Different parts of Medicare cover prescription medications. Taking out a Medicare Part D plan covers a range of medications for chronic diseases and conditions. Part B also provides limited drug coverage.
Medicare Part D is an optional plan that people do not automatically enroll in with Medicare. Private insurers administer Part D policies, so the drugs they include and out-of-pocket expenses may vary.
Typically, Medicare Part B does not cover the drugs a person takes as an outpatient or buys at their pharmacy. However, it may cover the costs of drugs they receive as an inpatient.
In this article, we explain how prescription drug coverage works under Parts D and B, as well as the likely out-of-pocket expenses and exclusions.
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 Part D is an optional prescription drug coverage that a person may purchase once they become eligible for Medicare.
Part D coverage includes:
- the generic and name brands of most outpatient prescription medications
- certain vaccines, such as that for shingles
All Medicare Part D plans cover the same categories of drugs.
Part D plans must cover a minimum of two drugs in each medication class. However, the coverage for specific drugs in each category varies by plan.
Part D only covers drugs for which a doctor has issued a prescription and that the Food and Drug Administration (FDA) has approved.
Stages of Medicare coverage
Under Part D, prescription drug coverage moves through four stages.
Before the start of each membership year, Medicare announces how much a person has to spend to move through each stage.
The stages include:
- Deductible stage: During this stage, the insured person pays 100% of drug costs until meeting their yearly deductible. Some plans do not have a deductible.
- Initial covered stage: Individuals pay a copay for covered drugs, and Part D plan pays the rest.
- Coverage gap: Once a beneficiary reaches the spending threshold for their initial coverage, they enter the coverage gap, or Donut Hole. In 2020, this means that a person pays 25% of the cost of a drug.
- Catastrophic stage: Once a person reaches their next spending threshold, they pay only a small copay until the end of the plan year. Regardless of which stage a person is in, they return to the deductible stage on January 1.
Medicare part B covers limited types of medications in certain situations, including the following:
- drugs a person must administer using equipment from a durable medical equipment company, such as a nebulizer
- medications that a licensed healthcare provider administers through infusion (IV)
- some injectable medications for home use
- injected and oral drugs for end stage renal disease (ESRD)
- certain oral chemotherapy drugs
- drugs that prevent bone loss in women bone fractures from menopause induced osteoporosis
- antinausea medications that people take to manage side effects of cancer treatment
- vaccines, such as the flu vaccine
- blood clotting factors to help people with hemophilia
- IV immunoglobulin to treat people with primary immune deficiency disease
- drugs to support a recent transplant that Medicare also funded
The cost of Medicare prescription drug coverage varies. The standard monthly premium for Medicare Part B in 2021 is $148.50.
The more a person earns, the higher their premium will be. For the medications that fall under Part B’s coverage, the insured person pays 20% of the Medicare approved cost for the medications.
Medicare Part D plans vary in cost. Individuals pay a monthly premium for Part D alongside their Part B premium. Out-of-pocket expenses may also vary depending on:
- the premium
- the deductible
- the spending limit when a person enters the coverage gap
Part D costs include a monthly premium. However, some people with Part D also pay an income adjusted monthly fee in addition to their premiums.
In 2021, people did not pay an additional fee if they reported an income of less than $88,000 when filing alone or $176,000 when filing a joint return.
People that made more than the above income pay their monthly premium and an extra fee, as follows:
|Individual yearly income||Joint income||Income adjusted payment alongside monthly premium|
|$88,000– $111,000||$176,000 –$222,000||$12.30|
|$500,000 or above||$750,000 and above||$77.10|
People also need to meet a deductible before Medicare Part D covers prescription drug costs.
In 2021, no Part D plans have a yearly deductible higher than $445. Certain Part D plans may not have a deductible.
People who have limited income may qualify for the Extra Help Program through Medicare to pay for prescription drug plans. Read more on Extra Help.
People eligible for Medicare Parts A and B also meet the criteria for Medicare Part D.
Most people become eligible for Medicare Part D at 3 months before their 65th birthday and have up to 3 months following their birth month to apply.
Individuals who do not select a Medicare Part D plan when they become eligible may pay a late enrollment fee if they join a plan at a later date.
People pay this late fee each month on top of their usual premium. This applies on a lifelong basis.
People who want a Medicare Part D plan should try to join during their eligibility period to avoid lifetime penalty fees. It is helpful to compare plans and consider drug coverage choices since plans vary.
Individuals that want to join a plan can visit Medicare Plan Finder through the Medicare.gov website to find plans in their area.
People that miss their initial eligibility period or want to change plans can do so from October 15–December 7 every year. Coverage starts on January 1 of the following year.
Medicare Part B or Part D covers a variety of prescription drugs. Exclusions may apply to some plans, such as the following:
- weight loss medications
- cold and flu medications
- drugs that a doctor has not prescribed
- drugs that promote fertility
- drugs to restore hair growth
- supplemental vitamins and minerals
Since Part D plans vary, some plans may cover the above drugs. It is best to check with individual insurers for exact coverage.
Depending on the medications a person takes, they may reach the coverage gap, which is also called the donut hole.
The coverage gap is the stage where an insured person exceeds their initial coverage limit for drug costs but has not yet reached the stage of catastrophic coverage.
The spending limits change each year. Typically, in the coverage gap, the beneficiary pays more for prescription drugs than they did after meeting their deductible. In 2021, this comes to 25% of drug costs.
Medicare Part D covers prescription drugs. Coverage for certain medications may come from Part B, such as vaccines and antirejection drugs after a transplant.
Once an insured person reaches their Part D deductible, Medicare pays for brand name and prescription drugs, usually with a copayment.
If Medicare and the individual reach the spending limit on a Part D plan, they also reach the coverage gap and must pay for 25% of all prescribed medicines until reaching catastrophic coverage.
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