What is Medicare Part D (Drug Plans)?

Medicare Part A is the first building block of your health insurance in retirement and is known as “Hospital Insurance”.

Part A Covers:

  • Inpatient care in hospitals.

  • Inpatient care in a skilled nursing facility.

  • Hospice care services.

  • Inpatient care in a Religious Non-medical Health Care Institution.

  • Home Health Services.

Part A may also cover (if admitted as an inpatient for a medically necessary need in a Medicare recognized health facility):

Each plan has its own list of covered drugs (called a formulary). Many Medicare Part D plans place drugs into different “tiers” on their formularies. Drugs in each tier have a different cost. Currently there are 6 “tiers”, they are;

  1. Tier 1: Generic Drugs

  2. Tier 2: Some Brand Name Drugs and some Generic Drugs

  3. Tier 3: All Brand Name Drugs

  4. Tier 4 and 5: medications that are chosen by the Insurance Companies to be not subject to any of the rules and regulations set forth by Medicare. Typically medications that contain a living organism or are injectable.

  5. Tier 6: specific to Diabetic medications

What are the costs of Part D:

Monthly premiums

The price of the premiums varies by residency, medications covered and by the insurance company that administers the plan.

If part of a Medicare Advantage Plan the monthly premium paid may include the amount for prescription drug coverage.

In 2021 the national average premium for a stand-alone Part D is $41.55 a month. Please note: Part D premium is also subjected to Medicare’s Income Related Monthly Adjustment Amount (IRMAA) that places a surcharge on top the current premium for retirees who happen to be earning too much income

Annual Deductibles

The national average Annual Deductible in 2021 is $399.10 while the maximum that can be charged is $445.00 When enrolling into a Part D plan there is always an option to select a plan that comes with a deductible or not.

Within most states, having a Part D plan with a deductible equates in a lower monthly premium, but please consider that the Annual Deductible must be met before the insurer will cover the cost of the medication.

Copayments or coinsurance

Set by the insurance company that administers the plan.

Co-pays are typically a dollar amount between $1.00 to $50.00 for each prescription filled depending on the tier of medication.

Co-insurance is a percentage of the overall cost of the prescription that is determined by the tier of medication. The percent ranges from 25% to 50% of the total cost of prescription.

Who is eligible for Part D coverage:


  • Available to those who are entitled to Medicare.

  • Must be 65 years-old or older.

  • You must no longer be covered by a creditable health insurance plan through an employer or spouse’s employer.

  • You must have enrolled into Medicare Part A and / or Part B.

  • You must live in the plan’s service area (can’t have a different state’s plan).

  • Those that live outside of the US and its territories as well as those incarcerated are NOT eligible.  When is enrollment to join Part D:

Open Enrollment:

Open enrollment is October 15 thru December 7 for those who are new to Medicare or who would like to make a change to any existing plan.

Initial Enrollment Period (IEP):

  • This is the period when you are first eligible for Medicare at age 65.

  • Available for those who are no longer covered through an employer or spouse’s employer and are at least 65 years-old.

  • NOTE: COBRA does NOT count as creditable health coverage.

Disenrollment Period

Jan 1 thru Feb 14 to leave a Medicare Advantage Plan & switch back to Original Medicare – may also join a Drug plan.

Special Enrollment Periods

  • Available to anyone who changes residency out of their coverage area.

  • Available if a creditable medication is no longer covered by the plan (the plan was cancelled by the provider).

  • Available to anyone who enters or leaves a Long-Term Care facility.

  • Available to anyone who qualifies for extra help or loses the status of needing extra help.

 5 Star Plans

Anyone can enroll at any point in a given year in any plan that is ranked by CMS as a 5 star.  What happens if enrollment is delayed or coverage is dropped:

If enrollment is delayed into Medicare Part D or coverage is dropped for any reason, a person may be subject to the Late Enrollment Penalty.

The Late Enrollment Penalty starts after 62 days of not having creditable prescription drug coverage either through Medicare or an employer plan.

The Late Enrollment Penalty is 1% of the National Base Premium ($33.06 a month in 2021) for every month not enrolled into a Part D Plan.

An example of the late enrollment penalty:

Person A went without coverage for 7 months. The penalty is 7 months multiplied by 1% and then multiplied again to National Base Premium of $33.06 or 7% x 35.02 = $2.31 a month.

NOTE: Late enrollment penalties never go away and will be reassessed each year based on that current year’s National Base Premium.

If you have further questions on Medicare Part D or any other Part of Medicare please contact:

  • The Centers for Medicare Services at 1-800-772-1213 (TTY: 1-800-325-0778).

  • Your local Social Security office – locations can be found https://www.ssa.gov/locator

  • MedicareWizard at https://MedicareWizard.biz

Source: The official website of the U.S. Government, Medicare.gov.