Medicare Part D Prescription Drug Coverage Explained

What is Medicare Part D?

Medicare Part D helps pay for the cost of prescription drugs. You can get Part D included in your Medicare Advantage plan or through a standalone Part D plan from a private insurance company. 

What Medicare Part D covers

Part D covers brand-name, generic, and specialty medications. Each plan has a list of drugs it covers, known as a formulary.

Drugs not covered and plan restrictions

Medicare Part D plans cover a wide range of prescription medications, but not every drug is covered. Some covered drugs have rules you must follow. Each Part D plan has its own formulary (list of covered drugs) and rules, so it’s important to review plan details to make sure your prescriptions are covered.

Here are some common limitations:

• Drugs not covered by Part D: Certain medications are excluded under Medicare rules, such as over-the-counter drugs, weight loss medications, fertility drugs, and drugs used for cosmetic purposes.
• Prior authorization: Some prescriptions require approval from the plan before they’re covered. This helps ensure the medication is being used safely and appropriately.
• Step therapy: In some cases, you may need to try one or more lower-cost or alternative medications before the plan will cover a higher-cost drug.
• Quantity limits: Plans may limit the amount of a covered medication you can receive at one time to help promote safe and effective use.

Medicare Part D costs

Your costs when enrolled in a Part D plan include:

• Your Part D plan monthly premium, if applicable.
• Any out-of-pocket costs such as copays, coinsurance, and deductibles included with the prescription drug plan you choose.
• A late enrollment penalty (this applies only if you have a period of 63 days without Part D or other creditable prescription drug coverage).

Stages of prescription drug coverage

As your prescription medication spending increases throughout the year, you move from one stage to the next. You start at the deductible stage at the beginning of each year. All Part D drug plans have the same stages.

Deductible stage

UPMC for Life plans do not have a deductible for Tier 1 and Tier 2 prescription drugs. If your plan does have a deductible, you will pay the full price for your drugs until you meet your Part D deductible.

Most UPMC for Life plans have a combined deductible for Tiers 3, 4, and 5. For drugs on these tiers, you will pay the full cost of each prescription until you reach your plan’s deductible amount. Once you have reached your deductible, you will move into the initial coverage stage.

Initial coverage stage

Your plan begins to pay for your covered prescriptions. You pay a copay or coinsurance, depending on the drug tier, until your total yearly costs reach $2,100. The total yearly drug costs are the drug costs paid by both you and your Part D plan.

Catastrophic coverage stage

Your total yearly drug costs will be capped at $2,100. Once your total yearly out-of-pocket drug costs reach $2,100, you will not pay anything for your drugs. You will stay in this stage until the end of the year. 

Am I eligible for Medicare Part D?

You’re eligible for Part D if you are already enrolled in Medicare Parts A and B and live in the plan’s service area.

Medicare Part D is available regardless of income. Your income does not determine whether you can enroll, but it may affect whether you qualify for Extra Help or how much you have to pay for a standalone Part D plan.

Enrollment options

You can get Medicare Part D coverage in one of two ways but cannot have both at the same time. Choosing the right option depends on how you prefer to receive your Medicare benefits and whether you want prescription drug coverage bundled into one plan.

• Standalone Part D plan:
  • Added to Original Medicare (Parts A and B)
  • Can be paired with Medicare Supplement (Medigap) plan
  • Covers prescription drugs only
• Medicare Advantage plan with prescription drug coverage:
  • Most Medicare Advantage plans include Part D coverage combined in one plan along with Parts A and B
  • If you have a Medicare Advantage plan that includes drug coverage, you cannot also join a separate standalone Part D plan

Enrollment periods and late penalties

Medicare Part D has specific enrollment periods that determine when you can sign up, change plans, or drop coverage. Understanding these timeframes can help you avoid gaps in prescription drug coverage and unexpected costs.

• Initial Enrollment Period (IEP): This is your first opportunity to enroll in Medicare Part D. It begins three months before your 65th birthday, continues through your birthday month, and ends three months after your birthday month. If you’re eligible for Medicare because of disability, your IEP begins when you’re first eligible for Medicare. You must first sign up for Medicare Parts A and B before enrolling in a Medicare Advantage plan with Part D coverage or a standalone Part D plan.
• Annual Enrollment Period (Oct. 15 – Dec. 7): During this time, you can join a Part D plan or Medicare Advantage plan with drug coverage, switch plans, or drop drug coverage. Your coverage will be effective Jan. 1.
• Medicare Advantage Open Enrollment (Jan. 1 – Mar. 31): If you’re already on a Medicare Advantage plan, you can change to another plan or back to Original Medicare. If you choose Original Medicare during this period, you can also join a Part D drug plan. Your coverage will be effective on the 1st of the next month.
• Special Enrollment Periods: You may qualify for a Special Enrollment Period outside the standard enrollment periods if you experience certain life events, such as moving out of your plan’s service area or losing other creditable drug coverage.

Late enrollment penalties

Enrolling in Medicare Part D at the right time helps protect you from higher costs down the road. If you delay enrolling when you’re first eligible and go 63 days or more without creditable drug coverage, you may face a late enrollment penalty when you do enroll. This penalty increases your monthly premium and generally lasts as long as you have Part D coverage. Signing up during the appropriate enrollment periods also ensures that your medications are covered when you need them, so you don’t have gaps in coverage or have to pay out-of-pocket.

Extra Help with prescription drug costs

If you have limited income and resources, you may qualify for Extra Help. Learn how you can get help with prescription drug costs.

Frequently asked questions about Medicare Part D

What happens if I don’t enroll in Medicare Part D when I’m first eligible?

If you don’t sign up for Medicare Part D when you’re first eligible and don’t have other creditable coverage, like employer coverage, you may face late penalties later. This includes higher monthly premiums for as long as you have Medicare Part D. You may also face gaps in coverage, causing you to have to pay out-of-pocket for your medications.

Is Medicare Part D required if I already have other drug coverage?

Medicare Part D is not required if you already have creditable drug coverage such as from an employer or the Veterans Administration. It’s important to confirm that your current plan is considered creditable (equal to or better than Medicare) to avoid late penalties later if you enroll in a Part D plan.

Can I change my Medicare Part D plan during the year?

Yes. You can change Medicare Part D plans during the Annual Enrollment Period (Oct. 15 –Dec.7). If you’re already on a Medicare Advantage plan, you can also make one change to your coverage during the Medicare Advantage Open Enrollment (Jan. 1 – March 31). During this you can add or drop Part D prescription drug coverage or change to a different Medicare Advantage plan or to Original Medicare. However, you may qualify to change plans at other times if you’re eligible for a Special Enrollment Period, such as after moving or losing other drug coverage.

How do I know if my prescriptions are covered by a Part D plan?

It is important to check the plans formulary (list of covered drugs) before enrolling in a plan. You can review the plan’s formulary and look up your medications on the plan’s website or contact the plan directly for help. Be sure to also check for any coverage rules, such as prior authorization, step therapy, or quantity limits and confirm that your preferred pharmacy is in the plan’s network.