For many people on Medicare, prescription medications are a daily reality. Understanding how Medicare covers prescription drugs—and how to make sense of your options—is an important part of getting the most out of your Medicare coverage.
Medicare Part D is the part of Medicare that covers prescription drugs. It is offered through private insurance companies approved by Medicare, and enrollment is voluntary, though there are financial reasons to sign up when you first become eligible.
How Part D Works
Medicare Part D plans are offered by private insurers and vary in terms of which drugs they cover, what you pay, and which pharmacies are in-network. Each plan has a formulary—a list of covered drugs—organized into tiers. Drugs in lower tiers typically cost less than drugs in higher tiers, and the cost-sharing structure (what you pay versus what the plan pays) depends on which tier your medication falls into.
It is important to review a plan’s formulary before enrolling, especially if you take specific prescription medications regularly. A plan that covers your medications at a favorable tier can make a meaningful difference in your annual out-of-pocket costs.
The Cost Structure of Part D
Part D plans generally involve a monthly premium, an annual deductible, and cost-sharing at the pharmacy. Cost-sharing can take the form of copays (a flat dollar amount) or coinsurance (a percentage of the drug’s cost).
Beginning in 2025, Medicare introduced a cap on out-of-pocket drug costs for Part D enrollees, which is a significant change that limits how much beneficiaries pay for covered medications in a given year. Speaking with a Medicare-focused insurance professional can help you understand how these changes affect your specific situation.
When to Enroll
When you first become eligible for Medicare, you have an Initial Enrollment Period during which you can sign up for a Part D plan without a late enrollment penalty. If you delay enrollment and do not have other creditable prescription drug coverage (such as through an employer plan), you may face a permanent premium penalty when you do enroll.
Annual Plan Changes
Medicare Part D plans can change their premiums, formularies, and cost structures from year to year. The Annual Enrollment Period—which runs from October 15 to December 7 each year—is the time to review your current plan and compare it to alternatives for the coming year.
If you are approaching Medicare eligibility or are currently enrolled and want to review your Part D coverage, The Harrin Group is here to help. Call us at (210) 323-5177 or start a quote request on our website.
