Medicare Part D Plans (Prescription Drugs)

Medicare Part D is the Medicare outpatient prescription drug program. Medicare Part D plans help cover the cost of outpatient prescription drugs (including many recommended shots and vaccines, like the Shingles shots). Medicare Part D plans are administered by private insurance companies that follow the rules set by Medicare.

To select a Medicare Part D plan, you will want to make sure that your drugs will be covered. Additionally, you will want to check the tiers and cost sharing levels of each of your drugs. Also, you need to check to see if there are restrictions on your drugs, like Prior Authorization, Step Therapy, or Quantity Limits. Finally, you must determine if your preferred pharmacy has competitive pricing for the Medicare Part D plan that is best for you.

There are four phases to Medicare Part D and all Medicare Part D plans follow them.

Deductible Phase- You are responsible for all costs of the negotiated medication price.
Initial Coverage Phase- You pay a co-pay or co-insurance until the retail costs of your medications reach $4,020

Coverage Gap (Donut Hole) Phase- You pay 25% of the costs of your medications until your out-of-pocket costs reach $6,200.

Catastrophic Coverage Phase- In this phase you pay 5% of the cost of your medication or a small co-pay whichever is greater.

Review Your Medicare Part D Plan Annually

Medicare Part D plans can and do change each year. So, you must review your plan options each year during the Annual Open Enrollment from October 15th through December 7th. Your current plan may not be the best plan for you again next year. If you do not select a new Medicare Part D plan, you will be re-enrolled automatically in your current plan. Most geographic areas have more than 20 Medicare Part D plans to choose from.

You should also review your choice of pharmacy. Some pharmacies have much better pricing for certain Medicare Part D plans. This also can change from year-to-year.


Prior Authorization requires you and/or your doctor or other prescriber to complete and submit a prior authorization form to the insurance company.

Step Therapy requires you to first try another, similar drug to treat your medical condition before the insurance company will cover your drug for that same condition. For example, if your doctor prescribes Drug X and Drug Y can also be used to treat your medical condition, the insurance company may require your doctor or other prescriber to prescribe Drug Y first. If Drug Y does not work for you, or your doctor or other prescriber indicates why you cannot use Drug Y, then the company will cover Drug X.

Quantity Limits limit the quantity of a drug that the insurance company will only cover during a certain time period. Quantity Limits are generally used as a safety precaution to prevent certain prescription drugs from being used excessively.

Payment Options

You have several options for paying your Medicare Part D premiums. Medicare Part D premiums can be taken out of your Social Security payments. This is the safest option because your Medicare Part D plan can be terminated by the insurance company if you miss premium payments.

You can also pay your Part D premiums by check or by automatic bank draft.

Late Enrollment Penalties

If you don’t sign up for a Medicare Part D plan when you are supposed to, you will be subject to a late enrollment penalty when you do sign up. The late enrollment penalty is not a one-time thing; it is applied to your Medicare Part D premium each year going forward.

If you are over 65 and don’t have a Medicare Part D plan, you must start Part D coverage:

  • Within two months after you lose your prescription drug credible coverage from your employer

  • During the Annual Enrollment Period from October 15th through December 7th for a January 1st start date.

Based on Modified Adjusted Gross Income as reported on your IRS tax return from two years ago (2018).

Income Levels Monthly
Individual Tax Return Joint Tax Return You Pay
$88,000 or less $176,000 or less Your Plan Premium
Above $88,000 up to $111,000 Above $176,000 up to $222,000 $12.30 +
Your Plan Premium
Above $111,000 up to $138,000 Above $222,000 up to $276,000 $31.80 +
Your Plan Premium
Above $138,000 up to $165,000 Above $276,000 up to $330,000 $51.20 +
Your Plan Premium
Above $165,000 and
less than $500,000
Above $330,000 and
less than $750,000
$70.70 +
Your Plan Premium
$500,000 or above $750,000 or above $77.10 +
Your Plan Premium