Prescription drug coverage, or Part D, is one of the most complicated parts of Medicare. The two main things you need to know are that there are two different ways to get Part D and different levels of cost sharing involved. Also, keep in mind that the drugs covered by each plan vary widely. Be sure to check the formulary – the list of covered prescription drugs – of each plan you’re interested in.
Two ways to get Part D:
Stand-Alone Part D Plan [or Prescription Drug Plan (PDP)]
Medicare Advantage Plan with Prescription Drug Coverage (MA-PD)
- Most Medicare Advantage plans offer Part D coverage, but you must make sure before you enroll in that plan.
This means the amount you pay for your prescriptions. This amount can include copay, coinsurance, and deductibles. There are different levels, or stages, of cost sharing until you have spent a certain amount, determined annually.
- The first stage is called the “deductible”. During this stage, you will be responsible for all of your drug costs. Not all plans have deductibles.
- The next stage is called the “Initial Coverage Limit”. In this stage, you will pay a copay or coinsurance for each drug purchase until you reach a limit, which changes every year and is defined by Medicare.
- During the next stage, called a “coverage gap” or “doughnut hole,” you will be responsible for no more than 25% of the cost of your drug during the Coverage Gap Stage.
- True Out-of-Pocket expenses (TrOOP) – The amount you pay or is paid on your behalf, as copays, coinsurance and deductible payments toward the cost of your prescription drugs.
- Once you pass the coverage gap and your TrOOP expenses have reached your plan limit, you are eligible for the third level, also known as “catastrophic coverage.” At that point, you will pay a much smaller amount for your drugs the rest of the plan year.