Understanding Medicare Part D and Prescription Drug Coverage

Prescription drugs are a significant expense for many older adults. Medicare Part D is the portion of Medicare that helps cover the cost of outpatient prescription medications. Since Original Medicare (Parts A and B) does not include most prescription drugs, Part D is critical for nearly all beneficiaries to have. In this section, we will explain how Part D works, what it covers (and doesn’t), how to get coverage, and recent changes that make Part D more affordable. We’ll also provide practical tips for managing your medication costs under Medicare.

What is Medicare Part D?

Medicare Part D is prescription drug coverage provided through private insurance plans approved by Medicare. You can get Part D in one of two ways:

• By joining a stand-alone Part D plan (sometimes called a PDP) that supplements Original Medicare.
• By enrolling in a Medicare Advantage plan that includes drug coverage (an MA-PD plan).

Either way, the Part D benefit is optional, but highly recommended. If you have Part A or Part B, you are eligible to enroll in Part D​. Each Part D plan has a formulary, which is the list of prescription drugs it covers. Plans must cover a wide range of drugs and are required to include most medications in certain protected classes (like cancer drugs, HIV medications, antidepressants, etc.), but specific drug coverage and the tier (copay level) can vary from plan to plan.

The government sets guidelines and regulations, but premiums and covered drugs differ by plan. All plans must provide a standard level of coverage that is at least as good as Medicare’s defined standard, but they can also offer enhanced coverage for higher premiums.

Important: Part D is voluntary but comes with a late enrollment penalty if you delay without other creditable drug coverage. If you go 63 days or more without creditable drug coverage after your initial eligibility, Medicare will charge a permanent penalty added to your Part D premium.

Example: If you were 14 months late, and the base premium in 2025 is $36.78, your penalty would be about $5.15 per month added for life.

How Part D Coverage Works (Coverage Phases)

Part D coverage involves several phases each year, based on your drug spending:

• Deductible: You may pay 100% of drug costs up to a plan’s deductible (max $545 in 2024).
• Initial Coverage: You pay copays or coinsurance until the plan and you have spent a certain amount together.
• Coverage Gap (Donut Hole): Once you reach the spending limit (e.g., ~$4,660), you pay 25% for most drugs until you hit the out-of-pocket maximum.
• Catastrophic Coverage: Previously, you paid 5% after reaching the threshold. Starting 2024, you pay $0 during this phase.

New Cost Caps:

• 2024: No cost-sharing after hitting the out-of-pocket max (~$8,000).
• 2025: An annual out-of-pocket cap of $2,000 is introduced.

Also:

• All ACIP-recommended vaccines (e.g., shingles, tetanus) are $0 under Part D.
• Insulin is capped at $35/month, no deductible.
• Extra Help expanded in 2024 to include more low-income seniors.

Enrolling in Part D

You can enroll in a Part D plan during:

• Initial Enrollment Period (IEP): 7 months around your 65th birthday.
• Annual Open Enrollment: Oct 15 – Dec 7 each year.
• Special Enrollment Periods (SEP): For specific life events (moving, loss of other coverage, qualifying for Extra Help).

Part D enrollment is through private insurers or Medicare’s website. Review plans annually—premiums, drug lists, and networks change.

What Part D Covers (and Doesn’t)

Covered:

• Brand and generic outpatient drugs
• Insulin and related supplies
• Shingles and other ACIP-recommended vaccines

Not required to cover:

• Weight loss/gain drugs
• Fertility medications
• Hair growth drugs
• Over-the-counter supplements (except a few exceptions)
• Erectile dysfunction drugs for ED (may be covered for other conditions)

Part B vs. Part D: Part B covers drugs administered in clinical settings; Part D covers self-administered outpatient drugs. Specialty drugs are often placed in high tiers with higher coinsurance.

Costs in Part D

You may encounter:

• Premiums: Average ~$32/month in 2024 (higher if you choose enhanced plans).
• IRMAA: Extra premium for higher-income individuals.
• Deductibles: Up to $545 for brand-name drugs.
• Copays/Coinsurance: Based on drug tiers (1-5 or 6).
• Out-of-pocket cap: $8,000 (2024), $2,000 (2025)

Pro Tip: Review your monthly Explanation of Benefits (EOB) to track spending and progress toward your out-of-pocket cap.

Tips for Choosing and Using Part D

• Make a medication list.
• Use Medicare Plan Finder or a SHIP counselor to compare plans.
• Check formularies and tiers—not all plans treat drugs equally.
• Watch for restrictions like prior authorization or quantity limits.
• Pick a plan with preferred pharmacies or good mail-order pricing.
• Evaluate premium vs. copay trade-offs.

Managing costs during the year:

• Ask your doctor about generics or alternatives.
• Use preferred pharmacies and mail order when available.
• Apply for Extra Help if eligible—saves thousands annually.
• Look into manufacturer assistance and SPAPs if your state offers them.

Need help? Breezly’s advocates can review your meds, identify cheaper options, assist with exceptions, and ensure your plan is still the right fit.

In Summary

Medicare Part D is your safeguard against crippling prescription costs. Enroll on time, review your plan annually, and take advantage of resources like Extra Help, new $2,000 caps, and insulin price limits. With the right plan and support from services like Breezly, you can stay healthy without breaking the bank.