Medicare covers prescription drugs, but the amount you pay depends on which part of Medicare you have and which drug you need

Medicare has two main ways to cover prescription drugs. If you have Original Medicare (Parts A and B), you need a separate Part D prescription drug plan to cover most medications. If you have Medicare Advantage (Part C), prescription drug coverage is usually included in that plan. Either way, you will pay a monthly premium, an annual deductible, and a share of the cost when you fill a prescription.

Not every drug is covered. Medicare maintains a list called the formulary for each plan, and it changes every year. Your plan may require you to try a cheaper drug first before covering an expensive one, or it may require prior approval from your doctor. The amount you pay also depends on which "tier" or category your drug falls into — generic drugs cost less than brand-name drugs.

Key Takeaways

  • Original Medicare (Parts A and B) requires you to sign up for a separate Part D plan to cover prescription drugs, and you must enroll during the right time period or pay a penalty.
  • Medicare Advantage plans usually include prescription drug coverage as part of the plan, so you do not need a separate Part D plan.
  • Each plan has a formulary — a list of covered drugs — and it changes every year, so you should check your plan's formulary before your prescriptions renew.
  • You will pay a monthly premium, an annual deductible, and a per-prescription cost that varies by drug tier and your plan's rules.
  • If a drug you need is not covered, you can ask your doctor to request an exception, or you can switch plans during the annual open enrollment period.

How Part D prescription drug plans work

Part D is a voluntary plan you purchase separately if you have Original Medicare. You choose from several plans offered by private insurance companies, each with its own list of covered drugs, costs, and pharmacies. You pay a monthly premium (the amount varies by plan and changes yearly), and you are responsible for an annual deductible before the plan starts to help pay for drugs.

Once you meet your deductible, you enter the "initial coverage" stage. You pay a copay or coinsurance (a percentage of the drug's cost) for each prescription, and the plan pays the rest. The copay or coinsurance amount depends on the drug's tier — usually generic drugs are tier 1 (lowest cost), brand-name drugs are tier 2 or 3, and specialty drugs are tier 4 or 5 (highest cost).

If your drug costs reach a certain amount in a year, you enter the "coverage gap" or "donut hole." In this stage, you pay a larger share of the cost until your out-of-pocket spending reaches a yearly limit. After that, catastrophic coverage kicks in and you pay only a small copay or coinsurance for the rest of the year.

How Medicare Advantage prescription drug coverage works

Most Medicare Advantage plans include prescription drug coverage as part of the plan. You do not need to sign up for a separate Part D plan. The plan's formulary, deductibles, copays, and coverage limits are all part of your Medicare Advantage plan documents.

Medicare Advantage plans vary widely in what they cover and what you pay. Some plans have no deductible for drugs, while others do. Some plans cover generic drugs at a low copay but charge more for brand-name drugs. You should review your plan's formulary every year before your prescriptions renew, because the list of covered drugs and the copay amounts can change.

When to check your plan's formulary

Your plan's formulary is the official list of drugs your plan will help pay for. You can find it on your plan's website or by calling the plan's customer service number. The formulary lists each drug by its generic name and brand name, shows which tier it is in, and tells you if your doctor needs to get approval before you can fill it.

You should check the formulary before your prescriptions renew — usually in the fall, before the new year. If a drug you take is not on the formulary, or if the copay has gone up, you have options: ask your doctor if a covered drug would work instead, request a formulary exception from your plan, or switch to a different plan during the annual open enrollment period (October 15 to December 7 each year).

What happens if your drug is not covered

If your plan does not cover a drug you need, you can ask your doctor to submit a formulary exception request. Your doctor explains to the plan why you need that specific drug instead of a covered alternative. The plan has 72 hours to respond (or 24 hours in urgent cases). If the plan approves the exception, it will cover the drug. If it denies the request, your doctor can appeal.

You can also choose a different plan during open enrollment. Every year from October 15 to December 7, you can switch to a different Part D plan (if you have Original Medicare) or a different Medicare Advantage plan. The new plan takes effect January 1. This is the best time to move to a plan that covers the drugs you actually take.

How to enroll in Part D or change your plan

If you have Original Medicare and do not have prescription drug coverage, you can sign up for Part D during the initial enrollment period (when you first become may be able to access for Medicare) or during the annual open enrollment period (October 15 to December 7). If you miss these windows, you may have to pay a penalty when you do enroll.

You can compare plans and enroll through Medicare.gov, by calling 1-800-MEDICARE, or by working with a licensed insurance agent. When you compare plans, look at the monthly premium, the annual deductible, the copay for each of your current drugs, and whether your pharmacy is in the plan's network.

If you already have Part D or Medicare Advantage coverage, you can switch plans during the annual open enrollment period. You do not need a reason to switch — you can change plans straightforward because you want to. The change takes effect January 1.

What to ask your doctor and pharmacist

Before you fill a new prescription, ask your doctor if the drug is on your plan's formulary and what the copay will be. If your doctor prescribes a brand-name drug, ask if a generic version is available and covered at a lower copay. If your plan requires prior approval, your doctor's office can submit that request before you go to the pharmacy.

At the pharmacy, ask the pharmacist what your copay is and whether a generic or lower-tier drug would work instead. Some pharmacists can also tell you if a drug is on your plan's formulary and what your out-of-pocket cost will be. If the copay is higher than you expected, ask the pharmacist if the plan covers a similar drug at a lower tier.

Frequently Asked Questions

Do I have to pay a penalty if I do not sign up for Part D when I first become may be able to access?

Yes. If you have Original Medicare and do not enroll in Part D during your initial enrollment period or a special enrollment period, you will pay a penalty when you do enroll. The penalty is about 1% of the national average Part D premium for each month you were without coverage. This penalty stays with you for as long as you have Part D.

Can I use my Part D plan at any pharmacy?

Most Part D plans have a network of pharmacies where you pay the copay listed in your plan. If you use an out-of-network pharmacy, you may pay more or the plan may not cover the drug at all. Check your plan's website or call customer service to find pharmacies in your network.

What if I cannot afford my copays?

If your income is low, you may may have access to for the Low-Income Subsidy program, which helps pay your Part D premiums, deductibles, and copays. You can explore through Social Security or your state Medicaid office. Some drug manufacturers also offer patient information programs that provide free or low-cost drugs to people who meet income requirements.

Can I switch Part D plans in the middle of the year?

No, unless you have a may have access to life event such as losing other health coverage, moving to a different state, or becoming may be able to access for Medicaid. The annual open enrollment period (October 15 to December 7) is the only time most people can switch plans. The change takes effect January 1.

What is the difference between a copay and coinsurance?

A copay is a fixed dollar amount you pay for each prescription — for example, $10 for a generic drug. Coinsurance is a percentage of the drug's cost — for example, 20% of the price. Your plan may use copays, coinsurance, or both, depending on the drug tier and your stage of coverage.