Medicare Part D covers prescription drugs that you obtain from the pharmacy. It’s important to note that Part D is not automatically included with Medicare; you must actively enroll in it. Private health insurance companies are responsible for offering Part D plans, but they are required to comply with federal government regulations. While enrolling in Part D is technically optional, forgoing prescription drug coverage can be risky. If you do not sign up when you first become eligible, there are significant and permanent penalties for enrolling later.
You pay a monthly premium to an insurance company for your Part D plan. You will have an annual deductible to meet and will pay a copay or a percentage of the drug’s cost. Each Medicare prescription drug plan has a list of covered drugs called its formulary. The formulary has medications in Tiers 1-5; the lower the tier, the less you have to pay for your medication. To get Medicare drug coverage, you must enroll in a Medicare-approved plan that offers drug coverage. Each plan can vary in cost and the specific drugs covered.
The Drug Coverage Gap(Donut Hole)
- You will reach the drug coverage gap when you and your plan have spent $5,030 in 2024.
- During the coverage gap, you will pay up to 25% of the cost for all covered medications. Keep in mind that brand-name drugs can be expensive while in the donut hole.
- You will exit the coverage gap once your out-of-pocket spending for covered drugs reaches $8,000 in 2024.
- 2024 is the final year for the drug coverage gap. In 2025, a $2,000 out-of-pocket cap will be implemented for Medicare Part D Drug Plans. Once you have reached the out-of-pocket cap, you will not need to pay anything for covered prescription medications.
