What a Medicare Drug Plan Covers

A Medicare drug plan, officially called Part D, pays for prescription medications you take at home. It does not cover drugs you receive in a hospital or doctor's office — those are covered under Part B or Part A. Part D is run by private insurance companies that contract with Medicare, so the drugs covered and the cost to you depend on which plan you choose.

Every Part D plan must cover drugs in certain categories: cancer medications, heart disease drugs, diabetes treatments, HIV/AIDS medications, and rheumatoid arthritis drugs. Beyond those required categories, each plan decides which other drugs it will pay for. This means the same medication might be covered by one plan but not another, or covered at a different price.

Part D plans also cover generic versions of brand-name drugs when they become available. If your doctor prescribes a brand-name drug but a generic exists, your plan will usually cover the generic at a lower cost. You can ask your doctor or pharmacist whether a generic is available for your medication.

Key Takeaways

  • Part D is prescription drug coverage run by private insurance companies, and you choose which plan to join during your enrollment period.
  • Every plan covers certain drug categories required by Medicare, but each plan has its own list of covered drugs and its own costs.
  • You pay a monthly premium, a copay or coinsurance at the pharmacy, and you may hit a coverage gap where you pay more out of pocket.
  • You can change plans once a year during the annual enrollment period, which runs from October 15 to December 7.
  • If you do not join a plan when you first become may be able to access and do not have other drug coverage, you will pay a permanent penalty on your premium.

How Much You Pay for Medications

Part D has four payment stages, and your costs change as you spend more on drugs during the year. The stages reset every January 1.

In the deductible stage, you pay the full cost of your drugs until you reach your plan's deductible amount — usually between $0 and $545, depending on the plan. Some plans have no deductible. Once you hit the deductible, you move to the next stage.

In the initial coverage stage, you pay a copay (a flat amount like $5 or $10) or coinsurance (a percentage of the drug's cost, like 25%). Your plan pays the rest. This stage continues until your total out-of-pocket spending reaches $5,850 for the year.

When your out-of-pocket costs hit $5,850, you enter the coverage gap, sometimes called the "donut hole." In the gap, you pay a larger share of the drug cost — currently 25% of the price for most drugs. This stage ends when your total out-of-pocket spending reaches $7,050.

Once you spend $7,050 out of pocket, you reach catastrophic coverage. From that point through the end of the year, you pay only a small copay (usually $3.95 to $9.85 for generic drugs, higher for brand-name drugs) and your plan covers the rest.

Choosing and Changing Your Plan

You choose your Part D plan during your initial enrollment period, which is the seven months that begin three months before you turn 65. If you miss that window, you can join during the annual enrollment period from October 15 to December 7 each year. Coverage starts January 1 of the following year.

If you already have Part D coverage, you can switch to a different plan during the annual enrollment period. You do not need a reason to switch — you can change plans straightforward because you want different coverage or lower costs. The new plan's coverage begins January 1.

To compare plans, use the Medicare Plan Finder tool on Medicare.gov. Enter the medications you take, and the tool shows you which plans cover them and what you will pay at each stage. You can also call 1-800-MEDICARE to speak with someone who can walk you through your options.

What Happens If You Do Not Join When You First Become may be able to access

If you become may be able to access for Medicare and do not join a Part D plan, and you do not have other drug coverage that Medicare considers "creditable," you will owe a late enrollment penalty. This penalty is added to your monthly premium for as long as you have Part D coverage.

The penalty is calculated based on how many months you went without coverage. As of 2024, the penalty is roughly 1% of the national average Part D premium for each month you were not enrolled. If you waited 12 months to join, for example, your penalty would be about 12% of that average, added to your premium every month.

The penalty does not go away if you switch plans later. Once you have it, it stays on your record. The only way to avoid it is to join Part D during your initial enrollment period or to have other drug coverage that Medicare recognizes as creditable — such as coverage through a current employer or union, or through TRICARE or the Veterans Health Administration.

How to Find Out Which Drugs Your Plan Covers

Each Part D plan publishes a document called a formulary, which is the official list of drugs the plan covers. You can find your plan's formulary on the insurance company's website or by calling the plan directly. The formulary also tells you the copay or coinsurance for each drug and whether your doctor needs to get approval before the plan will pay.

Formularies change every year, usually on January 1. A drug your plan covered last year might not be covered this year, or the cost might go up. This is one reason to review your coverage during the annual enrollment period and compare plans if your current plan no longer works for you.

If your plan does not cover a drug your doctor prescribed, you have options. You can ask your doctor to prescribe a different drug that is on the formulary. You can ask your plan to make an exception and cover the drug anyway — this is called a formulary exception or prior authorization. Your doctor usually has to submit this request in writing, and the plan has 72 hours to respond.

Extra Help Paying for Medications

If your income and savings are low, you may be able to get Extra Help, a federal program that pays some or all of your Part D costs. Extra Help covers premiums, deductibles, copays, and coinsurance. You do not have to be on Medicaid to receive it.

To find out whether you may have access to for Extra Help, contact Social Security at 1-800-772-1213 or visit ssa.gov. You can also call your State Health Insurance information Program (SHIP), which is free and can help you understand your options. To find your local SHIP, call 1-877-839-2675 or visit shiptalk.org.

When to Contact Your Plan or Doctor

Contact your Part D plan if a drug you need is not on the formulary, if your copay suddenly increases, if the pharmacy says your plan will not pay, or if you have questions about your coverage. The plan's customer service number is on your insurance card and in your plan documents.

Contact your doctor if a medication is too expensive even with your plan's coverage, or if you are having trouble affording your drugs. Your doctor may be able to prescribe a less expensive alternative, request a formulary exception, or connect you with a patient information program run by the drug manufacturer.

Frequently Asked Questions

Can I use my Part D plan at any pharmacy?

Most Part D plans have a network of pharmacies where you pay the copay or coinsurance 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 documents or call the plan to find pharmacies near you.

What if I cannot afford my copay at the pharmacy?

Tell the pharmacist you cannot afford the copay and ask whether a generic version or a different drug on your plan's formulary costs less. You can also ask your doctor about patient information programs run by drug manufacturers, which may provide free or low-cost medications. If you think you may have access to for Extra Help, contact Social Security or your State Health Insurance information Program.

Do I have to take the brand-name drug my doctor prescribed, or can my plan require me to take generic?

Your plan can require you to try the generic version first before it will pay for the brand-name drug. This is called "step therapy." If the generic does not work for you, your doctor can request that the plan cover the brand-name drug instead. Ask your doctor to submit this request in writing to your plan.

What if I move to a different state?

Your current Part D plan may not be available in your new state. You can change plans outside the annual enrollment period if you move. Contact your current plan or call 1-800-MEDICARE to find plans available where you are moving and to make the switch.

Can I get Part D if I am still working and have drug coverage through my employer?

You do not have to join Part D if your employer coverage is creditable — meaning it covers at least as much as Medicare Part D. When you do retire and lose that coverage, you will have a special enrollment period to join Part D without a late penalty. Ask your employer's benefits office whether your coverage is creditable.