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What is a Medicare Part D?

Medicare Part D offers prescription drug coverage to everyone with either Medicare Part A and/or Part B. Like the Part C plans the Part D plans are purchased from private insurance companies that are contracted with Medicare.
 
There are 2 ways to get prescription drug coverage:
 
  • Standalone Medicare Prescription Drug Plans
    • ​These are plans specifically designed to cover prescriptions only. If you are on Original Medicare (A & B) and want to add prescription coverage, this is what you would need.
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  • Medicare Advantage Plans
    • Most Medicare Advantage Plans (but not all) include Part D coverage. These plans are referred to as MAPD (Medicare Advantage Prescription Drug plans).

Costs of Medicare Part D

This question can't be answered the same for everybody. There are many different Medicare Part D plans to choose from and they all have different cost. Premiums, deductibles, co-pays, network pharmacies and formularies (covered drugs) vary from plan to plan. It is important to review all available plans to determine which will cover your drugs the best.
 
If you have a higher income you might pay more for Part D coverage. Click here to view more information and the income levels chart.
 
Also, some individuals get extra help with their Medicare Part D cost. This is known as Low Income Subsidy (LIS). In order to find out qualify for extra help you should contact Social Security.

Coverage Gap / Donut Hole

The Part D Donut Hole is a gap in prescription coverage that occurs after your total drug costs exceed $4,660 (in 2023).

This amount includes all drug costs that you have paid in addition to all costs your Rx insurance has paid.
 
The threshold to enter the donut hole ($4,660) and the member responsibility, while in the coverage gap and catastrophic stages, is identical across almost every plan. Some plans might offer additional coverage for generic drugs while in the donut hole, but the generic drugs are, most likely, not what caused you to reach the donut hole to begin with.

Here is an breakdown of the different payment stages under the Part D plans:
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STAGE 1
 

ANNUAL DEDUCTIBLE STAGE (if applicable)

During this stage you pay 100% of your drug cost until you have satisfied the plan's yearly deductible.

 

If your plan does not have a deductible then you automatically skip this stage.

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STAGE 2
 

INITIAL COVERAGE STAGE

During this stage you pay a co-pay (dollar amount) or co-insurance (percentage) for each covered drug. The plan pays the remaining portion of the drug.

 

You remain in this stage until your total drug costs (you + plan) reach $4,660 (in 2023).

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STAGE 3
 

COVERAGE GAP STAGE ("Donut Hole")

The Coverage Gap, often called the "donut hole", begins when your total drug costs reach $4,660 (in 2023).

 

During this stage you are responsible for 25% of the cost of any covered prescription.

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STAGE 4
 

CATASTROPHIC STAGE​

Once your total out-of-pocket reaches $7,400 (in 2023) you will enter the Catastrophic Stage.

 

During this stage you are responsible for $10.35 for brand-name drugs or $4.15 for generic drugs (or 5% - whichever is higher).​

What is the Part D late enrollment
penalty (LEP)?
The late enrollment penalty is an amount that's added to your Medicare Part D premium. You may owe a late enrollment penalty if at any time after your Initial Enrollment Period is over, there's a period of 63 or more days in a row where you do not have Part D coverage or other creditable coverage.

Click here for more information how on to avoid this penalty if you had prior drug coverage from an employer plan or somewhere else.
 
The cost of the LEP depends on how many months you were eligible but did not have Part D coverage. The LEP is calculated by multiplying 1% of the "national base beneficiary premium" ($32.74 in 2023) by the number of full, uncovered months that you were eligible for Part D coverage. The "national base beneficiary premium" may increase each year so if it goes up then so will your penalty. In most cases, you have to pay this penalty for as long as you have drug coverage. 
 
If you receive extra help (LIS) then you will be exempt from this penalty.
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