What Is Medicare Part D?

Qualifying for Medicare can be a relief, but it can also be confusing because there are so many different parts to the program. A, B, C and D … After a while, it starts to feel a little like alphabet soup!

Here’s the simple explanation: Original Medicare includes Parts A and B, but you have additional options available, including Parts C and D. Part D is probably the easiest to remember because the letter matches what it covers: prescription drugs.

What Is Medicare Part D?

Medicare Part D is optional prescription drug coverage through private insurance companies. In general, Original Medicare doesn't cover prescription drugs. Some exceptions exist, such as drugs you receive during surgery. However, if you have regular prescriptions, your Medicare Part A and Part B won't cover them, which is why some seniors choose to add Part D coverage.

You can get a standalone Part D plan along with Original Medicare. Another option is to choose a Medicare Part C, or Medicare Advantage, plan that includes prescription drug coverage. Part C typically offers some additional coverage options that you don't get with Original Medicare. If you're considering a Part C plan, make sure it includes prescription drug coverage.

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Who Qualifies for Medicare Part D?

Anyone who qualifies for Medicare coverage also qualifies to have a Part D plan. This typically includes adults aged 65 and older, people with disabilities and people with end-stage renal disease. You need to be enrolled in Part A, Part B or both before you can enroll in a Medicare Part D plan.

What Does Medicare Part D Cover?

A Medicare Part D plan typically covers a wide range of prescription drugs, including brand-name and generic options. Insurance companies offering Part D plans typically cover at least two drug options in several categories for medications that are common for people on Medicare to take. The specific drugs offered can vary by plan and are listed on the company's formulary. If the medications you take aren't covered by a plan, your doctor might be able to prescribe a different option that's covered, or you can request an exception. Most companies break up the list of covered medications into tiers, with different pricing for each tier.

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How Much Does Medicare Part D Cost?

Since it's offered by private insurance companies, Medicare Part D can vary in cost. The average monthly premium for Part D is $31.50. However, you can find plans with lower and higher premiums, depending on where you live, the company and the coverage the plan provides.

You might also have to pay extra if you are a higher earner. Called Part D - IRMAA, this additional fee is on top of the monthly Part D premium and is based on your income. It only applies to people who make $97,000 per year and file individually, or $194,000 per year if they’re married and file jointly. The extra amount ranges from $12.20 to $76.40 per month, depending on how much you make.

If you decide to go with a Medicare Advantage Plan that includes prescription drug coverage, you could pay anywhere from $0 to over $200 per month for the plan. The average monthly cost for Part C  is $18, but it's important to review what the plan covers, and check the covered providers since those plans can be more restrictive than Original Medicare. You'll also need Part A and Part B to get a Medicare Advantage Plan, which means you'll also have to pay the monthly Part B premium of $164.90.

Do You Need Medicare Part D?

Medicare Part D isn't required coverage for Medicare users. It's completely optional, but it's often recommended, since Original Medicare doesn't provide prescription drug coverage. Even if you're not taking prescription medications now, there's a good chance you'll eventually need them.

If you don't sign up for Part D when you first become eligible, you can sign up later, but that usually means you'll have a late enrollment penalty added to all future premium payments. Medicare uses a formula to calculate the fee. It's 1% of the national base beneficiary premium times however many full months you went uncovered, which means you didn't have Part D or other creditable coverage. They round that number to the nearest $0.10.

For example, say you went 14 months without coverage. The base beneficiary premium for 2023 is $32.74. Multiplying 0.14% by $32.74 equals $4.58, which gets rounded up to $4.60.

For 2023, the fee would be $4.60 on top of the premium. The fee gets adjusted each year if the base rate changes. Enrolling as soon as you're eligible, even if you don't need it yet, helps you avoid this fee.