Medicare Part D Plans: What You Should Know

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Medicare Part D plans are provided only through private insurance companies that have legal agreements with the government; it is never provided directly from the government. If you want Part D, you must choose Part D coverage that works with your Medicare health benefits.

If you have Original Medicare, choose a stand-alone Part D plan. Enrollment outside of your Open Enrollment is typically between Oct. 15th through Dec. 7th of each year, or Annual Enrollment Period (AEP).

If a Part D plan is not picked up when eligible you will be penalized 1% each month you could have had the plan, and didn’t. This penalty will be paid separately to Medicare if you enroll in a Part D plan in the future.

Medicare Part D Plans – Prescription Drugs

There are three phases of coverage to understand with Part D Medicare. It is important to understand these phases, particularly if you find yourself requiring a high cost for your prescribed medication.

The three phases are:

  1. Initial Coverage Phase
  2. Donut Hole Phase
  3. Catastrophic Coverage Phase

The Initial Coverage Phase is outlined with the Part D Medicare Plan chosen. This will consist of deductibles, co-pays, and coinsurance that the beneficiary will be required to pay and adhere to up to reaching the Initial Coverage Limit.

The Donut-Hole Phase starts once the initial coverage limit is reached. Then the beneficiary has to pay the full cost of his, or her, prescription drugs up until the total out-of-pocket expense is reached. However, starting in 2019 the donut hole, or coverage gap, will be starting to close. This is great news for Medicare beneficiaries.

The Catastrophic phase will continue from this point allowing the beneficiary to pay the outlined co-pays. This will reduce their cost a great deal until the next calendar year. Then everything will reset and start with the new outline of benefits for the current years plan.

For 2019 Medicare prescription drug changes, click here.

Additional FAQs

What is the Part D Penalty?

You might face an extra monthly fee if you wait until after your Initial Enrollment Period to enroll. This penalty discourages people from waiting until they need medications before enrolling. The penalty is added to your monthly premium.

The cost is determined on how long you went without creditable prescription drug coverage. It’s calculated by multiplying 1% of the national base beneficiary premium.

Is Medicare Part D Subsidized? 

All Medicare Part D plans are subsidized by the U.S. government. However, some seniors can qualify for a larger subsidy. They include people who must take particularly expensive medications. These individuals receive further assistance regardless of how much income they have.

Additionally, anyone with a relatively small income can acquire a more generous subsidy. This feature of the Part D program is known as Extra Help. It assists low-income beneficiaries with their prescription drug costs so that they don’t enter the coverage gap.

Used in Conjunction with Original Medicare

Medicare beneficiaries often use Medicare Part D plans in conjunction with the Original Medicare Part A coverage and B plans. Some people combine them with Medicare savings accounts or fee-for-service programs.

A number of retirees choose to enroll in Medicare Advantage plans that include drug coverage; these individuals don’t need Part D. In fact, you’ll automatically lose membership in a Medicare Advantage plan with drug coverage if you sign up for a separate prescription plan.

Preferred Pharmacy Network for Medicare Part D

Each plan has different rules about the pharmacies that you can use. All plans pay for medicines from traditional drug stores, and mail-order suppliers are covered by some insurers. You might only be able to use specific pharmacies on a list.

It’s important to choose a plan that allows you to purchase medications at a nearby drug store. Otherwise, you may need to travel long distances after being diagnosed with a medical condition.


Premiums vary depending on the specific plan that you select. Most of an insurer’s customers pay the same price, but an extra charge will apply if you have a high level of income. This type of fee is also added to the cost of Medicare Part B.

The government assists people who need help paying for Part D coverage. Depending on where you live, greater assistance may be available from state or federal agencies. You must meet income and asset requirements to qualify.

Drug Coverage

Every insurer maintains a unique list of drugs that it covers. Insurance companies often classify Medicare drug costs into multiple tiers. High-tier drugs typically have bigger co-pays. However, insurers make exceptions from time to time.

A company might pay for a larger portion of a drug’s cost if a doctor convinces them that less expensive medications couldn’t successfully treat your condition.

Physicians, pharmacists, and patients must follow various rules to maximize coverage. For instance, a Part D plan may limit you to purchasing a certain number of pills in each transaction. Insurers often require doctors to request permission before prescribing certain high-cost medicines.

A physician might be expected to prove that a drug is truly needed. Alternately, the insurance company could require you to try a less expensive drug before taking a more costly medication.


Every plan sets its own deductible. You won’t receive any coverage until you’ve spent this much money on covered prescription drugs in one year. The government caps deductibles at a certain amount; this limit changes from time to time. Insurers also charge co-pays. These costs differ tremendously depending on the plan that you choose.


The costs and features of a prescription drug plan aren’t set in stone. They have the potential to change on a yearly basis. Insurers may adjust their rates and decide to drop or start covering specific medications.

However, these companies must tell you about upcoming policy updates. A document called the “Annual Notice of Change” reveals any new policies that will take effect in January. This gives you an opportunity to switch plans if desired.


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