Medicare Part D

Medicare Part D is private insurance to help cover the cost of prescription medications. Part D plans provide coverage for both generic and brand name medications and can be added to Medicare Part A, B or Medicare Supplement Plans. It can also be included in a Medicare Advantage Plan. You can only be enrolled in one Part D plan at a time.

The Steps of Part D Drug Coverage

There are four steps of drug coverage during the calendar year. Your drug plan will send you statements on these amounts as you fill your prescription drugs.

Step 1 Annual Deductible

If your plan has a deductible, you will pay the full cost of the drug until you reach the deductible amount.

For 2024 no plan may exceed a deductible of $545. Once this is reached you will pay the cost-share for the covered drug.

Step 2 Initial Coverage

After you have met your deductible, you will pay your plan's copays or coinsurance for covered drugs. You are in this stage until your total yearly costs reach $5,030. The total yearly costs are the total drug costs paid by both

you and your plan.

Step 3 Coverage Gap

Also referred to as the Donut Hole, you will pay 25% of the plan's cost for covered Brand-Name and Generic Drugs until your costs total $8,000.

Step 4 Catastrophic Coverage

After your yearly costs reach $8,000 you will pay NOTHING for covered prescription drugs for the rest of the plan year.

The Medicare Part D Late Enrollment Penalty (LEP)

This is an amount that may be added to your monthly Part D premium. If you go without Part D or other creditable prescription drug coverage for a period of 63 days or do not enroll during your Initial Election Period (IEP), you may owe this penalty.

How Much is the Penalty?

Your penalty is 1% of the national base beneficiary premium for each month you were without creditable prescription drug coverage. In 2024 the national base premium is $34.70.

Case Study:

Bob did not enroll in a prescription drug plan after he retired in January 2023 since he did not take any medication and did not have any other creditable coverage. He will not be able to enroll in a plan until the Annual Election Period running October 15th to December 7th of 2023. His plan will become effective January 1, 2024.