Medicare Part D prescription drug coverage typically covers medications you have filled at a pharmacy (as opposed to medications that are administered at a doctor’s office or hospital – which usually fall under Part B). There are only two ways to get Part D coverage: by purchasing a standalone prescription drug plan or by enrolling into a Medicare Advantage plan that includes Part D coverage. To be eligible for a standalone prescription drug plan you must first have Medicare Part A and/or Part B and live in the plan service area. To be eligible for a Medicare Advantage plan with Part D coverage you must have both Medicare Parts A and B and live in the plan service area. 

What costs are associated with Part D?

Part D premiums

Most drug plans charge a premium which varies from plan to plan. Your Part D plan premium is in addition to your Part B premium. If you are enrolled in a Medicare Advantage plan (e.g.: an HMO or PPO) the premium for your plan may include your Part D premium. 

Lower income people:

People who qualify due to low income may have their Part D premiums paid by their state Medicaid program and have reduced co-pays for their medications. To see if you qualify, please call Social Security at: (800) 772-1213 or your state Medicaid program.

Higher income people:

In 2024, those who filed 2022 individual tax returns with an annual income of $103,000 or more, and those filing jointly with an annual income of $204,000 or more, may pay an additional surcharge (sometimes called the “Part D IRMAA”) on top of their monthly drug plan premium.

Click here to get prescription drug plan options and costs.

Part D deductibles

The standard Part D deductible for 2024 is $545 (although it is important to note that there are drug plans which do not have deductibles).   

Drug co-pays or coinsurance

A co-pay or coinsurance is the amount you pay for medications after your deductible is met (if your plan has a deductible). Drugs are typically grouped into cost sharing “Tiers” with corresponding co-pays or co-insurance. Generally, the lower the drug tier, the lower the co-pay.

For example, Tier 1 drugs are typically preferred generics and will have the lowest co-pays. Tier 2 drugs are usually non-preferred generics and will have a higher co-pay then Tier 1. Tier 3 are generally categorized as preferred brand drugs with a higher copy than Tier 2, and Tier 4 drugs are usually non-preferred drugs with an even higher co-pay. Many drug plans will also list Tier 5 as specialty drugs (such as injectables) which you may be responsible for a percentage of the full cost (known as a “coinsurance”).

Donut Hole/Coverage Gap

The Coverage Gap (a.k.a. “The Donut Hole”) is the phase you could reach if the full cost of your medications (meaning your co-pay or coinsurance plus what your drug plan pays) reaches $5,030 in 2024. Once you are in the Coverage Gap you are then responsible for 25% of the full cost for brand name and generics drugs. 

Example: If you are taking a preferred brand drug that has a full cost of $200, your preferred brand co-pay might be $50 (before you hit the coverage gap) which would make your drug plan’s portion $150. If you were to hit the Coverage Gap during the year, your cost for that brand drug would then be 25% of $200 (the full cost of the drug) which equals $50.

Catastrophic Coverage

In 2024, the catastrophic phase occurs when your total out of pocket costs for your medications during the year has reached $8,000. During the catastrophic phase, co-pays for generics and brand name drugs co-pays become $0.

Do I have to have Part D coverage?

The short answer is no. But if you decide not to enroll in a Part D plan when you are first eligible and you do not have other creditable drug coverage (like from an employer or union plan) or receive a Low Income Subsidy, you may end up having to pay a Part D Late Enrollment Penalty (LEP). Medicare calculates the amount of your Part D LEP by 1% of the national average premium (also called the "national base beneficiary premium") times the number of months you didn’t have Part D or creditable drug coverage. In 2024, the Part D national average premium is $34.70. The Part D LEP is rounded to the nearest $0.10 and would apply for the rest of your life.

Example: In 2024, if a Medicare eligible person had previously decided to go without drug coverage for 24 months and then enrolled in a Part D plan, the penalty would be $34.70 x 1% = $0.347  x 24 months = $8.328, rounded to the nearest $0.10 is $8.30 per month in addition to the plan's monthly premium.   

Things to consider

Before choosing a drug plan, it is important to determine not only if the medications you are taking are covered by the plan you are considering, but also what tier your medications may fall under and whether or not you will reach the drug coverage gap. These factors will have a direct impact on what you will be paying for your medications throughout the year.