Medicare Part D covers prescription drugs, but not all of them

Medicare Part D is prescription drug coverage that helps pay for medications you take at home. It covers most common drugs — including brand-name and generic medications — but each plan has its own list of which drugs it will pay for. That list is called a formulary, and it changes every year.

Part D does not cover all medications. Some drugs are excluded by law, and some are excluded by your specific plan. The amount you pay depends on which tier your drug is on — plans usually have three to five tiers, with lower tiers costing you less out of pocket.

Part D is optional, but if you do not sign up when you first become may be able to access and you go without coverage, you may pay a penalty for as long as you have Medicare. The penalty is added to your monthly premium.

Key Takeaways

  • Part D covers most prescription medications taken at home, but each plan decides which drugs it will pay for using a formulary that changes yearly.
  • Drugs are organized into tiers, usually three to five levels, and your out-of-pocket cost depends on which tier your medication is on.
  • Part D does not cover medications given to you in a hospital or doctor's office, or certain drugs like over-the-counter items and most vitamins.
  • If you do not sign up for Part D when first may be able to access and you go without drug coverage, you will owe a late enrollment penalty that stays on your premium for life.
  • You can change your Part D plan once a year during the annual enrollment period, which runs from October 15 to December 7.

What Part D actually covers

Part D covers prescription medications you pick up at a pharmacy and take at home. This includes brand-name drugs, generic drugs, and most biologics (drugs made from living cells). The coverage applies whether you fill your prescription at a retail pharmacy, by mail order, or at a specialty pharmacy.

Your plan's formulary lists the drugs it covers. Most plans cover medications for common conditions like high blood pressure, diabetes, heart disease, arthritis, and depression. If your drug is on the formulary, your plan will pay its share of the cost. You pay the rest, depending on which tier the drug is on and where you are in your coverage.

Part D also covers some vaccines you get at a pharmacy, such as the flu shot and shingles vaccine. However, vaccines given in a doctor's office or hospital are covered under Medicare Part B instead.

What Part D does not cover

Part D does not cover drugs given to you in a hospital, nursing home, or doctor's office — those are covered under different parts of Medicare. It also does not cover medications that are not on your plan's formulary, unless you get an exception from your plan.

By law, Part D cannot cover over-the-counter drugs, most vitamins and minerals, or drugs used for cosmetic purposes. It does not cover fertility drugs, weight-loss drugs (with rare exceptions), or most drugs used to treat erectile dysfunction. Certain other medications are excluded by law, including some older drugs that have been replaced by newer options.

If your doctor prescribes a drug that is not on your plan's formulary, you have options. You can ask your doctor to prescribe a different drug that is covered, or you can ask your plan for a formulary exception. Your doctor must submit the request, and the plan has 72 hours to respond (or 24 hours in urgent cases).

How drug tiers work and what you pay

Most Part D plans organize drugs into three to five tiers. Lower tiers have lower out-of-pocket costs, and higher tiers cost you more. A typical structure looks like this: Tier 1 (generic drugs, lowest cost), Tier 2 (preferred brand-name drugs), Tier 3 (non-preferred brand-name drugs), Tier 4 (specialty drugs, highest cost), and sometimes Tier 5 for the most expensive drugs.

Your cost for each drug depends on your plan's cost-sharing structure. Some plans use copayments (a flat dollar amount per prescription), some use coinsurance (a percentage of the drug's cost), and some use both. A generic drug on Tier 1 might cost you $5 to $10 per prescription, while a specialty drug on Tier 4 might cost you 25% to 33% of the drug's price.

As you fill prescriptions throughout the year, you move through different coverage stages. In the initial coverage stage, your plan pays its share and you pay your share. Once you and your plan have spent a certain amount on drugs (the threshold varies by year), you enter the coverage gap, sometimes called the "donut hole." In the gap, you pay more out of pocket until your total spending reaches the catastrophic threshold, at which point catastrophic coverage begins and your costs drop again.

The coverage gap and catastrophic coverage

The coverage gap is a temporary period when you pay more for your drugs. It starts after you and your plan have spent a combined amount on covered drugs — this amount changes each year. Once you enter the gap, you pay a higher percentage of the drug's cost until your total out-of-pocket spending reaches the catastrophic threshold.

