Medicare Part D: Your Comprehensive Guide 2023
Understand Part D eligibility, enrollment, coverage, costs, and more.
What Is Medicare Part D?
Medicare Part D provides beneficiaries with prescription drug coverage at more affordable rates.
When eligible for Medicare, adding Medicare Part D to your Original Medicare coverage is one of the ways you can add prescription drug coverage to your health insurance.
While Original Medicare covers both hospital and medical insurance, it leaves most prescription drugs uncovered.
Medicare Part D helps to cover those prescription drug costs.
Part D plans are offered by private insurance companies that must be Medicare-approved and follow all Medicare determined guidelines.
Part D beneficiaries pay a monthly premium for self-administered prescription drug coverage.
Guide to Medicare Part D Topics:
Am I Eligible for Medicare Part D?
How Do I Enroll in Medicare Part D?
How Should I Choose My Medicare Drug Coverage?
Medicare Part D Costs
Part D Late Enrollment Penalty
What Does Medicare Part D Cover?
Prescription Drug Coverage Options
What If My Medicare Part D Plan Is Ending?
Am I Eligible for Medicare Part D?
If you’re eligible for Original Medicare (Parts A and B), then you’re also eligible for Medicare Part D coverage.
In order to purchase a Medicare Part D plan, you must be enrolled in either Medicare Part A or Part B (or both).
How Do I Enroll in Medicare Part D?
Once you’ve enrolled in Medicare Part A or Part B (or both), you have the option of enrolling in Medicare Part D coverage simultaneously.
So, in other words, you have the option to enroll in Medicare Part D during your Initial Enrollment Period, which is the period you’re first eligible for Original Medicare.
You also have the option of enrolling later during the annual Open Enrollment Period (October 15 – December 7).
Be aware, however, that if you don’t enroll when first eligible, you may have to pay a late enrollment penalty.
Note: Medicare Part D prescription drug plans are only available through private insurers.
How Do I Join a Medicare Drug Plan?
Once you’ve determined which Medicare Part D you want to join, you have a few options for signing up:
Online. Use the Medicare Plan Finder or your chosen plan’s website.
Phone. Call the plan provider or call Medicare (1-800-633-4227).
Mail. Complete a paper enrollment form.
Note: The enrollment process will require your unique Medicare Number and the start date of your Part A and/or Part B coverage.
Both the number and the date are listed on your Medicare card.
So, be sure to have this information available when you’re set to enroll.
How Should I Choose My Medicare Drug Coverage?
If you’re interested in purchasing a Medicare Part D plan but not quite sure where to begin, consider starting with a look at what you prioritize in a drug plan.
This might be cost, specific product requirements, or other health and lifestyle needs.
Here are a few questions you can ask to focus your search:
Do I want extra protection from high costs?
Look for the prescription drug plans that offer coverage in the coverage gap.
From there, check those plans to determine if they cover your drugs in the coverage gap.
Do I want balanced drug expenses throughout the year?
Look for the prescription drug plans that have a low deductible or no deductible at all.
You can also look for plans that offer additional coverage in the coverage gap.
Do I take specific drugs?
Look for the prescription drug plans that include your specific drugs on their formulary.
Once you know which plans include your drugs, compare the costs of those plans.
Do I take generic prescriptions?
Look for the prescription drug plans with tiers that charge low copayments or no copayment for generic prescriptions.
Do I primarily want coverage now to avoid future penalties?
Look for the prescription drug plans that have a low monthly premium.
All drug plans must cover a majority of the drugs used by Medicare recipients.
Do I want health care and prescription drug coverage from one plan?
Look at Medicare Advantage plans that have prescription drug coverage.
Important Note: Before enrolling in your new drug plan, be sure to learn how your new Medicare prescription drug coverage will impact any current drug coverage you have.
This may be drug coverage from an employer, union, Medigap plan, Department of Veterans Affairs, TRICARE, or Indian Health Service.
It’s possible that your new plan will impact your current drug coverage, so talk with your plan provider beforehand.
What Are the Costs for Medicare Part D?
There will be a series of costs for your Part D plan throughout the year.
Generally, Part D plans charge a monthly premium and your plan may also have an annual deductible.
