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Medicare Part D: What You Need to Know
What is Medicare Part D?
Medicare Part D—a federal program that began in 2006—provides Medicare beneficiaries access to retail prescription drugs at affordable copays. Prior to the introduction of Medicare Part D, Medicare beneficiaries mostly paid for their medications as an out-of-pocket expense as Original Medicare (Medicare Part A and Medicare Part B) doesn’t cover all prescription drug costs.
Also referred to as Medicare Prescription Drug Plans, Medicare Part D helps cover the cost of prescription medications, giving you broader healthcare coverage and potentially saving you money.
Some of the key things you need to know about the Medicare Part D include:
- Part D plans are operated by Medicare-approved private insurance companies
- Part D plans provide prescription drug coverage for both generic and brand name medications
- Medicare Part D has four phases of prescription drug coverage
- The cost varies based on the plan you choose, your medications and pharmacy
- Drugs covered and costs can change from year to year, so it’s important to compare plans
- Participation in Medicare Part D is purely voluntary
Who is eligible to receive Medicare Part D coverage?
Medicare Part D is a benefit offered to everyone who has Medicare. For Medicare recipients needing prescription drug coverage, a Medicare Part D plan can be purchased either as a standalone plan to supplement Medicare Parts A and B or to accompany a Medicare Supplement Insurance plan.
A Medicare Part C plan may also offer prescription drug coverage.
The Cost of Medicare Part D
Most Medicare Part D plans charge a monthly fee that varies by plan and you’ll have to pay this in addition to a Medicare Part B premium. If you also purchase a Medicare Part C plan that includes prescription drugs, the plan’s monthly premium could include an amount for the drug coverage. Each insurance company sets its own rates.
In addition to the monthly premium, you will also need to share the costs of the medications you purchase at the pharmacy. The cost-sharing may include some deductible spending if your Part D plan has a deductible.
In 2020, there are many Medicare Part D plans to choose from in each state. Each insurance company sets its own formulary (list) of medications that are covered by the plan, making it important to choose a plan with a formulary that offers the medications you need. If you enroll in a plan without thoroughly checking the formulary, you may later learn that the plan does not cover one of your medications.
Some people with higher incomes may have to pay more for their Medicare Part D plan, like if you earned more than $87,000 filing individually or $1740,000 filing jointly. This is called the Income-Related Monthly Adjusted Amount or IRMAA and the chart below shows your estimated prescription drug plan monthly premium based on your income as reported on your IRS tax return.
|If your filing status and yearly income in 2018 was|
|File individual tax return||File joint tax return||File married & separate tax return||You pay each month (in 2020)|
|$87,000 or less||$174,000 or less||$87,000 or less||your plan premium|
|above $87,000 up to $109,000||above $174,000 up to $218,000||Not applicable||$12.20 + your plan premium|
|above $109,000 up to $136,000||above $218,000 up to $272,000||Not applicable||$31.50 + your plan premium|
|above $136,000 up to $163,000||above $272,000 up to $326,000||Not applicable||$50.70 + your plan premium|
|above $163,000 and less than $500,000||above $326,000 and less than $750,000||above $87,000 and less than $413,000||$70.00 + your plan premium|
|$500,000 or above||$750,000 and above||$413,000 and above||$76.40 + your plan premium|
Enrolling in Medicare Part D
A Medicare Part D Prescription Drug plan is an elective form of Medicare coverage, which means that you’re not required to enroll in one. If you choose to enroll in Part D later than your Initial Enrollment Period, there could be significant penalties. To avoid this and to ensure you have prescription drug coverage when you need it, you should enroll in Medicare prescription drug coverage when you are first eligible for Medicare.
You can make changes to your prescription drug coverage during the Medicare Annual Enrollment Period (AEP), which runs October 15-December 7.
It’s important to know that 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 is a good idea to review your drug coverage during AEP. Even if your medications don’t change, it is possible to save money on a different plan. On the other hand, if you are happy with your prescription drug plan, you can simply allow it to renew automatically at the end of the year.
Explore Medicare Part D with SelectQuote
If you’d like to learn more about Medicare Part D prescription drug plans, we can help you understand your options and save you time and potentially money. In just minutes, we can compare Medicare options available in your area, ensuring you’re getting all the benefits you deserve. There’s no obligation to enroll.