Choosing best Medicare Part D plan

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Most people age 65 and older take prescription drugs, and the full cost of medications can easily be hundreds — or even thousands — of dollars per year. Original Medicare, which is Parts A and B, generally doesn’t cover prescription drugs. Instead, you can buy Medicare Part D prescription drug coverage from a private insurer to help with those expenses.

Part D plans must meet some government standards, including:

It covers at least two drugs from certain prescription drug categories.
It caps, as of July 2023, the cost of Part D-covered insulin (a one month supply) at $35 with no deductible.
In addition, according to CMS, if you have limited income and resources, you may be able to get Extra Help to pay your plan premiums and other drug costs. If you qualify, you won’t have to pay the Part D late enrollment penalty.

Beyond that, each Medicare Part D plan has different premiums, co-payments and lists of covered drugs (called the “formulary”). Most states have 25 to 30 plan options. So, you may have several Part D options in your area. The best choice for you depends on the price, coverage and the drugs you take.

Key Takeaways

Original Medicare, which is Part A and Part B, doesn’t offer prescription drug benefits. Instead, those with Original Medicare may opt to get a separate Medicare Part D plan through a private company to get prescription drug benefits.
Most Part D plans have five pricing tiers, including generics, brand-name medications, and specialty drugs.
When choosing a Medicare Part D plan, it’s wise to consider your annual medication costs and the drugs that you take. With that information, you can narrow down your choices and make sure a plan you’re considering provides enough coverage for your medication costs.

How much does Medicare Part D cost?

The premiums can vary a lot by plan, so it’s wise to shop around and compare the offerings. Plus, people with high incomes pay more. If your modified adjusted gross income in 2024 is more than $103,000 if you file taxes individually (or more than $206,000 if married filing jointly), you have to pay extra for Part D benefits.

These surcharges are generally based on your last income-tax return on file unless you’ve experienced certain life-changing events since then. See Medicare Premiums: Rules for Higher-Income Beneficiaries for more information.

But premiums are only part of the cost. Most plans have a deductible — the maximum deductible is $545 in 2024, although many plans have lower deductibles. The deductible is what you spend on prescription drugs before your plan pays its portion. In some plans that do have a deductible, drugs on some tiers are covered before the deductible.

You also have to pay copayments for your drugs. Those costs vary depending on the plan’s pricing tier for your medications. Some plans with low premiums may have high copayments for your prescriptions, which could make that plan more expensive than other options by the end of the year.

According to CMS, “Starting January 1, 2024, once your out-of-pocket spending reaches $8,000 (including certain payments made by other people or entities, including Medicare’s Extra Help program, on your behalf), you’ll automatically get ‘catastrophic coverage.’ This means you won’t have to pay a copayment or coinsurance for covered Part D drugs for the rest of the calendar year.”

Alternative to Medicare Part D

You have another option than Original Medicare. Medicare Advantage plans are offered by private insurers, which combine the hospital and medical coverages found in Parts A and B. Medicare Advantage plans also often have prescription drug benefits.

So, instead of getting Original Medicare and adding a Part D policy, you could get a Medicare Advantage plan that combines all three coverage types.

Find out more about Medicare Advantage.

When can you choose Medicare Part D plans?

You can sign up for Medicare Part D when you first sign up for Medicare — within three months before and three months after the month you turn age 65. According to CMS, if your birthday is on the first of the month, the initial enrollment period starts, “four months before you turn 65 and ends two months after the month you turn 65.”

But you don’t have to sign up then if you have other “creditable” drug coverage. For instance, you may have drug coverage through an employer or retiree plan that’s comparable or better than Medicare’s.

You have up to 63 days after losing that coverage to enroll in Part D. If you go beyond 63 days without creditable coverage:

You’ll have to pay a late enrollment penalty when you sign up for Part D.
The late penalty equals 1% of the national base beneficiary premium for every month that you didn’t have Part D or creditable coverage. 
The penalty lasts for as long as you have Medicare drug coverage.