When it comes to new prescriptions and refills, your Part D plan will charge you either a copayment or coinsurance cost.
Finally, you’ll be responsible for out-of-pocket costs, which vary in amount depending on your plan.
With this in mind, you’ll want to thoroughly compare the Part D plan options that are available in your area.
This way, you can be sure that you’ve chosen a plan that covers your prescription drugs at the best price.
When comparing plans, remember to compare the four known costs associated with Part D plans mentioned above:
Premium
Annual Deductible
Copayment or Coinsurance
Coverage Gap (out-of-pocket)
Note, however, that the costs you end up paying for your drug plan will vary on several conditions and circumstances. These include:
The Part D plan you have chosen.
The prescription drugs you require.
Your plan’s formulary (and if it includes your drugs).
The pharmacy you use (and if it’s in your plan’s network).
Any Extra Help you may receive for Part D costs.
Note: Drug costs can vary from year to year. If you find that you’re paying more in drug costs than in the prior year, discuss this with your doctor.
Your doctor may know of a more cost-friendly alternative that could help to reduce your out-of-pocket costs.
Part D Plan Monthly Premium
The monthly premium for your Part D plan is a fee you must pay every month.
This premium is in addition to your Part B premium, which means that if you join a Part D plan you’ll have two monthly premiums.
Monthly premiums vary in amount from plan to plan, so it’s worthwhile to take this cost into consideration when weighing plans.
Since 2011, higher income beneficiaries have their Medicare Part D monthly premiums based on income.
These individuals pay both the income-related monthly adjustment amount and their plan's Part D premium amount.
The following are the 2023 Part D income-related adjustment amounts for beneficiaries that file individually and jointly.
Medicare Part D Income-Related Adjusted Premium Amounts (2023): Individual Tax Return
$97,000 or less = $0
Above $97,000 and up to $123,000 = $12.20
Above $123,000 and up to $153,000 = $31.50
Above $153,000 and up to $183,000 = $50.70
Above $183,000 and less than $500,000 = $70.00
$500,000 and above = $76.40
Medicare Part D Income-Related Adjusted Premium Amounts (2023): Joint Tax Return
$194,000 or less = $0
Above $194,000 and up to $246,000 = $12.20
Above $246,000 and up to $306,000 = $31.50
Above $306,000 and up to $366,000 = $50.70
Above $366,000 and less than $750,000 = $70.00
$750,000 and above = $76.40
You do have the option of automatically deducting your Part D monthly premium from your monthly Social Security payment.
If you’re interested in this option, contact your drug plan provider (not Social Security).
The first automatic deduction usually takes place three months after opting in, at which point the last three months will be deducted at one time.
From this point forward, you’ll see one deduction taking place every month.
Part D Income-Related Monthly Adjustment Amount (IRMAA)
Some individuals may have to pay their monthly premium plus an additional amount known as the Part D income-related monthly adjustment amount (IRMAA).
This applies to individuals if their modified adjusted gross income is above a certain threshold.
Social Security will notify you if you have to pay Part D IRMAA.
For those that Part D IRMAA applies to, most have the amount taken out of their Social Security check.
Otherwise, you’ll receive a bill from Medicare for the amount. The amount must be paid in order to keep your Part D coverage.
Important Note: Your Part D IRMAA is separate from your plan’s monthly premium. This amount is paid to Medicare, not your plan’s provider.
Part D Plan Annual Deductible
The annual deductible for your Part D plan is the amount you pay each year for your prescription drugs before your plan begins to pay a portion of the costs, as well.
The annual deductible amount varies from plan to plan. Some prescription drug plans don’t have an annual deductible.
For those plans that do, however, Medicare sets a limit on the deductible that all plans must follow.
For 2023, no Medicare drug plan is allowed to have an annual deductible that exceeds $505.
This amount has increased $25 from the 2022 limit of $480.
Part D Plan Copayment or Coinsurance
The copayment or coinsurance for your Part D plan is the amount you pay for your prescription once your deductible has been met.
A copayment is a set dollar amount for all drugs on a specific tier.
For example, your copayment may be $10 for a generic drug, while a non-preferred brand name drug may be $40.
Coinsurance is paying a percentage amount of the drug cost.
