Medicare beneficiaries can get prescription drug coverage through Medicare Part D. While the plan is optional, enrollees with high medication expenses will find significant savings with prescription drug coverage, especially with new cost-saving measures introduced for 2025.
It’s essential to understand your options before the Medicare Open Enrollment period ends. If you don’t enroll when you’re first eligible, you may be charged a late-enrollment penalty. Plus, the sooner you enroll, the sooner you can start enjoying the benefits of coverage and the financial protection it offers.
Open enrollment for Medicare Part D in 2025 begins on October 15, 2024, and ends on December 7, 2024.
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What is Medicare Part D?
Medicare Part D is an optional benefit offered to all Medicare beneficiaries. The program provides prescription drug coverage and offers enrollees a discount on medications. New enhancements for 2025 include the introduction of a $2,000 cap on annual out-of-pocket drug costs, part of the Inflation Reduction Act, making drug coverage even more affordable. (cms)
Medicare prescription drug coverage is available in two ways:
- If you have Original Medicare, you can get coverage by enrolling in a stand-alone Medicare Prescription Drug Plan.
- If you have Medicare Advantage (Medicare Part C), you can get prescription drug coverage by enrolling in a Medicare Advantage Prescription Drug plan.
What Does Medicare Part D Cover?
Whether you get Medicare Part D as a stand-alone plan or bundled with a Medicare Advantage plan, the coverage of medications varies slightly between plans. However, all Medicare Part D plans must follow federal guidelines to cover essential prescription drugs.
The new enhancements for 2025 ensure that all beneficiaries benefit from the $2,000 out-of-pocket maximum on prescription drugs. Additionally, Part D plans now offer the Medicare Prescription Payment Plan, allowing you to spread out-of-pocket costs across monthly payments instead of paying all at once. This option will be available beginning January 1, 2025. (cms)
List of Prescription Drugs Covered by Part D
When you enroll in a prescription drug plan, you want to ensure the medication you take is included in the coverage. Each Medicare Part D plan has its own list of covered prescription drugs (the formulary).
The insurer’s formulary includes both brand-name prescription drugs and generic drugs. In addition, at least two drugs in the most commonly prescribed categories are included in the formulary to help people with different medical conditions access the medication they need.
The formulary might not include your specific medication; however, a similar drug is available in most cases. Suppose you or your prescriber believes none of the drugs included in the formulary match your condition. In that case, you can apply for an exception and possibly get your medication included in the coverage.
Generic Drugs Covered by Part D
Generic drugs are copies of brand-name drugs and are the same in terms of dosage, strength, intended use, consumption, and quality. Sometimes, there may not be a generic drug for you to take in place of your brand-name drug. In which case, talk to your doctor to see if there is another generic drug that will work just as well.
Prescription Drug Tiers
Medicare Part D uses a tiered formulary system to determine how much they will pay. The tiers range from low cost, which includes lower-cost brand-name or affordable generic drugs, to high-cost tiers, including more expensive medications.
Therefore, some Medicare recipients may pay more than others on a certain plan, or may choose to select a more expensive but comprehensive plan, depending on the type of prescription they need.
An example of an insurer’s prescription drug tiers:
- Tier 1: The lowest copayment with the most generic prescription drugs.
- Tier 2: Mid-range copayment with brand-name prescription drugs included on the formulary list.
- Tier 3: Higher copayment with brand-name prescription drugs not included on the formulary list.
- Specialty tier: The highest copayment with the most expensive prescription drugs.
Suppose your drug is in a higher tier and your doctor doesn’t advise you to take a similar medication on a lower tier. In that case, it is possible to apply for an exception and get the drug included on a lower-priced tier.
Am I Eligible for Medicare Part D?
You are eligible for Medicare prescription drug coverage if:
- You’re enrolled in Medicare Part A and/or Part B
- You live in the service area of a Medicare plan that includes prescription drug coverage.
When Can I Enroll in Medicare Part D?
Suppose you are eligible for Medicare Part D. In that case, there are time frames during which you can enroll in a stand-alone Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan:
- The Initial Enrollment Period is your earliest opportunity to enroll, starting three months before you turn 65.
- The Annual Election Period is your annual opportunity to enroll or make changes to your Medicare Part D coverage (October 15 to December 7). During this time, you can enroll in a Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan for the first time, switch plans, or disenroll from your plan.
- If you have a qualifying life event, you can enroll during a Special Election Period. Examples of qualifying events include moving outside your current plan’s service area, losing Medicaid eligibility, or moving into a nursing home.
Late Enrollment Penalty
Even if you’re not taking prescription medications right now, it’s a good idea to enroll in Medicare Part D straight away.
The first opportunity to enroll in Medicare Part D is once you have Medicare Part A and/or Part B, which is possible three months before your birthday month and three months after. If you don’t enroll in Medicare Part D during this period, you could face a late-enrollment penalty that is permanently added to your premiums when you enroll.
Medicare Advantage & Part D Premiums for 2025
The average monthly premium for Medicare Advantage plans (including those that provide prescription drug coverage and Special Needs Plans) is projected to decrease from $18.23 in 2024 to $17.00 in 2025. Medicare Advantage plans typically bundle Part A, Part B, and prescription drug coverage together, often including additional benefits like hearing, dental, and vision coverage.
For stand-alone Part D plans, the average total premium is projected to decrease from $41.63 in 2024 to $40.00 in 2025. For people with Medicare Advantage Prescription Drug plans, after applying rebate dollars, the average Part D premium will decrease from $15.56 in 2024 to $13.50 in 2025. (cms)
Copayments & Coinsurance
Most Medicare Part D plans require enrollees to pay a copayment or coinsurance on prescription drugs; this amount will depend on the plan you choose and the type of medication you are buying.
A copayment is a fixed amount of money. For example, a $5 fee on low-tier prescriptions and perhaps $40 and above for higher-tier medications. Coinsurance is a percentage of the cost; for example, a 20% fee on all prescription drugs would cost you $70 for a $350 prescription.
Part D plans sometimes require coinsurance, but at other times they may need a copayment. Before you enroll in a plan, check what costs you will be required to pay for your current medications.
Medicare Part D: No More Donut Hole in 2025
Starting in 2025, the Medicare Part D coverage gap, commonly referred to as the donut hole, will be eliminated. Previously, enrollees had to pay 25% of their prescription drug costs after reaching a certain spending threshold, until they hit catastrophic coverage. However, this phase will no longer exist due to changes under the Inflation Reduction Act (KFF) (AMCP).
In 2025, Part D will include:
- A $590 deductible for standard plans, after which you will pay 25% of the cost of your covered medications during the initial coverage phase.
- Once your out-of-pocket costs reach $2,000, you will no longer have to pay anything for your covered medications for the rest of the year. (KFF)
This redesigned structure simplifies Part D coverage, removing the donut hole and providing more predictable out-of-pocket costs for Medicare beneficiaries. The new system will help limit the financial burden for those with high prescription drug needs.
Applying for Medicare Part D
Finding the right Medicare Part D plan is all about striking the perfect balance between premiums, out-of-pocket costs, and star rating. Every year, Medicare evaluates plans based on a 5-star rating system. If you would like a licensed agent to help find the best prescription drug coverage in your area, get in touch with us.
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