Medicare Part D is prescription drug coverage for Medicare. If you have traditional Medicare, you can purchase a Part D plan from a private insurance company. The average monthly cost for Medicare Part D in 2019 was $39.63.

There are several factors that determine what you pay for Medicare Part D. Keep reading to find out more about Medicare prescription drug coverage and what it may cost.

Launched in 2006, Part D is Medicare’s prescription drug coverage. The goals for Medicare prescription drug plans is to decrease costs for people older than age 65. According to an article in the Journal of the American Geriatrics Society, Medicare Part D increased prescription drug use by 13 percent and decreased patient costs by 18 percent in the first six years coverage was offered.

If you are older than age 65, you are legally required to have some form of prescription drug coverage. You can buy it from a company that offers Medicare Part D, receive drug coverage from a Medicare Advantage plan, or have prescription drug coverage from a private health plan that meets Medicare coverage requirements.

A number of companies offer prescription drug plans. According to the Kaiser Family Foundation, UnitedHealth, Humana, and CVS Health cover an estimated 60 percent of beneficiaries enrolled in Medicare Part D for 2019.

Medicare Part D costs vary based on your plan and your income.

Plan choice

Private insurance companies offer Part D plans and a variety of plans are available. You can compare plans and companies to find the plan that best meets your needs.

According to the Kaiser Family Foundation, the average cost in 2019 for a standalone Part D prescription drug plan was $39.63. If a person has Medicare Advantage, their prescription drug coverage is included in their plan’s premium.

Plan cost can vary based on the number of covered drugs, including what a person pays for generic and brand-name drugs.

Some monthly premium examples from 2019 for the most popular standalone Part D plans include:

  • SilverScript Choice (the most common Part D plan): $31
  • AARP MedicareRx Preferred: $75
  • Humana Walmart Rx Plan: $28
  • Humana Preferred Rx Plan: $31
  • AARP MedicareRx Saver Plus: $34

The monthly premium isn’t the only cost you could have related to a prescription drug. You may have to pay an annual deductible as well as a copayment or coinsurance for certain drugs (usually name-brand, more expensive drugs). Having Part D insurance can help cut down on much of these costs, but you will likely still have to pay some amount for name-brand prescription medications.

Income

If your modified adjusted gross income is higher than a certain amount, you may have to pay an extra monthly premium. Medicare calls this an income-related monthly adjustment amount or IRMAA. Medicare calculates this amount based on your tax return from two years ago.

If you make $87,000 or less as an individual or $174,000 or less as a joint tax return, you don’t have to pay a IRMAA. The highest IRMAA, $76.40 per month, is for an individual who makes $500,000 or above or a joint tax return of $750,000.

When you are shopping for a Medicare Part D plan, the plan will provide you with a list of covered medications. Medicare requires a drug company to cover at least two drugs in the most-prescribed drug categories.

The company will usually place the medications in “tiers” or levels. Here’s an example of how tiers usually work:

  • tier 1: most generic prescription drugs are on this tier, and you usually pay the least for these
  • tier 2: some brand-name prescription drugs are on this list, and you will have a “medium” copayment for these
  • tier 3: brand-name prescription drugs that aren’t as preferred as tier 2 drugs, and you will have a higher copayment than tier 2 for these
  • specialty: these are high-cost, name-brand drugs that you will pay the most for

However, some companies may order their tiers slightly differently.

If you are considering a Medicare prescription plan, it’s a good idea to make a list of medications you take. You can review a potential plan’s list of covered medications, called a formulary, to see how many of your drugs are there. You can also talk to your doctor to see if they can prescribe less expensive alternative medications in the same drug class.

You can enroll in Medicare Part D during your Initial Enrollment Period (IEP). This is the same as when you qualify for Medicare in general, which is 3 months before your 65th birthday, your 65th birthday month, and 3 months after your 65th birthday.

However, some areas don’t have Medicare Part D because there is no insurance company in that location. However, you would qualify for Part D if you moved into an area that has Part D coverage.

Some people may qualify for Medicare Part D at an earlier age if they have medical conditions such as amyotrophic lateral sclerosis (ALS), end stage renal disease (ESRD), or a disability that qualifies for Social Security disability.

Deadlines for enrolling in Medicare Part D
  • 3 months before your birthday to the 3 months after: your Initial Enrollment Period for Medicare
  • October 15 to December 7: open enrollment period for Medicare or when you can make changes to your current Part D plan
  • December 8 to November 30 of the following year: the 5-star Special Election Period during which you can enroll in a Medicare prescription drug plan that has a 5-star rating (the highest rating for quality).
  • January 1 through March 31: the time period you can enroll in Medicare Part D if you have Medicare Advantage, but wish to switch to original Medicare.

You may owe a Medicare Part D late enrollment penalty if you do not have any form of prescription drug coverage for 63 days in a row after your IEP. You will be required to pay this penalty for the rest of your life.

The Medicare Part D late enrollment penalty you must pay depends on how long you did not have any form of prescription drug coverage. The longer without coverage, the higher the penalty.

To calculate a late enrollment penalty:

  • Count the number of months you didn’t have prescription drug coverage.
  • Multiply this number of months by 1 percent.
  • Multiply the percentage by the national base beneficiary premium ($32.74 for 2020).
  • Round the result to the nearest $0.10.
  • This is the number you will pay each month in addition to your monthly drug coverage premium.

Here’s an example. Say you didn’t have prescription drug coverage for 10 months. This will be 10 percent of the national base beneficiary premium or $3.27. Rounded up to the nearest tenth, this is $3.30 extra per month.

It’s possible the late enrollment cost could increase with each year if Medicare changes the national base beneficiary premium.

If you receive a notification you’re being charged for prescription drug coverage, and you think it’s in error, you can apply for a “reconsideration.” Your drug plan will send information on how to apply for this, but you must do so within 60 days from when you received a letter notifying you of the late enrollment penalty.

Medicare Part D plans have made prescription medications more affordable. If you or a loved one is older than age 65, you are required to have prescription drug coverage. If you do not sign up during your enrollment period, you could face permanent penalties.