Parts of Medicare basics – Part D prescription drug coverage

The best place to start learning about Medicare is with the basics – with Parts A, B, C and D. As the final part of our Medicare Basics series, this article is about Medicare Part D.

Part D is known as Medicare prescription drug coverage, and you can get this in one of two ways – as a stand-alone Part D plan (PDP plan) or as part of a Medicare Advantage plan.

Part D covers certain prescription drugs. It does not cover drugs that are already covered by Medicare Parts A and B or that are excluded by Medicare. Part D also covers some vaccines, so let’s look at both items below.

The federal government requires that certain, common types of drugs be covered by Medicare Part D, but each individual plan may choose which specific drugs of each type it will cover. A plan may include both generic and brand-name drugs. The list of drugs a plan offers is called a formulary.

Because Part D and Medicare Advantage plans are provided by private insurers, any drugs not listed on the formulary will not be covered.

Medicare Part D plans will cover commercially available vaccines if they are (1) reasonable and necessary to prevent illness and (2) not already covered by either Medicare Part A or Part B. The vaccines a plan will cover will vary by provider. Vaccines should appear in the plan’s list of covered items, but sometimes a new preventive vaccine may not yet be covered. When that happens, you’ll want to ask the plan provider directly.

Part D costs will vary by plan, provider and location. Costs may include premiums, deductibles, copayments and coinsurance. The amount you pay will also change based on how a plan’s drug formulary is organized. Part D and Medicare Advantage plans organize their drug lists in a tiered format. Generally, the lower the tier, the lower the cost of the drug. For example, a generic drug will usually live on a lower tier and cost less than a brand-name drug.

Finally, if you enroll in Part D late, you will also have to also pay a Part D premium penalty, which is 1% of the average Part D premium for each month you delay enrollment. This penalty is paid as long as you have Part D.

There are two ways to get prescription drug coverage with Medicare. You can get a stand-alone Part D plan (also known as a PDP plan). Or, you can opt to get a Medicare Advantage plan that includes drug coverage.

Most people get Part D coverage when they turn 65 and enroll in Medicare for the first time. But when you plan to work past 65 and have employer health coverage, you may decide you’re going to delay enrolling in Medicare. Part D can get tricky here though. Why? Because even if you’re eligible to delay Medicare with employer coverage, if the drug coverage your employer provides isn’t considered creditable by Medicare (as good as, or better, than the standard Part D plan), then you can’t actually delay Part D without facing financial penalties.

Medicare expert, Phil Moeller walks through what you need to know and think about for Part D when working past 65 here.

As noted above, there are some things to consider when it comes to Medicare Part D, so take your time exploring plans.