Prescription Drug Coverage: How Part D Works

Two ways to get Part D

You can get Medicare drug coverage through a standalone Part D plan that works alongside Original Medicare, or through a Medicare Advantage plan that includes drug coverage. Both are offered by private companies approved by Medicare, and both follow the same basic structure.

The formulary

A formulary is the plan's list of covered drugs. If your medication is not on it, the plan generally will not pay for it, although you can request an exception. Formularies are grouped into tiers: lower tiers such as preferred generics cost you the least, while higher tiers such as non-preferred brands and specialty drugs cost more.

Some drugs carry extra rules, like prior authorization, quantity limits, or step therapy, which requires trying a lower-cost drug first. These rules vary from plan to plan for the same drug.

Pharmacies matter

Plans have pharmacy networks, and many designate preferred pharmacies where your copays are lower. Mail order is often another option. The same drug on the same plan can cost noticeably different amounts depending on where you fill it, so check that the pharmacy you actually use is in network and preferred.

How costs work through the year

Most plans have a deductible you pay before coverage kicks in, though some drugs or tiers may be exempt. After that you pay copays or coinsurance for each fill. Part D now includes a yearly limit on what you pay out of pocket for covered drugs; once you reach it, you pay nothing more for covered Part D drugs for the rest of the year. Medicare sets that limit annually, so check Medicare.gov for the current figure.

Medicare also offers a Prescription Payment Plan that lets you spread your out-of-pocket drug costs across monthly payments instead of paying large amounts at the pharmacy. It does not lower what you owe, but it can smooth the cash flow.

Extra Help

Extra Help is a federal program that lowers Part D premiums, deductibles, and copays for people with limited income and resources. Many people who qualify never apply. If money is tight, ask us about it or apply through Social Security.

The late enrollment penalty

If you go 63 days or more in a row without Part D or other creditable drug coverage after you are first eligible, Medicare adds a penalty to your premium for as long as you have Part D. It is calculated from the number of months you went without coverage. Employer plans, VA coverage, and some other sources count as creditable; your plan should tell you each year whether it does.

How to compare plans the right way

We run this comparison for you against the plans we represent, using your real prescriptions. Bring your pill bottles or a list, and we will show you the total cost side by side.

• Start with your exact medication list: drug names, doses, and how often you fill them.
• Check that each drug is on the formulary and note its tier and any restrictions.
• Confirm your pharmacy is in network, and whether it is preferred.
• Add up the premium plus your expected copays for the whole year. That total is what matters.
• Repeat every fall. Formularies and pricing change on January 1.