Medicare Part D is the prescription drug benefit available to every Medicare beneficiary. Established by the Medicare Modernization Act of 2003 and launched in 2006, Part D helps offset the cost of outpatient prescription medications through plans run by private insurance companies.
How Part D Operates
Part D is not managed directly by the federal government. Rather, private insurers contract with Medicare to provide prescription drug plans (PDPs). These plans must satisfy minimum standards established by Medicare but can differ in their specific coverage, pricing, and drug lists.
You can obtain Part D coverage through two paths:
- Standalone Prescription Drug Plan (PDP): Paired with Original Medicare or a Medigap policy
- Medicare Advantage Prescription Drug Plan (MA-PD): Included as part of a Medicare Advantage plan that offers drug coverage
What Part D Includes
Part D plans cover a broad range of FDA-approved prescription medications, including:
- Brand-name drugs
- Generic drugs
- Specialty medications
- Insulin and certain diabetic supplies
- Most vaccines not covered under Part B
Every plan maintains a formulary -- the list of medications it covers. Formularies are organized into tiers, with each tier carrying a different cost-sharing amount. Lower tiers (generic drugs) generally have the lowest out-of-pocket costs.
What Part D Does Not Include
Part D plans typically do not cover:
- Over-the-counter medications
- Drugs intended for weight loss or cosmetic use
- Medications covered under Part A or Part B (such as drugs administered during an inpatient stay)
- Drugs that have not been approved by the FDA
Why Part D Is Important
Prescription drug expenses can represent a significant cost for Medicare beneficiaries. Without Part D coverage, you would be responsible for the full retail price of all medications. Part D plans negotiate reduced prices with pharmacies and drug manufacturers, helping you achieve substantial savings.
In addition, signing up for Part D when you first become eligible helps you avoid the late enrollment penalty. If you go 63 or more consecutive days without Part D or other creditable prescription drug coverage, you may face a permanent penalty that gets added to your monthly premium.
Extra Help for Those with Limited Income
Medicare offers a program called Extra Help (also referred to as the Low-Income Subsidy) that assists individuals with limited income and resources in covering Part D premiums, deductibles, and copays. If you qualify, Extra Help can save you thousands of dollars each year on prescription drug costs.
Getting Started
During your Initial Enrollment Period or the Annual Enrollment Period, review and compare Part D plans offered in your area. Take into account the medications you use, the pharmacies you prefer, and the total estimated costs when making your selection.