You can also switch Medicare Part D plans during the Annual Enrollment Period every fall, which runs from October. 15 to December 7, for coverage to start January 1. And you can also change plans outside of the Annual Enrollment Period if you have a qualifying life event that lets you have a special enrollment period. For instance, if you move, you may be eligible for a special enrollment period to change your Part D coverage.

It’s important to review your coverage during open enrollment. Plans can make significant changes to their costs and coverage from year to year.

“A big issue is keeping your coverage on auto-pilot,” says Cameron Giardini, co-owner of Giardini Medicare in Howell, MI, which helps people with Medicare issues and supplemental coverage. “Their plan may change the monthly premium, medication tiers, deductible — really, the entire plan can be different from one year to the next.”

Your plan must send you an Annual Notice of Change in September, alerting you to changes in the plan’s costs and coverage for the next year.

But even if your plan isn’t making major changes, it’s still a good idea to compare plans during open enrollment. Other plans may have entered the market or changed their coverage and pricing and may now be a better deal for you. And you should definitely shop around again if your medications changed over the past year. The plan with the best deal in the past may not have the best coverage for your new medications.

You can use the Medicare Plan Finder to compare all of the options in your area during open enrollment. You can also get help from your State Health Insurance Assistance Program (find contact information for your state at www.shiptacenter.org, which usually runs seminars about choosing a plan in the fall and can also provide free counseling and assistance.

How to pick the best Medicare Part D plan for you

The biggest mistake when choosing a Part D plan is to focus only on premiums. If you don’t take any medications now, selecting a low-premium plan can be a good strategy. But if you take medications, see whether the drugs you take are covered on the plan’s formulary and to find out how much you’d need to pay in co-payments.

Also, find out whether the plan has any medication restrictions, including:

Step therapy, which only covers certain drugs if you’ve tried other less-expensive drugs first.
Prior authorization, which requires your doctor to submit documentation explaining why you need to use that specific drug.

You’ll additionally want to find out whether the plan has a preferred pharmacy. Most plans have partnered with national pharmacy chains over the past few years and offer much lower co-payments at preferred pharmacies than at other network pharmacies.

Some people opt to choose the Part D plan offered by the same company where they have Medigap coverage, without shopping around and comparing overall costs.

“Just because you use one company for Medigap doesn’t mean they should use it for Part D,” says Giardini.

In fact, the best Part D plan may be different for you and your spouse depending on your medications (but be careful if your plans have other preferred pharmacies).

Source:

Medicare.gov. “Costs.” Accessed October 2023.

Medicare.gov. “Costs for Medicare drug coverage.” Accessed October 2023.

Medicare.gov. “Yearly deductible for drug plans” Accessed October 2023.

Medicare.gov. “When does Medicare coverage start.” Accessed October 2023.

Medicare.gov. “Catastrophic coverage.” Accessed October 2023.

Disclaimer:

Insure.com is not affiliated with or endorsed by the government or Federal Medicare program. Plans are insured or covered by a Medicare Advantage (HMO, PPO, and PFFS) organization with a Medicare contract and/or a Medicare-approved Part D sponsor. Enrollment in the plan depends on the plan’s contract renewal with Medicare Enrollment in a plan may be limited to certain times of the year unless you qualify for a Special Enrollment Period or you are in your Medicare Initial Enrollment Period. We do not offer every plan available in your area. Currently we represent 10 organizations which offer 100 products in your area. Please contact Medicare.gov, 1800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options. Not all plans offer all of these benefits. Benefits and availability may vary by carrier and location. Limitations and exclusions may apply. Every year, Medicare evaluates plans based on a 5-star rating system

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Kimberly Lankford

Contributing Researcher

Kimberly Lankford has been a financial journalist for more than 20 years. She received the personal finance Best in Business Award from the Society of American Business Editors and Writers. She also has written three books: “The Insurance Maze: How You Can Save Money on Insurance – and Still Get the Coverage You Need” “Rescue Your Financial Life,” and “Ask Kim for Money Smart Solutions.”