What are prescription drug plans for Medicare?

You have two overarching choices for prescription drug coverage in Medicare:

  • A Part D plan if you have Original Medicare.
  • Medicare Advantage from a private insurance company.

Original Medicare, which is Parts A and B, covers hospitalizations and physician services. However, it doesn’t cover prescription drugs. That’s where Part D comes in. Anyone with Original Medicare, anyone can get a Part D plan.

Private companies offer Part prescription drug plans, which were first introduced in 2006. Although the companies set the plans' cost and coverage, they must meet several government standards.

For example, they:

  • Must cover at least two drugs from specific prescription drug categories.
  • Must cover 95% of the cost of covered medications (together with Original Medicare) after you pay $7,400 in out-of-pocket costs for the year, leaving you to pay just 5% of your drug costs when you reach that catastrophic coverage level

You can sign up for a Part D plan when you first enroll in Medicare or you can switch plans during Medicare Annual Enrollment Period which runs from October 15 to December 7 for coverage starting January 1 of the next year. You may also qualify for a special enrollment period in certain circumstances, such as if you move or lose other coverage.

You aren't required to sign up for Part D when you enroll in Medicare. However, if you don't have "creditable coverage," you may have to pay a penalty when you sign up. Creditable coverage includes coverage from an employer or retiree plan that's comparable or better than Medicare's.

If you don't sign up for Part D within 63 days of losing creditable coverage, you'll have to pay a lifetime late penalty. The penalty equals 1% of the national average Part D premium for every month that you didn't have Part D or creditable coverage.

Most people have several Part D plan choices in their area. To find out what plans are available in your area, use the Medicare Plan Finder at https://www.medicare.gov/find-a-plan .

When choosing a plan, make sure the plan covers drugs you take and determine their pricing tier. For example, you may have to pay a $45 copay for preferred brand-name drugs or 40% of the cost of non-preferred brand-name drugs.

Also, find out if the plan has preferred pharmacies.

"Most, but not all, Part D plans have preferred pharmacies," says Cameron Giardini, co-owner of Giardini Medicare in Howell, MI.

Your copayments are usually lower at preferred pharmacies than they are at other pharmacies. For example, you may have a $4 copay for generic drugs at a preferred pharmacy but a $20 copay if you buy it at another pharmacy.

Some plans also have prior authorization requirements for more expensive drugs. Prior authorization requires your doctor to fill out a form explaining why you need to use that drug. They may also have step therapy requirements for some drugs, in which you must try a similar but less-expensive drug first if possible.

Medicare Part D vs. Medicare Advantage

Another way to get Medicare drug coverage is through a Medicare Advantage plan. Private insurers offer Medicare Advantage plans.

The private insurer provides hospitalization and physician services coverage instead of Original Medicare. Most Medicare Advantage plans also have prescription drug coverage. People with Medicare Advantage can’t get a Part D plan, so you’ll want to make sure a Medicare Advantage plan covers prescription drugs before signing up. If a consumer does sign up for an MA plan that does not have prescription drug coverage, they can enroll in Part D.

Medicare Advantage has become a more common way for people to get coverage. Nearly one half of Medicare beneficiaries have Medicare Advantage rather than Original Medicare. The number has been growing since the early 2000s.

When deciding between Part D and Medicare Advantage, you need to take a step back. Drug coverage is just one part of the Medicare Advantage coverage. You first need to decide whether you want to get your medical coverage from Original Medicare or through a Medicare Advantage plan and then compare how each plan covers your drugs.

If you have Original Medicare, you have to pay $170.10 per month for Part B in 2022.This premium covers doctor services and outpatient care and you'll also have some deductibles and copayments.

You also will sign up for Part A, which covers inpatient hospital care. Part A generally doesn't have a premium for most people (only people who paid less than 10 years’ worth of Social Security tax have to pay a Part A premium). However, Part A has a $1,556 deductible in 2022 and daily copayments if you’re hospitalized for more than 60 days.

Meanwhile, a Medicare Advantage plan, also called Part C, provides coverage for health care and almost always prescription drugs all in one plan. The premiums can be low and some plans even offer $0 premiums, in addition to the Part B premium. On the other hand, Medicare Advantage may have more out-of-pocket costs than if you went with Original Medicare, a Part D plan and added a supplemental Medigap plan that is only available to Original Medicare members.

Premiums for Original Medicare, Part D and Medigap together are generally higher than a Medicare Advantage plan.

You’ll want to run those costs. Find out more about Medicare costs below.

Another benefit of going with Original Medicare is that you’ll have a wider network provider (any doctor who accepts Medicare). Medicare Advantage has a limited network of providers. This could be a problem when you’re traveling. Some Medicare Advantage plans like HMOs only pay for out-of-network expenses in an emergency, but others like PPOs will charge you higher copayments or deductibles if you go out of network.

One plus about Medicare Advantage plans is that most offer additional coverages not found in Original Medicare, such as vision and dental care, hearing aids, gym memberships and transportation. Check the specific plan you are interested in to find out exactly what benefits may be included.

You can find the Medicare Advantage plans available in your area by using the Medicare Plan Finder. You can input your drugs and dosages and your general health condition to see how much your premiums plus out-of-pocket costs are likely to add up to for each plan during the year.

You can sign up for a Medicare Advantage plan when you enroll in Medicare or you may be eligible for a special enrollment period in some circumstances, too. You can also sign up for Medicare Advantage or switch plans during open enrollment each fall, which runs from October 15 to December 7 for coverage starting January 1.

How much does Medicare prescription drug coverage cost?

Part D premiums can vary a lot. In fact, premiums can vary significantly even within a state.

Plus, if your income is more than $91,000 if you're single or $182,000 for joint filers, you'll also have to pay a high-income surcharge on top of your Part D premiums.

Premiums are just one part of the cost. You’ll also want to compare how much you'd have to pay out-of-pocket for your medications. A plan with low premiums can end up costing more because of higher copays. The Plan Finder can help you estimate those costs for the year.

However, don’t just compare premiums. Out-of-pocket costs like deductibles play a vital role in health insurance expenses.

Also, compare the:

  • Cost sharing for your medications.
  • Costs and coverage details for your typical health care needs.
  • The portion of the costs you'd have to pay for major medical expenses.

You can compare all of the Part D and Medicare Advantage plans in your area by using the Medicare Plan Finder. You can also get help from your State Health Insurance Assistance Program (SHIP), which provides free counseling to help with Medicare decisions.

No matter what Medicare prescription drug plan you choose, it's a good idea to compare the coverage and costs each year during the open enrollment period -- even if your health status doesn't change.

"The plan may change the monthly premiums, medication tiers, deductible -- the entire plan can be different from one year to the next," says Giardini.

Find out more about Medicare costs.


  1. Medicare costs
  2. Medicare Advantage 2022 Spotlight: First Look
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