Medicare comes in three parts: Part A, Part B, and Part D. Part C is a private alternative to Parts A and B. Part A is free for most people on Medicare. It covers hospital and hospice care, as well as short-term nursing and home health care. Part B covers doctor visits and the types of medical services you would receive at those visits. Part D covers prescription drugs and can be added to Parts A and/or B.
Part B costs most people $170.10 per month in 2022. Part D, which can be added to Part B, is set to cost an average of $33 per month in 2022.
Here's what you need to know about Part D, and how much it will cost you.
- Medicare Part D covers prescription drugs. It can be added to Parts A and/or B, or you can receive prescription drug coverage through a Medicare Advantage Plan (Part C).
- You pay your portion of the monthly premium if you receive Part D coverage as part of Medicare. The cost varies, but the nationwide base is about $33 per month in 2022.
- Each plan will also have a copayment and coinsurance amount.
Sign Up as Soon as Possible
You can add Part D coverage to Medicare Parts A and/or B. Like Parts A and B (and most other insurance plans), plans generally come with a deductible. This is the amount you'll pay before the insurance begins paying a portion of costs. Just like Part B, you’ll probably pay a late enrollment penalty if you don’t sign up for prescription drug coverage when you’re first eligible unless one of two conditions applies:
- You have qualifying prescription drug coverage from another source, such as an employer's health plan
- You receive Extra Help from Medicare. Extra Help assists low-income recipients in paying the costs of their prescription drugs
Paths to Medicare Drug Coverage
Medicare Part D coverage is available through two different paths.
You can add Part D coverage to Medicare Parts A and/or B. Medicare has a plan finder to help you pick the coverage that fits your goals and budget. You can search by zip code, input the prescription drugs you take, and provide your local pharmacy, along with some other information. The plan finder will give you Part D coverage options, including cost.
Your other choice is to receive prescription drug coverage through a Medicare Advantage (Part C) or another Medicare health plan that offers prescription drug coverage as part of the plan.
Part C coverage costs vary, but they average about $19 a month in 2022, down from $21.22 in 2021. Plan C offers a better value than Parts A and B alone, if you're willing to go to in-network providers. Medicare leaves a lot of coverage gaps that may leave you with medical bills that you’re unable to pay. Most people enroll in Part C coverage to protect against these costly expenses.
Medicare Part D Cost
You will pay the monthly premium if you receive Part D coverage as part of Medicare. The cost varies depending on your income and the plan you choose, but the nationwide base premium is about $33 per month in 2022.
Like Part B and most other insurance plans, these plans generally come with a deductible. This is the amount you'll pay before the insurance begins paying a portion of costs. The highest annual deductible allowed by Medicare in 2022 for Part D is $480. Many plans come with a much smaller deductible, and some don’t have one.
Each plan will also have a copayment and coinsurance amount. A copayment is a fixed amount that you pay for your prescriptions. The copayment on generic drugs might be $5, while brand name drugs on certain tiers might require a $25 copayment. Higher tiers might require a larger copayment.
You might pay a coinsurance amount for drugs in the highest tiers of 25%, making your portion of the bill $100 if the prescription costs $400.
Some drugs could require copayment and coinsurance.
Part D is administered through private insurance companies. Each may place certain drugs in different tiers. You might pay higher out-of-pocket expenses for the same drug in a different plan.
The Coverage Gap
Once you and your plan have spent $4,430 on covered prescription drugs in 2022, you enter the coverage gap, or the "donut hole" as it's sometimes called. This is up from $4,130 in 2021.
The coverage gap is a temporary limit on what the plan will cover for drugs. You won’t enter a coverage gap if you receive Extra Help from Medicare, but most insurance plans do not cover the gap.
In 2022, 75% of the price of both branded and generic drugs are covered while you are in the coverage gap. Your out-of-pocket expenses are what will eventually move you out of the coverage gap, and most of what you pay while in the gap will count.
Some drug companies have signed an agreement with Medicare to offer discounts on brand-name drugs to people in the coverage gap.
How to Shop for Coverage
Sometimes cheaper is better, but that's typically not the case with Medicare Part D. The most important thing to check is the plan’s coverage for the drugs you currently take. Your out-of-pocket expenses will more than negate the money you saved on the premiums if a low-cost plan doesn’t cover your drugs.
Look at the benefits, and compare them to what you would pay out of pocket. Also look at the costs before, during, and after the donut hole. Look at the premium once you calculate how much you would pay compared to what the plan would pay. Sometimes a higher premium will cost you less because your out-of-pocket expenses are lower.