Medicare Part D is a prescription drug coverage program offered through private insurance carriers to help you pay for your medications. It’s optional and offered to everyone with Medicare.
The key is to choose a plan that covers your specific medications and meets your budgetary needs, as there are many different Part D plans available with varying coverage and costs.
To get Part D coverage, you must enroll in a standalone Part D prescription drug plan or choose a Medicare Advantage plan (Part C) that includes prescription drug coverage. You typically enroll when you first become eligible for Medicare upon turning 65.
Every fall, Medicare beneficiaries have the opportunity to review and change their Medicare Part D drug plan. This is known as the Annual Election Period, or AEP. This year, the AEP for 2024 plans runs from Oct. 15 to Dec. 7. The plan you chose during this period will become effective Jan. 1, 2024.
Why you should review your plan
According to statistics from the Kaiser Family Foundation, 7 out of 10 Medicare beneficiaries do not review their drug plan during the election period. It is essential to review your drug plan each year during the AEP to ensure you’re getting the most from your drug plan, particularly when it comes to your maintenance medications.
Depending on where you live, you could have your choice of more than 25 Medicare Part D drug plans, each with varying monthly premiums and copays for maintenance medications.
Each beneficiary’s individual maintenance medications are different, so there is not a one-size-fits-all solution. Researching the different plans and comparing costs for your meds at your pharmacy of choice will help ensure you get the best value. Also, each year plans change – a medication that is covered one year may not be included in the next year’s plan.
If you do not elect to make any changes, you will stay on your current plan for the next calendar year and will need to wait until the next AEP to make changes. Your old plan will terminate automatically when your new plan becomes effective on Jan. 1.
Out-of-Pocket Costs
Your monthly premium is the amount you pay each month for your Part D plan. Premiums can vary depending on the plan and the medications it covers. Some plans may have no premium, while others have higher premiums for more comprehensive coverage.
In the deductible stage, you are responsible for 100% of your prescription drug costs until meeting your annual deductible, which is the amount you pay out of pocket for your prescriptions before the plan starts covering costs. In 2024, no Medicare drug plan may have an annual deductible more than $545, up from $505 in 2023. Some plans carry a zero-dollar deductible, and in many plans, the deductible may not apply to certain low-cost or generic drugs.
You enter the initial coverage stage once you have met your deductible. At this point, you pay for a portion of your prescription costs through a copay or coinsurance. Your Part D plan pays the rest for prescription drugs included on your plan’s formulary, or list of covered medications.
After you and your plan have together spent $5,030 on prescription drugs, you enter the coverage gap, sometimes referred to as the “donut hole.” Now you pay 25% of the cost for both generic and brand-name drugs, plus a small pharmacy dispensing fee of about $1-$3.
The catastrophic coverage stage kicks in after your True Out-of-Pocket (TrOOP) costs for prescription drugs reach $8,000 – including manufacturer discounts on brand-name drugs. At this point, you no longer face any cost-sharing for the rest of the year. Only 5% of beneficiaries reach the catastrophic coverage stage.
No matter what, everything resets on Jan. 1, and you return to the deductible stage at the beginning of the next year.
