Comparing Medicare Prescription Drug Plans For Seniors
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Medicare Prescription Drug Plans
Medicare Prescription Drug plans, also known as Medicare Part D, help cover the cost of both generic and brand name medications. If you are already enrolled in Original Medicare (Part A and Part B), enrolling in a prescription drug plan will give you broader healthcare coverage that may also save you money. A Medicare Part D plan can be purchased as a standalone plan to supplement Original Medicare or to accompany a Medicare Supplement Plan. Another option for obtaining prescription drug coverage is with a Medicare Advantage plan—also known as Medicare Part C.
Prescription Drug Plan Benefits and Considerations
- Prescription drug plans are operated by Medicare approved private insurance companies.
- Part D plans help provide prescription drug coverage for both generic and brand name medications.
- The cost of prescription drug coverage varies depending on the plan you choose, which medications you use and if your pharmacy is in network.
- Prescription drugs covered and plans can change from year to year.
Consider the following questions as you apply for a Medicare Prescription Drug plan:
- Does the prescription drug plan cover all of your current prescriptions?
- Are the premiums for the Medicare Part D plan competitive compared to other options?
- Does the plan work with your preferred pharmacy or allow you to order your medications through mail?
Prescription Drug Plans by the Numbers:
According to the Centers for Medicare and Medicaid Services, these are the most popular plans and carriers across the United States. However, popularity can be a poor metric for determining the right Medicare Prescription Drug plan for your needs. SelectQuote specializes in finding the correct coverage for your healthcare needs and budget.
| Carrier | Enrolled |
|---|---|
| SilverScript | 5,737,304 |
| WellCare | 4,074,375 |
| Humana | 3,416,906 |
| Medco Containment Life and Medco Containment NY | 2,129,782 |
| UnitedHealthCare Ins. Co. & UHC Ins. Co. of NY | 1,830,429 |
| UnitedHealthcare Insurance Company | 1,782,837 |
CMS.gov, August 2021
Four Phases of Prescription Drug Coverage
Medicare Part D plans help Medicare beneficiaries cover the costs of prescription drugs. As a Medicare beneficiary, out-of-pocket prescription drug costs may change overtime depending on which phase you are in. The four phases of prescription drug coverage (Medicare Part D) include:
Prescription Drug Coverage Phase 1: Medicare Deductible Period
The first phase of prescription drug coverage is the Medicare Deductible Period. During the deductible period, you’ll be expected to pay the full negotiated amount for your covered prescription drug costs until you meet your Medicare Part D plan deductible.
Deductibles vary from plan to plan, but it should not exceed $4,660 in 2023. Some prescription plans even have a $0 deductible, which means you would skip phase 1 and move onto phase 2, the Medicare Initial Coverage Period.
Prescription Drug Coverage Phase 2: Medicare Initial Coverage Period
The Medicare Initial Coverage Period starts immediately if you do not have a deductible ($0) or if your prescription drug payments equal your prescription drug plan’s deductible (max $505).
During the Medicare Initial Coverage Period, your Medicare Part D plan will pay some of the prescription drug costs, while you will pay a copayment (a set dollar amount) or coinsurance (a percentage of the drug’s cost) set by your plan.
Once the total retail costs of your prescriptions reaches $4,660 (the amount you pay and your plan pays), the Medicare Initial Coverage Period ends. Some Medicare beneficiaries will stay in this period for the entire year.
Prescription Drug Coverage Phase 3: Medicare Coverage Gap (Donut Hole) Period
The Medicare Coverage Gap, sometimes still known as the Donut Hole, starts once you and your plan have spent a total of $4,660 on your covered prescription drugs. In this period, you will pay 25% of the retail cost for both brand name and generic prescription drugs. Once the total out-of-pocket costs for your prescription drugs reaches $7,400, the Medicare Coverage Gap (Donut Hole) period ends.*
Prescription Drug Coverage Phase 4: Medicare Catastrophic Coverage Period
The Medicare Catastrophic Coverage Period is the fourth and final phase of a prescription drug plan. The Catastrophic Coverage Period starts once you have reached $7,400 in out-of-pocket prescription drug costs.
While in the Medicare Catastrophic Coverage Period, Medicare Part D beneficiaries are only required to pay a small coinsurance amount or copayment during the remainder of the calendar year. The Medicare Part D phases start over again for prescription drug coverage once January 1st of the next year hits.
Prescription Drug Plan Costs
Most Medicare Prescription Drug plans for seniors charge a monthly premium that varies by plan and where you live. If your modified adjusted gross income is above a certain amount, you may pay a Part D income-related monthly adjustment amount (Part D IRMAA).
