Part D
Medicare Part D is prescription drug coverage. You can get it through a standalone Prescription Drug Plan (PDP) or through a Medicare Advantage plan that includes drug coverage.
Understanding Part D
Medicare Part D is prescription drug coverage available to everyone with Medicare. You can get Part D through a standalone Prescription Drug Plan (PDP) if you have Original Medicare, or through a Medicare Advantage plan that includes drug coverage (MA-PD).
Each Part D plan has a formulary (list of covered drugs) organized into tiers. Lower tiers typically have lower copays, while specialty drugs are usually in the highest tier with the highest costs.
Part D has four coverage phases: Deductible (you pay full cost), Initial Coverage (you pay copays/coinsurance), Coverage Gap or "Donut Hole" (you pay 25% of drug costs), and Catastrophic Coverage (you pay a small coinsurance).
If you don't sign up for Part D when first eligible and don't have creditable drug coverage, you'll pay a permanent late enrollment penalty of 1% per month without coverage.
Frequently Asked Questions
Do I need Part D if I have Medicare Advantage?
Most Medicare Advantage plans include Part D drug coverage. If your MA plan includes drugs, you don't need a separate Part D plan. However, verify your medications are covered on the plan's formulary.
What happens if I don't sign up for Part D?
If you delay Part D enrollment without creditable drug coverage, you'll pay a permanent late enrollment penalty of 1% of the national base premium for each month you were without coverage.
Is there a cap on Part D costs?
Starting in 2025, Part D out-of-pocket costs are capped at $2,000 per year thanks to the Inflation Reduction Act. This effectively eliminates the coverage gap (donut hole) for most beneficiaries.
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Related Terms
Donut Hole
The donut hole (coverage gap) is a temporary limit on what the drug plan will cover. Once you reach this limit, you pay a higher percentage of drug costs until you reach catastrophic coverage.
Formulary
A formulary is a list of prescription drugs covered by a Medicare drug plan. Drugs are organized into tiers, with different cost-sharing for each tier.
Creditable Coverage
Creditable coverage is prescription drug coverage that's at least as good as Medicare Part D. If you have it, you can delay Part D enrollment without penalty.
Premium
A premium is the monthly payment you make for your Medicare coverage. You pay premiums for Part B, Part D, Medicare Advantage, and Medigap plans.
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