Medicare Part D Plans

Medicare Part D is the prescription drug coverage component of Medicare, established to help Medicare beneficiaries pay for prescription medications. It is available to anyone who has Medicare, regardless of income, health status, or prescription drug usage. Here’s an overview of the basics of Medicare Part D to help you understand how this program works and how it can benefit you.

The Basics of Medicare Part D

What It Covers:

Medicare Part D provides coverage for prescription drugs. It includes a range of generic and brand-name drugs. Each Medicare Part D plan has a formulary, which is a list of covered drugs. Formularies must include at least two drug options in each class of covered medications, but they can vary by plan.

How It Is Offered:

Part D coverage is not offered directly by Medicare but through private insurance companies that contract with Medicare. Beneficiaries can choose to enroll in a stand-alone Prescription Drug Plan (PDP) for those who are on Original Medicare or a Medicare Advantage Plan with prescription drug coverage (MA-PD).

What does Medicare Part D cover?

Each Medicare Part D plan uses a list of approved drugs to decide what’s covered and what isn’t. This list is called a drug formulary. The formulary may differ from plan to plan. Many plans arrange their list of covered drugs in different levels, called “tiers”. Generally, drugs in a lower tier will cost less than drugs in a higher tier. Here is one example of a typical Medicare drug plan’s tier system (but remember, your plan may be different):

Tier 1 - Preferred Generic

Generic or brand drugs that are available at the lowest cost share for the plan

Tier 2 - Generic

Generic or brand drugs that the plan offers at a higher cost to you than Tier 1 Preferred Generic drugs

Tier 3 - Preferred Brand

Generic or brand drugs that the plan offers at a lower cost to you than Tier 4 Non-Preferred drugs

Tier 4 - Non-Preferred Drug

Generic or brand drugs that the plan offers at a higher cost to you than Tier 3 Preferred Brand drugs

Tier 5 - Specialty Tier

Some Injectables and other high-cost drugs

Tier 6 - Select Care Drugs

Select generic and brand drugs used to treat certain chronic conditions

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Learn about the types of Medicare Part D

Stand-Alone Prescription Drug Plans (PDPs)

These plans add drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service (PFFS) Plans, and Medicare Medical Savings Account (MSA) Plans.They are ideal for beneficiaries who choose to retain Original Medicare but want to add prescription drug coverage.Each PDP has its own formulary (list of covered drugs), and these formularies are divided into different tiers, which determine the co-payment or coinsurance costs for each drug.

Medicare Advantage Prescription Drug Plans (MA-PDs)

In PPO plans, members pay less if they use doctors, hospitals, and other healthcare providers that belong to the plan’s network. They can use out-of-network providers but may pay more out-of-pocket.

Making an Informed Decision

To be eligible for Medicare Part D, you must meet the following criteria:

Medicare Coverage: You must be entitled to Medicare Part A and/or enrolled in Medicare Part B. This includes anyone who is 65 or older, as well as younger individuals who qualify on the basis of disability or certain health conditions.
Residency: You must live in the service area of a Medicare Part D plan. Each plan has specific geographic boundaries where it offers coverage.

Enrollment in Medicare Part D

Enrollment in Medicare Part D is not automatic (except for certain situations), and there are specific times when you can sign up or make changes to your plan:

Initial Enrollment Period (IEP): This is a 7-month period that begins three months before the month you turn 65, includes the month you turn 65, and ends three months after that month. If you are under 65 and receive Social Security Disability Insurance (SSDI), your IEP starts three months before your 25th month of disability benefits and ends three months after your 25th month of benefits.
Annual Election Period (AEP): Also known as the Open Enrollment Period for Medicare Advantage and Medicare prescription drug coverage. It runs from October 15 to December 7 each year. During this period, you can join, switch, or drop a Part D plan. The new coverage starts on January 1 of the following year.
Medicare Advantage Open Enrollment Period (MA-OEP): From January 1 to March 31 each year, if you’re enrolled in a Medicare Advantage Plan, you can switch to another Medicare Advantage Plan or switch back to Original Medicare. If you switch to Original Medicare, you can also join a Medicare Part D plan.
Special Enrollment Periods (SEPs): These are available under certain circumstances, such as moving out of your plan’s service area, losing other credible drug coverage, or living in an institution. SEPs allow you to make changes to your Medicare Part D coverage outside the regular enrollment periods.

Special Situations

Automatic Enrollment: If you receive benefits from Medicaid, are enrolled in a Medicare Savings Program, or receive Supplemental Security Income benefits, you may be automatically enrolled in a Medicare Part D plan. If you qualify for Extra Help (a program to help pay for Medicare prescription drug program costs), you may also be automatically enrolled.

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How Does Medicare Part D?

Medicare Advantage plans work by partnering with private insurance companies to administer your Medicare benefits. When you enroll in a Medicare Advantage plan, you still retain your Medicare eligibility, but your healthcare services are managed and covered by the plan you choose. Medicare pays a fixed amount to the insurance company for your care, and the plan is responsible for coordinating your healthcare services, often through a network of doctors and hospitals.

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