In 2022, the annual deductible for a Medicare Prescription Drug plan is $480. Depending upon the plan, you may be charged the full Part D deductible, a partial deductible or have the entire deductible waived.
You will pay the network discounted price for your medications until you have satisfied the deductible, at which point you will pay a copay for your medications based on the drug formulary. The insurance company tracks the amount spent by both you and the insurance company until you have together spent a total of $4,430 in 2022. Once you hit this limit, you will pay only 25% of your brand name medications and 25% of generics. You will continue these amounts until your total out-of-pocket costs have reached $7,050 in 2022.
Medicare Drug Plan Premiums by Income
According to Medicare.gov, your prescription drug plan costs could be higher if your income is over a certain threshold. This can be referred to as IRMAA—the Medicare Income-Related Monthly Adjustment Amount—and is an amount you can be expected to pay if your income is above the brackets set by the Social Security Administration. Your additional premium is typically a percentage of the national base beneficiary premium.
2023 Prescription Drug Plan Premiums Based on 2021 Income Tax Returns
Use the table below to get a better idea of what your 2023 prescription drug plan premium could be. Simply find the amount of your 2021 tax return to see what you could pay for your prescription drug plan premiums in 2023.
| If your filing status and yearly income in 2021 was | |||
| Individual Tax Return | Joint Tax Return | Married & Separate Tax Return | Prescription Drug Premiums (in 2023) |
|---|---|---|---|
| $97,000 or less | $194,000 or less | $97,000 or less | Your plan premium |
| above $97,000 up to $123,000 | above $194,000 up to $246,000 | not applicable | $12.20 + your plan premium |
| above $123,000 up to $153,000 | above $246,000 up to $306,000 | not applicable | $31.50 + your plan premium |
| above $153,000 up to $183,000 | above $306,000 up to $366,000 | not applicable | $50.70 + your plan premium |
| above $183,000 and less than $500,000 | above $366,000 and less than $750,000 | above $97,000 and less than $403,000 | $70.00 + your plan premium |
| $500,000 or above | $750,000 and above | $403,000 and above | $76.40 + your plan premium |
| Prescription Drug Premiums (in 2023) | Individual Tax Return |
|---|---|
| your plan premium | $97,000 or less |
| $12.20 + your plan premium | above $97,000 up to $123,000 |
| $31.50 + your plan premium | above $123,000 up to $153,000 |
| $50.70 + your plan premium | above $153,000 up to $183,000 |
| $70.00 + your plan premium | above $183,000 and less than $500,000 |
| $76.40 + your plan premium | $500,000 or above |
| Prescription Drug Premiums (in 2023) | Joint Tax Return |
|---|---|
| your plan premium | $194,000 or less |
| $12.20 + your plan premium | above $194,000 up to $246,000 |
| $31.50 + your plan premium | above $246,000 up to $306,000 |
| $50.70 + your plan premium | above $306,000 up to $366,000 |
| $70.00 + your plan premium | above $366,000 and less than $750,000 |
| $76.40 + your plan premium | $750,000 and above |
| Prescription Drug Premiums (in 2020) | Married & Separate Tax Return |
|---|---|
| your plan premium | $97,000 or less |
| $12.20 + your plan premium | not applicable |
| $31.50 + your plan premium | not applicable |
| $50.70 + your plan premium | not applicable |
| $70.00 + your plan premium | above $97,000 and less than $403,000 |
| $76.40 + your plan premium | $403,000 and above |
Medicare Enrollment Options for Prescription Drug Plans
A Medicare Prescription Drug plan is an elective form of Medicare coverage, which means that you’re not required to enroll in one, but you could face significant penalties if you choose to pick up a PDP plan later. To avoid any potential penalties and ensure prescription drug coverage when you need it, you should enroll in a Medicare prescription drug plan when you are first eligible for Medicare.
You can make changes to your prescription drug coverage during the Medicare Advantage and Prescription Drug Plan Annual Enrollment Period (AEP), which runs from October 15-December 7 each year.
Part D plans can change their formulary and benefits each year. The formulary determines how much of the cost of each medication they will cover, so it’s a good idea to review your drug coverage during AEP. Even if your medications don’t change, it is possible you could save money on a different plan, but if you’re happy with your prescription drug plan, you can simply allow it to renew automatically at the end of the year.
At SelectQuote, we can help you navigate your Medicare options before you sign up for a Medicare prescription drug plan.
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