Medicare Part D prescription drug plans cover many prescribed medications. However, coverage may not be available in some instances. This could be due to drug type, cost, or regulation.
Original Medicare includes Part A, which covers the medications a person receives when they are an inpatient at a hospital, and Part B, which covers limited outpatient drugs, such as those that a doctor administers in their office.
For other types of take-home prescribed drugs, a person must have Part D coverage.
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 optional prescription drug coverage available to those with original Medicare. Private Medicare-approved insurance companies administer these plans.
When it comes to coverage, the federal government sets guidelines for insurance companies to follow, but the companies can decide which drugs their plans will cover. The lists of drugs covered may often vary.
Costs for Part D plans also vary. If an individual enrolls after their initial enrollment period, for example, the monthly premium will include a permanent late enrollment fee.
In general, most Part D plans do not cover:
- drugs for hair growth
- fertility drugs
- over-the-counter drugs
- medications covered by Medicare parts A and B
- medications for erectile dysfunction
- weight management medications
Medicare Part B covers a limited range of drugs under specific circumstances, including:
- certain medications for transplants
- medications for end stage renal disease
- flu and pneumonia shots
- injections for osteoporosis
- medications to be used at home with durable medical equipment, such as a nebulizer
Part D covers a much broader range of prescription medications that an individual takes at home. These include:
Part D plans have lists of covered drugs. These lists, called formularies, divide drugs into five different tiers. Usually, a person will pay less for medications classified in lower tiers.
Plan providers must make their formularies available so that people can compare their drug availability.
Medicare rules require Part D plans to cover at least two drugs in the most commonly prescribed categories. Often, this will be a brand-name drug and its generic version, which is typically more affordable.
Each plan can differ and not cover the same medications. This means that a person may have a particular drug covered in one Part D plan but not another.
Plans may change their formulary at any time. However, the plan provider must notify an individual at least 60 days before making a change.
The 2021 costs for Medicare Part D may differ depending on the plan a person chooses. For example, they may have different monthly premiums, deductibles, and copayments. Charges can also change from year to year.
Plan premium costs depend, in part, on a person’s income. Individuals who earn above a specific amount may need to pay a higher monthly premium.
Premium changes are called Income-Related Monthly Adjustment Amounts (IRMAAs), and Medicare bases this information on a person’s tax returns from 2 years ago. For example, a person’s tax return from 2019 will determine their 2021 premium.
A person pays their IRMAA directly to Medicare and pays their plan premium to the private insurer.
Income brackets and cost information for 2021 are as follows:
|Individual filing||Filing a joint return||2021 cost|
|$88,000 or less||$176,000 or less||plan premium|
|above $88,000 and up to $111,000||above $176,000 and up to $222,000||$12.30 + plan premium|
|above $111,000 and up to $138,000||above $222,000 and up to $276,000||$31.80 + plan premium|
|above $138,000 and up to $165,000||above $276,000 and up to $330,000||$51.20 + plan premium|
|above $165,000 and up to $500,000||above $330,000 and up to $750,000||$70.70 + plan premium|
|$500,000 or above||$750,000 and above||$77.10 + plan premium|
Plan providers follow Medicare rules for out-of-pocket expenses, coverage gaps, and deductibles.
For 2021, Medicare implemented the following rules:
- Deductibles: No Part D plan may have a deductible that costs more than $445.
- Coverage gaps: Individuals move into the coverage gap once they have spent $4,130. The coverage gap is the phase that occurs after a person and their plan cover a certain amount of drug costs.
- Out-of-pocket maximum: The maximum amount a person will pay out of pocket is $6,550. After someone reaches their out-of-pocket maximum for the year, they move into the catastrophic coverage phase, and costs will significantly decrease.
The Medicare Extra Help program helps people with the copayments, premiums, and deductibles associated with Part D plans.
An individual may qualify for Extra Help if they have limited incomes or resources. Income limits are $25,860 for a married couple and $19,140 for a single individual. In some cases, even if a person’s income is higher than this, they may still qualify for assistance.
Resource limits are $29,160 for married people and $14,610 for individuals, and this includes:
- bank accounts
- mutual funds
Certain things do not count as income or resources when determining eligibility, including:
- food stamps
- housing assistance
- primary car
- primary house of residence
- life insurance
Medicare Part D plans cover many, but not all, types of prescription drug. A person can check a plan provider’s formulary to make sure that their required medication is available.
Usually, Part D plans do not cover drugs for weight management, erectile dysfunction, or fertility.
Part D plans cover two drugs in the most commonly prescribed categories. However, different policies may offer different drug options.