Prescription Drug Coverage

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What you need to know about Medicare Part D

Medicare Part D offers prescription drug coverage to anyone who is enrolled in Medicare. You can opt out of receiving this benefit, however if you choose not to sign up when you’re first eligible you will most likely pay a late enrollment penalty.

A few things about Medicare Part D:

When to Enroll

You’re eligible for Medicare Part D:

You may owe a late enrollment penalty if you go without a Medicare Prescription Drug Plan for any continuous period of 63 days or more after the Initial Enrollment Period is over. You will not have to pay the late enrollment penalty if you have other creditable prescription drug coverage or you get “Extra Help.”

The penalty itself is calculated by multiplying 1% of the national base beneficiary premium by the number of full months you were eligible for coverage but didn’t enroll.

Two Ways to Get Coverage

While Part D prescription drug coverage is only available through private health insurers, there are two ways you can receive your coverage:

If you have Medicare Parts A and B and don’t want to switch to a Medicare Advantage plan, then you’ll need to enroll in a stand-alone plan to avoid a late enrollment penalty (unless you have creditable coverage or are receiving Extra Help). While many Medicare Advantage plans offer prescription drug coverage as part of the plan, there are some that don’t.

Things to Consider when Choosing a Prescription Drug Plan

While price is always important, it’s not the only thing to consider when shopping for a prescription drug plan. You’ll want to keep these other factors in mind when making a decision:


Each Medicare Prescription Drug Plan has its own formulary, which is a list of the covered prescription drugs that the plan covers. If one or more of the prescription medications you take is not on a plan’s formulary, you may want to look elsewhere or talk to your doctor about alternative medications.


Most plans have a network of pharmacies they want you to use in order to get better prices. If you go to a pharmacy that’s not in your plan’s network, you may have to pay more for your prescriptions.

Mail Order

Some prescription drug plans can offer you a lower price if you get your medicine through a mail-order pharmacy. The plan may also require that you get a three-month supply at one time. In most cases, this isn’t a problem, but you may want to check with your doctor to make sure mail order is right for your medicines.

A Word about the Donut Hole

During your Medicare Prescription Drug Plan research, you’ve probably heard about the donut hole or coverage gap. The donut hole is a gap in coverage that occurs once you and your plan have met a pre-set spending limit for prescription drugs. When that limit is reached, $4,020 in 2020, you’re in the coverage gap and must pay for the cost of your prescription drugs. In 2020, once you’re in the coverage gap, you pay 25 percent of the cost for both brand-name and generic prescription drugs.

In 2020, you remain in the donut hole until your out-of-pocket costs reach $6,350. Once that happens, you enter catastrophic coverage and leave the coverage gap. From there, you pay only a small co-pay or co-insurance for the rest of the year.

Keep in mind that you may never reach the donut hole. What’s more, there are discounts available on both brand and generic prescription drugs for those who do reach the donut hole.