For example, if the cost of your prescription is $300 and your coinsurance is 25%, then you will end up paying $75.
Note: The amount you pay will correspond to the amount of covered prescription drug you receive.
The typical amount is a one-month supply, though you can request a lesser amount for most drug types.
If you’re trying a new medication with side effects or simply hoping to sync your medication refills, you might consider requesting less than the typical one-month supply.
Part D Plan Coverage Gap (Donut Hole)
Most Medicare Part D plans have a coverage gap (also known as the “donut hole”), which refers to a temporary limit on what your drug plan will cover for your prescription drugs.
While most Part D plans have this coverage gap, not everyone will enter their plan’s coverage gap.
This coverage gap only begins after both you and your drug plan have met a certain amount for covered drugs.
The amount tends to change from year to year.
For 2023, this amount is $4,660. This is a $230 increase from the 2022 amount of $4,430.
So, if you and your drug plan together have spent $4,660 on covered drugs, you’ll enter the coverage gap.
Counted Toward the Coverage Gap:
Annual deductible
Copayments and coinsurance
Costs paid in the coverage gap
Not Counted Toward the Coverage Gap:
Monthly premium
Pharmacy dispensing fee
Costs paid for uncovered drugs
Brand-Name Drugs and the Coverage Gap
When you enter the coverage gap, you’ll not have to pay more than 25% of your plan’s cost for covered brand-name prescription drugs, so long as they’re purchased at a pharmacy or through the mail.
While 25% is the uniform set limit, some plans may offer higher savings in the coverage gap.
Discounts can occur when your drug plan has set prices with the pharmacy for that particular drug.
While you’ll only pay 25% or less of brand-name drug prices, 95% of that payment will count toward your out-of-pocket costs, which helps to move you past the coverage gap.
Generic Drugs and the Coverage Gap
Starting in 2020, Medicare pays 75% of the price for generic drugs in the coverage gap. You are responsible for paying the remaining 25%.
Unlike brand-name drugs, with generic drugs it’s only your spending (not your plans) that will count toward moving you past the coverage gap.
Part D Plan Catastrophic Coverage
Similar to the threshold for entering your plan’s coverage gap, as your out-of-pocket costs mount, you’ll leave the coverage gap and enter catastrophic coverage.
For 2023, the out-of-pocket threshold for catastrophic coverage is $7,400. This amount has increased $350 from the 2022 amount of $7,050.
Note: For those that receive Extra Help to pay for their Part D costs, they will not enter the coverage gap.
Part D Plan Explanation of Benefits
For every month that you fill a prescription, your Part D plan will send you an “Explanation of Benefits” notice.
This notice will inform you how much you have spent on covered drugs and whether or not you’ve reached the coverage gap.
If you believe that you’ve reached the coverage gap but do no receive a discount, be sure to review your next Explanation of Benefits notice.
If there is no discount listed in the notice, contact your plan to confirm that your prescription records are up-to-date.
Additionally, you have the option of filing an appeal if your plan does not agree you’re owed a discount.
Part D Late Enrollment Penalty
The Part D late enrollment penalty is added to the cost of your Medicare Part D monthly premium.
This penalty only applies if you’ve gone without a Medicare Part D plan, Medicare Advantage plan, or other creditable prescription drug coverage for a period of 63 days or more once your Initial Enrollment Period has ended.
Once you’ve joined a Medicare Part D prescription drug plan, your plan provider will notify you if you owe a penalty, as well as the amount your premium will cost.
This Part D penalty applies for as long as you have a Medicare prescription drug plan.
Determining Your Part D Penalty:
The amount your Part D penalty will cost is determined by the amount of time you went without enrolling in Part D or receiving creditable prescription drug coverage.
Medicare determines your Part D penalty by multiplying 1% of the national base beneficiary premium ($32.74 for 2023) times the number of months you went without Part D or creditable drug coverage.
A month is only counted if it’s a full month gone without coverage. The penalty amount is rounded to the nearest $.10 and added to your Part D monthly premium.
Important: The national base beneficiary premium tends to fluctuate in amount with each year.
So, keep in mind that your Part D penalty may increase or decrease in amount from year to year.
