How to Compare Medicare Part D Plans

The list of prescription drugs covered under Part D depends on the type of plan you have. Each plan must provide a basic level of coverage that is set by Medicare.

Medicare Part D plans cover:

• A formulary of covered prescription drugs. Plans have their own formulary, or list of covered medications, and may change it during the year if they’re following Medicare guidelines. You’ll be notified if the formulary for your plan changes.
• Generic medications. Medicare prescription drug plans include both brand-name and generic prescription drugs.
• Different tiers of prescription drugs. Many Medicare prescription drug plans offer coverage in different tiers to lower the costs of medication. Tiers may be divided by generic or brand name, or by how preferred the prescription drug is.

In some cases, your provider may think it’s more beneficial to your health to prescribe you something in a higher tier rather than a similar drug in a lower tier. Prescription drugs in higher tiers are generally more expensive.

In this case, you can file an exception and ask your Medicare drug plan for a lower copayment.

The table below outlines the way formularies typically break down drug classes into a tier system.

Preferred vs. nonpreferred brand-name drugs

In general, generic prescription drugs are less expensive than brand-name drugs. Most Part D plans cover generic medications.

Generic versions of a prescription drug are not always available on the market, however. These may be considered “preferred brand name” because an alternative option isn’t available.

“Nonpreferred brand-name” prescription drugs, on the other hand, are medications that do have a comparable generic version available.

Since you won’t always know which drugs are generic, preferred brand name, or nonpreferred brand name, it’s important to ask the doctor who’s prescribing your medication whether it’s generic.

If it’s not generic, you can ask whether a generic version is available. This is especially important if you want to keep your drug costs low.

The costs of your prescription drug plan will depend on various factors including:

• the kinds of medications you need
• the plan you have
• if you go to a pharmacy in your plan’s network
• if the medications you need are on your plan’s formulary
• if you get Extra Help from Medicare

Some of the costs you’ll be responsible for may include:

• yearly deductibles
• monthly premiums
• copayments or coinsurance
• coverage gap costs
• Extra Help costs (if you get Extra Help)
• late enrollment penalties (if you pay them)

Deductibles and premiums may vary, depending on your Medicare prescription drug plan. Medicare dictates that yearly deductibles in 2022 can’t exceed $480.

Medicare Part D coverage gap

The coverage gap, also known as the “donut hole,” occurs when you and your Medicare prescription drug plan spend a certain amount of money in a year on prescription medications. The limit on spending in 2022 is $4,430.

The coverage gap includes the amount paid for your medications by your insurance company, your yearly deductible, and cost-sharing amounts for covered medications. It doesn’t include your monthly premium.

Once you have exceeded the spending limit, you’ll be responsible for a paying a certain percentage of additional prescription drug costs until you reach your out of pocket threshold.

Note that not everyone reaches the coverage gap every year.

It may help to consider these points when choosing a plan:

• Rules for switching plans. You can only switch drug plans during certain times and under certain conditions.
• Options for veterans. If you’re a veteran, TRICARE is the VA plan and is generally more cost-effective than a Medicare Part D plan.
• Employer-based prescription plans. Check to see what’s covered by your employer’s healthcare plans to determine out-of-pocket costs compared with a Part D plan.
• Medicare Advantage plans (MA). Some Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs) Medicare Advantage plans cover costs for parts A, B, and D, and they may also pay for dental and vision care. Remember, you’ll still have to enroll in parts A and B.
• Premiums and out-of-pocket costs can vary. You can compare plans to see which offers you the best coverage for your specific medication and healthcare needs. Medicare Advantage plans might have network doctors and pharmacies. Check to make sure your healthcare providers are on the plan.
• Medigap plans. Medigap (Medicare supplemental insurance) plans help pay for out-of-pocket costs. If you bought your plan before January 1, 2006, you might have prescription medication coverage, too. After this date, Medigap didn’t offer medication coverage.
• Medicaid. If you have Medicaid, when you become eligible for Medicare, you’ll be switched to a Part D plan to pay for your medications.

Questions to ask yourself

When deciding on a Part D plan, keep these points in mind:

• Are the medications I’m currently taking covered?
• What is the monthly cost of my medications on the plan?
• How much do medications that not covered on the plan cost?
• What are the out-of-pocket costs: copay, premium, and deductibles?
• Does the plan offer extra coverage for any high-cost drugs?
• Are there any coverage limits that might affect me?
• Do I have a choice of pharmacies?
• What if I live in more than one place during the year?
• Does the plan offer multistate coverage?
• Is there a mail-order option?
• What is the plan’s rating?
• Is there customer service with the plan?

To enroll in Part D, you must first be enrolled in a Medicare plan. You can get prescription drug coverage in two ways: with a Medicare prescription drug plan (Part D) or with a Medicare Advantage (Part C) plan.

If you’re enrolling in original Medicare (parts A and B) for the first time, you may benefit from also enrolling in Part D — even if you don’t currently need treatment.

If you don’t opt into Medicare Part D coverage when you initially sign up for Medicare, you’ll likely have to pay penalty fees to enroll at a later time. These fees generally last for as long as you have prescription drug coverage.

To enroll in Part D, you’ll first need to choose a Medicare drug plan. When choosing a plan, consider all medications you’re currently taking. Check the plan’s formulary to see if they’re covered and how much you’ll owe, including premiums and copays.

After you’ve chosen a plan, you can enroll in a few ways:

• Complete and mail in a paper enrollment form.
• Enroll using Medicare’s online plan finder tool.
• Call the plan provider to enroll over the phone.
• Call Medicare at 800-633-4227 to enroll over the phone.

You’ll need to provide your Medicare number and the date that your Part A and/or Part B coverage started. This information can be found on your Medicare card.

You may also get prescription drug coverage through a Medicare Advantage plan. Medicare Advantage plans offer the same coverage as original Medicare plans, and many offer prescription drug coverage as well.

If this is an option you’re interested in, you can search for Part C plans in your area that include prescription drug coverage here.

You have different options for getting prescription drug coverage under Medicare. You can talk to your healthcare provider or a local SHIP counselor about which Medicare plan might be best for you.

The plan you choose should be tailored to your health needs and budget. Medicare offers several resources to assist in paying for prescription drug coverage, such a tiered list of medications and programs like Extra Help.