Medicare Part D, also known as a prescription drug plan (PDP), has an annual deductible that usually changes yearly. Full payment of the deductible is required before the plan will cover eligible costs.
Some Medicare plans, such as Medicare Part D, are administered by private insurance companies.
In 2024, private insurance companies may not charge more than $545 for the Part D deductible.
In this article, we discuss what is covered by Medicare Part D, learn more about the Medicare Part D deductible, and how to get help with out-of-pocket expenses.
Glossary of Medicare terms
We may use a few terms in this article that can be helpful to understand when selecting the best insurance plan:
- Out-of-pocket costs: An out-of-pocket cost is the amount a person must pay for medical care when Medicare does not pay the total cost or offer coverage. These costs can include deductibles, coinsurance, copayments, and premiums.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before an insurer starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, this is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare Part D helps pay for brand-name and generic drugs that have been prescribed by a doctor.
A person must have original Medicare, parts A and B, to be eligible for a PDP.
Private insurance companies approved by Medicare administer Part D plans, and they must provide a standard level of coverage. The companies must also offer different coverage and cost-sharing options, which may mean a person pays a different amount for prescription drugs based on the plan purchased.
A person can buy a Part D policy in addition to Original Medicare, or they can choose a Medicare Advantage (Part C) plan that includes prescribed medication coverage.
An individual can compare plans using the Medicare Advantage plan finder.
Enrollment
Joining a PDP is optional, and a person can decide not to enroll when they are first eligible for Medicare. However, delaying enrollment may result in a penalty charge.
The late enrollment penalty can normally be avoided if a person has alternative coverage, such as through an employer, or is in receipt of Extra Help.
A deductible is the amount of money a person pays for their healthcare before their insurer starts to cover costs. Medicare Part D charges a deductible that usually changes each year.
As a general rule, the higher the deductible, the lower the monthly premium. As such, Part D policies with high monthly premiums usually have low deductibles.
Some policies also have copayments or coinsurance that will apply after a person has paid the full deductible. In these instances, the policyholder and the insurer will share eligible costs.
The annual deductible for Part D varies depending on the policy purchased, but Medicare does not allow private insurance companies to charge more than $545 in 2024.
Comparison to previous years
In 2006, the most that a company was able to charge for the Part D deductible was $250. By 2020, the highest deductible allowed had risen to $435.
Do all drug plans have a deductible?
Some Medicare drug plans do not have a deductible, and the policy pays for eligible prescribed medication up to the plan limits. Copayments or coinsurance charges may still apply.
As well as the deductible, other charges apply to PDPs, including:
- Monthly premiums: the amount the insurance company charges every month for the policy
- Copayments and coinsurance: the fixed price (copayment) or percentage amount (coinsurance) applied after meeting the deductible
- Late enrollment penalty: the amount added to the monthly premium when a person delays enrolling in Medicare Part D, payable for the entire time the policy is active
- Coverage gap: a temporary limit on drug coverage (also called the donut hole) that starts after a specific amount has been paid to cover drugs
The monthly premium for Medicare Part D depends on the drug plan chosen.
Medicare may use an Income-Related Monthly Adjustment Amount (IRMAA) to decide the premium cost relative to a person’s income. An individual must earn above $103,000 filing individually or above $206,000 filing jointly before paying an IRMAA charge.
A person pays the monthly premium directly to the private insurance company administering their chosen plan.
Should a person need additional support to pay for the cost of their prescription drugs, there are needs-based options available.
Extra Help is a program for people who receive Medicare and need help with prescription drug plan costs. To qualify for Extra Help, individuals must be enrolled with Medicare and have limited income and resources.
Another option may be Medicaid, a state-run program that can help to reduce prescription drug prices significantly.
Private insurance companies administer Medicare Part D prescription drug plans (PDPs). The plan is optional, but if a person delays enrolling, they may pay a penalty charge.
Most PDPs have a deductible, and Medicare limits this amount to a maximum of $545 in 2024. The deductible can change every year, but many policies have lower deductible options. However, plans with low deductibles often have higher monthly premiums.
Many Medicare Advantage plans include prescription drug coverage and people may refer to them as Part D. However, it is important to understand that if a person has a Medicare Advantage plan, they cannot enroll in a separate Medicare Part D plan.
If a person chooses a Medicare Advantage plan, they must get their prescription drug coverage through that plan and not through a standalone Medicare Part D plan.