Part D Penalty Example:
Let’s say that your Medicare Initial Enrollment Period came to a close at the end of June in 2020 and you did not join Part D or have any other source of creditable drug coverage.
Instead, you waited until the following year (2021) to join during the Open Enrollment Period.
So, your drug coverage takes effect January 1st of 2022 and your Part D late enrollment penalty is $6.00.
Breakdown:
18 months without coverage (July 2020 – December 2021)
1% for each month without coverage (1% x 18 = 18%)
18% times the 2022 national base beneficiary premium of $33.37
$6.01 rounded to the nearest $.10 = $6.00
You will owe an additional $6.00 for your 2021 Part D premium.
Part D Penalty Example Continued:
Because the national base beneficiary premium tends to change from year to year, your 2023 Part D late enrollment penalty may change in amount from 2022.
Medicare recalculates your penalty using the same count for months without coverage while swapping in the new 2023 national base beneficiary premium of $32.74.
Because the change in the national base beneficiary premium was minimal, your Part D late enrollment penalty will change to $5.90 after rounding.
Breakdown:
18 months without coverage (July 2020 – December 2021)
1% for each month without coverage (1% x 18 = 18%)
18% times the 2023 national base beneficiary premium of $32.74
$5.89 rounded to the nearest $.10 = $5.90
You will owe an additional $5.90 for your 2023 Part D premium.
Note: If you receive Extra Help to pay for your Medicare coverage, you will not be subject to a Part D late enrollment penalty.
What Does Medicare Part D Cover?
Medicare Part D plans offer prescription drug coverage for both brand-name and generic drugs.
Any plan that provides this prescription drug coverage through Medicare Part D is required to offer the standard level of coverage determined by Medicare.
However, the specific drugs covered by a Part D plan vary between plans. For this reason, it’s important that you ensure your prescription drugs are covered by the plan you choose.
Every Part D plan lists the prescription drugs that they cover, also known as a formulary.
The plan’s formulary is required to include at least two drug options in the most commonly prescribed categories. Part D plans tend to cover at least two drugs per category.
Note: Your Part D plan doesn’t cover drugs not listed on its formulary or drugs excluded by Medicare.
Also, keep in mind that Part D may not cover some prescription drugs if they’re already covered by Medicare Part A or Part B.
Your Part D Plan Formulary
Medicare Part D prescription drug plans typically have a list of the drugs they cover, known as a formulary.
Each plan gets to choose which of the drugs covered by Part D will make up their formulary.
As you browse different Part D plan offerings, you may notice that a given formulary does not include your specific drug.
If this occurs, most of the time there’s a drug available on the formulary similar to your specific drug.
In general, if you use the drugs on your plan’s formulary, you’ll save on costs.
If you have to use drugs not included on your plan’s formulary, you’ll end up paying full price rather than coinsurance or a copayment.
Note: If you and your doctor determine there are no suitable drug options available in your plan’s formulary that will work for your condition, you have the option of asking for an exception.
Formulary Tiers
It’s common for your plan’s formulary to place drugs in different “tiers.”
This practice allows for lower costs and each plan can divide its tiers in the way it sees fit.
Each tier in the formulary will cost a different amount.
Typically, drugs in lower tiers cost less than drugs in higher tiers. For example, generic drugs are commonly found in Tier 1 and carry the lowest copayment.
Whereas, non-preferred brand-name drugs are found in the higher Tier 3 and carry a higher copayment.
While drug plan tiers vary from plan to plan, here is an example of how those tiers would look in a hypothetical Medicare drug plan:
If your doctor thinks that you require a drug in a higher, more expensive tier rather than a similar drug that is available at a lower tier, you have the option of filing an exception and can ask your plan for a less expensive copayment.
Part D Plan Changes
Throughout the year, your drug plan can make changes to its formulary so long as it follows Medicare guidelines.
Plan changes often happen when drug therapies change, or when new drugs or medical information become available.
If your Part D plan meets certain requirements, it has the option of removing brand name drugs from its formulary and replacing it with a generic option.
Your plan also has the option of changing cost or coverage rules for brand name drugs when it adds new generic drugs to its formulary.
