Medicare Part D: Stand-Alone Prescription Drug Plans (PDPs)
Medicare Prescription Drug Plans (Part D) are designed to work with Medicare Supplement (Medigap) plans. Unlike Medicare Advantage Plans, which typically include drug coverage, Medigap plans do not—meaning individuals need a stand-alone Part D plan to cover prescription medications.
Prescription Drug Plans (PDPs) are offered by private insurance companies and must follow Medicare guidelines, but each plan decides which drugs it covers and how much they cost.
How Medicare Part D Works
Medicare Part D plans help cover the cost of prescription medications and are structured with tiers, deductibles, and pharmacy networks that affect your out-of-pocket expenses.
- Part D is separate from Original Medicare and Medigap.
- Each Part D plan has its own formulary (list of covered drugs).
- Costs vary based on the drug tier, deductible, and whether you use a preferred pharmacy.
- Plans must cover at least two medications per medical condition but can offer more.
- Most insurance companies offer mail-order pharmacy services, often as a preferred pharmacy option with additional cost savings.
Find a Plan That Covers Your Prescriptions
Understanding Prescription Drug Tiers
Most Part D plans classify medications into different tiers that determine your out-of-pocket costs. While Medicare requires every plan to cover at least two drugs per ailment, insurers decide which drugs go in which tier, meaning costs can vary significantly between plans and pharmacies.
| Tier | Drug Type | Typical Cost |
|---|---|---|
| Tier 1 | Preferred Generic Drugs | Lowest cost, $0-$10 copay |
| Tier 2 | Non-Preferred Generic Drugs | Slightly higher cost than Tier 1 |
| Tier 3 | Preferred Brand-Name Drugs | Moderate co-pays, generics with no competition may be here, usually subject to a deductible |
| Tier 4 | Non-Preferred Brand-Name Drugs | Higher-cost brand-name drugs, usually subject to a deductible |
| Tier 5 | Specialty Drugs | Highest-cost medications, usually for complex conditions, usually subject to a deductible |
| Tier 6 (if applicable) | Maintenance Generics | Some plans offer a special tier for long-term medications at reduced costs |
Key Takeaways About Drug Tiers
- A drug’s tier placement varies by insurance company. If one plan has a drug in Tier 2, another might list it in Tier 3. We never assume and always check.
- Not all drugs are covered by every plan. Just because one plan covers a prescription does not mean all will.
- Formularies (drug lists) change yearly. Even if a drug is covered this year, it may not be next year which is why having an annual review is so important.
Check Your Medications Against Part D Plans
Part D Deductibles & Coverage Stages
Most Medicare Prescription Drug Plans have a deductible that applies to Tiers 3, 4, and 5 before copays or coinsurance kick in.
Key Changes Starting January 2025
- The Donut Hole (Coverage Gap) has been eliminated due to the Inflation Reduction Act.
- All prescription drug costs are capped at a $2,000 yearly Maximum Out-Of-Pocket (MOOP) limit.
Coverage Stages in Part D
- Deductible Stage* You pay 100% of costs for Tiers 3, 4, and 5 until the deductible is met.
- Initial Coverage Stage You pay copays or coinsurance for covered drugs.
- Catastrophic Coverage Once you reach the $2,000 Maximum Out-Of-Pocket (MOOP), you pay nothing for covered medications for the rest of the year.
Important Cost Considerations
- Some plans have $0 deductibles on Tiers 1 & 2, but always check how the deductible applies to higher tiers.
- Plans reset every calendar year, meaning costs and coverage could change.
- Monthly Prescription Payment Plan (M3P) will spread your total prescription costs across the remaining fiscal year.
Learn More About Part D Deductibles & Costs
Preferred vs. Standard Pharmacies: What You Need to Know
Prescription Drug Plans use network pharmacies to control costs. Preferred pharmacies offer the lowest co-pays, while standard pharmacies may charge more.
- Preferred pharmacies = Lower copays and potential discounts.
- Standard pharmacies = Higher costs but still in-network.
- Out-of-network pharmacies = Full drug cost paid by the member.
- Mail-order pharmacies = Many insurance companies offer mail-order services as their preferred pharmacy, allowing members to receive 90 or 100-day supplies of medications at lower costs.
Key Tip: Always check if your pharmacy is a preferred location for your plan, filling prescriptions at a standard or out-of-network pharmacy can significantly increase costs.
Find a Part D Plan with Your Pharmacy in Network
Pros & Cons of Stand-Alone Prescription Drug Plans
Pros of Medicare Part D Plans
- Works with Medigap plans: Provides necessary drug coverage for those on Original Medicare with a supplement.
- Multiple plan options: Allows you to choose a plan that best matches your prescription needs.
- Access to nationwide pharmacy networks: Most plans include a variety of preferred retail and mail-order options.
- Annual opportunity to change plans: You can switch your Part D plan each year during the Annual Election Period (AEP).
- Prescription drug costs are capped at $2,000 per year: Eliminates excessive out-of-pocket spending on medications.
Cons of Medicare Part D Plans
- Coverage varies by plan: Not all insurers cover the same drugs, and tiers vary.
- Deductibles on higher-tier drugs: Must pay full price until the deductible is met.
- Pharmacy restrictions: Filling prescriptions at a non-preferred pharmacy can be more expensive.
Compare Part D Plans & Find the Best Fit
Common Myths About Medicare Part D
- “All Part D plans cover the same drugs.”
- Each plan has its own formulary, meaning some drugs may not be covered at all in certain plans.
- “All pharmacies charge the same price for medications.”
- Costs can vary significantly between preferred, standard, and out-of-network pharmacies.
- “Medicare covers all prescriptions automatically.”
- Medicare does not cover most outpatient prescription drugs, you must enroll in a Part D plan if you stay on Original Medicare or Medicare Supplement plans OR enroll in a Medicare Advantage plan that includes drug coverage.
- “If I don’t take prescriptions now, I can sign up later without penalty.”
- If you don’t enroll in Part D when first eligible and don’t have creditable drug coverage, you may face a lifetime late enrollment penalty.
- “Mail-order pharmacies aren’t worth considering.”
- Many insurance companies offer mail-order as a preferred pharmacy, often with significant savings for 90/100-day supplies.
Choosing the Right Part D Plan for You
Medicare Prescription Drug Plans are not one-size-fits-all. The best plan depends on:
- Your current medications: Ensure they are covered at the lowest tier possible.
- Pharmacy preferences: Make sure your preferred pharmacy is in-network.
- Total costs: Consider premiums, deductibles, and potential out-of-pocket expenses.
Our team can help you:
- Compare Part D plans to find the one that best covers your medications.
- Check preferred pharmacy networks to avoid overpaying.
- Ensure you enroll on time to avoid penalties.