Manufacturers' discounts and generic drug savings help reduce what you pay in the gap. If you take brand-name drugs, the manufacturer typically pays a portion of the cost in the gap, which counts toward your out-of-pocket total. Generic drugs in the gap are usually cheaper than brand-name drugs, so switching to a generic can help you move through the gap faster.

Once your out-of-pocket costs reach the catastrophic threshold (the amount changes yearly), you enter catastrophic coverage. At this stage, your plan pays most of the cost and you pay a small copayment or coinsurance for the rest of the year. This protection means your drug costs have a ceiling.

How to find out what your plan covers

Your Part D plan sends you a document called the "Summary of Benefits and Coverage" or "Evidence of Coverage" each year. This document lists your plan's formulary, cost-sharing amounts, and coverage rules. You can also look up your plan's formulary on Medicare.gov by entering your plan name and the drugs you take.

If you are not sure whether a specific drug is covered, call your plan's customer service number (on your insurance card) and ask. Have your prescription ready so you can give them the drug name, strength, and quantity. The plan can tell you the tier, your copayment or coinsurance, and whether you need prior authorization before the pharmacy will fill it.

Your pharmacist can also check your coverage. When you drop off a prescription, the pharmacy's system connects to your plan and shows what you will pay. If the cost is higher than expected, ask the pharmacist whether a generic or lower-tier alternative is available.

When coverage changes and how to switch plans

Part D formularies change every January 1. Your plan may add new drugs, remove drugs, move drugs to different tiers, or change your cost-sharing amounts. Your plan must send you a notice by October 15 telling you about any changes that will affect your current medications.

You can change to a different Part D plan once a year during the Annual Enrollment Period, which runs from October 15 to December 7. Your new coverage starts January 1. If your current plan removes a drug you take or moves it to a much higher tier, this is a good time to compare other plans that might cover your drugs at a lower cost.

You can also switch plans if you experience a may have access to life event, such as moving out of your plan's service area, losing other drug coverage, or having a significant change in your income. You have 60 days from the event to make a change.

What to ask your doctor and when to seek help

Before your doctor prescribes a new medication, tell them which Part D plan you have and ask whether the drug is covered. If it is not, ask whether a covered alternative exists. If your doctor believes the non-covered drug is medically necessary, they can submit a formulary exception request on your behalf.

If you cannot afford your medications, tell your doctor or pharmacist. Some drug manufacturers offer patient information programs that provide free or low-cost drugs to people who meet income requirements. Your pharmacist or social worker can help you find these programs.

Contact your Part D plan when ready if your pharmacy tells you a drug you have been taking is no longer covered, or if your cost suddenly increases. The plan may have made a coverage change, or there may be an error in their system. If you believe the plan made a mistake, you have the right to file an appeal.

Frequently Asked Questions

Do I have to enroll in Part D when I turn 65?

Part D is optional, but if you do not sign up when you first become may be able to access and you go without drug coverage, you will owe a late enrollment penalty. The penalty is a percentage of the national average Part D premium and is added to your monthly premium for as long as you have Medicare. It is usually cheaper to enroll on time than to pay the penalty later.

Can my Part D plan refuse to cover a drug my doctor prescribed?

Yes, if the drug is not on your plan's formulary. However, you can ask your plan for a formulary exception, and your doctor must submit the request. The plan has 72 hours to respond (or 24 hours if it is urgent). If the plan denies the exception, you can appeal the decision.

What happens if I cannot afford my Part D copayments?

Tell your doctor or pharmacist. Many drug manufacturers offer patient information programs for people with low incomes. Your plan may also have a program to help low-income members pay for drugs. You can also ask about switching to a generic drug or a lower-tier alternative that costs less.

Does Part D cover insulin?

Yes, insulin is covered under Part D. However, your out-of-pocket cost for insulin is capped at $35 per month for a one-month supply, regardless of which tier it is on or how much the drug costs. This cap applies to all Part D plans.

Can I use Part D at any pharmacy?

Most Part D plans have a network of pharmacies where you pay the lower in-network cost. If you use an out-of-network pharmacy, you may pay more. Some plans cover out-of-network pharmacies at a higher cost, and some do not cover them at all. Check your plan's pharmacy network before filling a prescription at a new location.