It’s also possible that a plan immediately removes drugs from its formulary if the FDA has determined them unsafe or if the drug manufacturer removes them from the market.
If it’s not an immediate change, such as the type listed above, your plan must notify you of any changes made during the year that will affect you.
Your plan must give you written notification at least 30 days prior to the change taking effect.
Also, at the time you request a refill, you’ll be provided written notice of the change and at least a month-long supply of the drug under the same plan conditions as before the change was made.
Part D Plan Generic Drugs
Generic drugs are classified as copies of brand-name drugs that use the same active ingredients as those of the brand-name.
Generic drugs must copy the brand-name drug in dosage form, strength, quality, performance characteristics, route of administration, intended use, and safety.
Additionally, it must prove to the FDA that it works in the same way as the brand-name drug.
In some cases, there might not be a generic drug alternative to a brand-name drug.
In this case, consult with your doctor and plan provider about your coverage, there may be a different generic drug option that will work just as well for you.
Prescription Drug Coverage Options
If you’re enrolled in Medicare, you have the option of adding prescription drug coverage.
There are two options that you can choose between for your prescription drug coverage.
1. Medicare Advantage Plan (Part C)
Medicare Advantage plans offer all of the coverage of Medicare Parts A and B, while often providing prescription drug coverage (Part D), as well.
Medicare Advantage plans that offer prescription drug coverage are sometimes referred to as “MA-PDs”.
You must be enrolled in both Medicare Parts A and B to enroll in a Medicare Advantage plan.
2. Medicare Part D Plan
Medicare Prescription Drug plans (Part D plans) are another way to add prescription drug coverage to your Original Medicare.
These prescription drug plans are sometimes referred to as “PDPs”.
You must be enrolled in Medicare Part A and/or Medicare Part B to enroll in a Medicare Part D plan.
Medicare Part D & Medigap
If you already have a Medigap plan that has prescription drug coverage, you cannot join a Medicare Part D plan.
If you have a Medigap plan that covers prescription drugs, you’ll need to inform your Medigap plan provider if you join a Medicare Part D plan.
You need to inform the provider, so that it can remove the prescription drug coverage from your Medigap plan and adjust your plan premium.
Note: Once prescription drug coverage is removed from your Medigap plan, you cannot get it back.
Creditable Drug Coverage
Each year your Medigap plan provider is required to notify you whether your plan’s prescription drug coverage is creditable.
If your Medigap plan has creditable prescription drug coverage, and you’re interested in joining a Medicare Part D plan, you can only do so during Open Enrollment (October 15 – December 7).
If your Medigap plan does not provide creditable prescription drug coverage, and you’re interested in joining a Medicare Part D plan, you may have to pay a late enrollment penalty when joining your Part D plan.
The late enrollment penalty will increase the amount of your monthly premium.
This penalty increases the longer you go without creditable prescription drug coverage and applies for as long as you have a Medicare Part D plan.
Can I Join a Part D Plan if I Have Medicare Advantage?
If you have a Medicare Advantage Plan with prescription drug coverage and you join a Medicare Part D plan, you’ll be disenrolled from your Medicare Advantage Plan.
Once disenrolled, you’ll revert back to Original Medicare coverage (along with your Part D plan).
If you’re interested in learning about how Medicare Part D works with other insurance coverage options, visit this helpful Medicare resource.
What If My Medicare Part D Plan is Ending?
While not commonplace, it’s possible that you receive notice that your Medicare Part D plan is ending.
If your plan is ending, you should have received written notification from your provider by early October detailing that your plan will be unavailable in the upcoming year.
Even though your plan is ending, your provider is still responsible for providing your plan coverage through the end of the year.
If your Part D plan is ending, there are two different methods by which you can enroll in a new plan: Open Enrollment or Special Enrollment. You can enroll in a new Part D plan during Open Enrollment (October 15 – December 7).
If you enroll during Open Enrollment your new plan’s coverage will begin on January 1 of the following year.
Additionally, because your Part D plan is ending, you’ll qualify for a Special Enrollment Period (December 8 – February 28).
If you join a new plan by the end of the year, your new coverage will begin on January 1 of the following year.
If you join a new plan in January, it takes effect on February 1. And if you join a new plan in February, it will take effect on March 1.
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