14,610 for an individual and $29,160 for a married couple. When calculating resources, the program excludes the following items:
- personal possessions
- burial plot
To apply for Extra Help, a person can fill out a form on this webpage. If an individual needs help in completing the form, they may call Social Security at 1-800-772-1213. A deaf person may call 1-800-325-0778.
People may enroll in a Part D plan during the Medicare initial enrollment period. Medicare state that this is a 7-month time frame that begins 3 months before an individual turns 65, includes their birthday month, and extends for another 3 months afterward.
When a person misses the initial enrollment period, they may sign up during the open enrollment period from October 15 to December 7 of each year.
This online search tool can help a person find Part D plans available in their area. Once they decide on a plan, they may enroll by:
- completing an application on the plan’s website
- completing an application on the phone by calling the plan
- completing a paper application and mailing it to the plan
If a person goes without prescription drug coverage for at least 63 consecutive days after the end of their initial enrollment period, they may have a late enrollment Part D penalty. This is an amount added to their monthly premium.
The penalty is generally permanent, which means a person has to pay it as long as they have a Part D plan. To avoid the penalty, a person can enroll when they first become eligible.
A Medicare Part D plan makes a person’s prescription drug costs more affordable. Although a person must pay out-of-pocket costs, they are considerably less than what the drug costs would be without coverage.
To enroll, people may sign up during their initial enrollment period when they first become eligible for Medicare. If they miss this period, they may sign up during the open enrollment period, although they may have to pay a late enrollment penalty.
The information on this website may assist you in making personal decisions about insurance, but it is not intended to provide advice regarding the purchase or use of any insurance or insurance products. Healthline Media does not transact the business of insurance in any manner and is not licensed as an insurance company or producer in any U.S. jurisdiction. Healthline Media does not recommend or endorse any third parties that may transact the business of insurance.
We will update the 2021 costs as soon as possible after the Centers for Medicare and Medicaid Services (CMS) have released them.
We last updated the costs on this page on November 3, 2020.