What is Medicare Part D? When you sign up for Medicare, you have the option to add a Part D plan for your medications.

Original Medicare does not cover prescription drugs. Enrolling in Medicare prescription drug coverage ensures you don’t lose affordable access to necessary medications. Part D isn’t required, but skipping it can be costly — there is a 1% penalty for every month you go without it. 

Scroll through this guide to learn how Medicare Part D works and discover how you can maximize your Medicare benefits. Then enter your ZIP code to compare plans from local Medicare Part D companies.

Medicare Part D Explained

Medicare Part D plans were created in 2006 to help seniors pay for expensive prescriptions. Prescription drugs are tiered based on class, with higher and specialty tiers having higher copayments. 

Original Medicare (Parts A and B) does not provide prescription drug coverage. It only covers medical costs and hospital stays. 

Medicare Part D vs. Original Medicare

What is Medicare Part A? Part A is hospital insurance that pays for hospital stays and nursing home or hospice care. What is Medicare Part B? This part if your policy covers routine medical services and equipment.

Original Medicare is only designed for hospital and medical care and doesn’t cover prescriptions. Every Medicare Part D plan is required to cover a wide range of prescriptions, including cancer and HIV/AIDS treatments.

Read More: Millennial’s Guide to Health Insurance

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What Medicare Part D Covers

What drugs are covered by Medicare Part D?  Most providers update the formulary every year or whenever the FDA announces a recall. Prescriptions are tiered based on class, so copayments will vary based on which class of drug you need:

• Tier 1: Mostly generic prescriptions with the cheapest copayments.
• Tier 2: More preferred or brand-name drugs than Tier 1, so copayments are slightly higher.
• Tier 3: Mostly non-preferred, brand-name prescriptions with the highest copayments.

A specialty tier also exists for very expensive prescriptions or exemptions. If you can’t afford a certain prescription or want to find a better price, talk to your doctor about comparable drugs in lower tiers.

The government requires Medicare to offer at least two prescriptions in each class. However, there are over 700 different Part D plans, and each has a different formulary listing the covered prescriptions. Insurance companies can also change their formulary list at any time.

Shop around and compare the list of covered prescriptions to ensure that yours is still on it before you renew coverage.

Medicare Savings Programs (MSPs)  can help reduce all prescription costs to $11. You have to meet the MSP income requirements to qualify. If you don’t, Medicare Supplemental Insurance, also known as Medigap, can cover some costs for an additional monthly premium and deductible. 

If you can’t find your specific prescription on any plan’s formulary, you can ask for an exception. Your doctor or prescribing physician must write a supporting statement explaining why this specific medication is necessary.

Comparing Medicare Part D Costs

Medicare Part D costs $34/mo for everyone, but the private insurance companies selling plans set their own deductibles. 

Medicare Costs by Plan Type

Your monthly Part D premium does not include your prescription copayments. Out-of-pocket costs can vary based on where you live and the provider you choose. 

Medicare Advantage vs. Medicare Part D Plan Comparison

What is Medicare Part C? Sometimes called Medicare Advantage Plans, Medicare Part C are stand-alone health policies that combine Original Medicare (Parts A and B) with Medicare Part D.

You pay one premium for all your coverage with Medicare Advantage, instead of separate monthly plans for each Part A, Part B, and Part D.

However, like Part D plans, Medicare Advantage plans have different formulary lists of brand-name and generic drugs. Compare multiple plans and companies online before you enroll.

Read More: What’s the difference between Medicare Advantage and Original Medicare?

How to Get Medicare Prescription Drug Coverage

There are two ways to get prescription drug coverage through Medicare: Medicare Part D or Medicare Advantage plans that include Part D. The good news is you enroll for either policy the same way on Medicare.gov.

Who is eligible for Medicare Part D? Part D is not available until you turn 65. There are specific enrollment periods around your 65th birthday when you can sign up for Medicare prescription drug coverage:

• Initial Enrollment Period (IEP): Starts three months before you turn 65 and ends three months after your birthday month
• Annual Enrollment Period (AEP): Between October 15 and December 7
• Open Enrollment Period (OEP): Between January 1 and March 31 for those who already have Medicare Advantage plans and need to change their coverage
• Special Enrollment Period (SEP): Must meet certain criteria to enroll, such as moving to another state or if your Medicare provider changes its coverage options.

Your IEP is the best time to sign up since you’ll have access to the lowest prices. Waiting to enroll can make it harder to get prescription coverage later. You’ll also pay a 1% penalty for every month you didn’t Part D.

If you’re still working or otherwise insured by an employer’s or spouse’s insurance policy, you won’t pay any penalties. 

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Bottom Line on How Medicare Part D Works

What is Medicare Part D? Part D is an essential add-on to Original Medicare for covering prescription drugs, which is not included in Parts A and B. Medicare Advantage plans often bundle prescription coverage, offering a more streamlined and potentially cost-effective solution if you’re looking for ways to finance what your health insurance won’t cover.

Enrolling in Medicare Part D can be done during specific periods around your 65th birthday, with penalties for delayed enrollment unless covered by another insurance policy. Prescription costs are tiered, with higher tiers costing more. 

Discuss alternative medications with your doctors or seek plans with better coverage for prescriptions if copayments are too expensive. Additionally, you can compare insurance companies online to find affordable Medicare Part D plans near you.