Read on to learn about the different ways your prescription drugs may be covered by Medicare.
What are the eligibility requirements for Medicare prescription coverage?
You’re eligible for Medicare if you’re a U.S. citizen or legal resident and:
- are 65 or older
- are under 65 and have received Social Security disability benefits for at least 2 years
- have end stage renal disease
- have Lou Gehrig’s disease (ALS)
If you meet Medicare eligibility requirements, you automatically become eligible for prescription coverage. Currently, around 72 percent of Americans have prescription drug coverage through Medicare Part D.
There are hundreds of Medicare health plans in most states, and it can be hard to figure out the best option. Even though finding the right coverage can save a lot, only about a third of Americans shop around plans to get the best coverage and cost.
The right plan for you depends on what medications you take, what you want to pay for out-of-pocket costs, including copays and deductibles, and what plans are available in your area.
There are four major parts to Medicare, and each offers some level of prescription coverage based on meeting individual plan requirements.
- Part A. This plan covers inpatient hospital stays including medications, hospice care, and skilled nursing care after a 3-day inpatient hospital stay. Part A may also cover some home health costs, including medications.
- Part B. This plan covers doctor visits, certain vaccines, medications given at a health facility or doctor’s office (like injections), and some oral cancer medications.
- Part C. Also known as Medicare Advantage (MA), these plans cover prescription costs through private HMO, PPO, private fee for service (PFFS), and special needs plan (SNP) choices. MA plans cover Part A and Part B costs, but hospice costs are covered by original Medicare. Most MA plans offer prescription drug coverage (Part D). If the plan doesn’t offer prescription drug coverage, you need to have separate Part D drug coverage or pay a penalty.
- Part D. About 43 million Americans have Part D coverage for outpatient prescription drugs. Part D plans cover most prescription drugs other than those covered by Part A or Part B.
Every Medicare Part D plan has a list of covered drugs, also called a formulary. Medicare requires all plans to cover at least two drugs from the most prescribed medication classes.
In addition, every plan must also cover all medications under these categories:
- HIV and AIDS
Most plans offer brand and generic options with different copays for each type. Each plan also has levels or tiers that different classes of medications fall under. The lower the tier, the less expensive the medication. Tier 1 is usually low-cost generic drugs.
Specialty or unique medications are in the highest tier and often require prior authorization and higher out-of-pocket costs.
If your medication isn’t covered under your plan and your doctor feels you need to take it, they can request an exception to cover it with supporting information. Each exception request is reviewed individually.
Medicare has a tool that lets you compare plans and costs. The tool lets you learn about available Part D plans, Part D with Medigap, and Medicare Advantage or Part C plans.
- your zip code
- your medications
- where you prefer to fill your medications (retail, mail order, other).
The resource tool then lists plans in your area with costs. Bear in mind that the first plan listed may not be the best option for you. Evaluate all the options before making your choice.
You can sort plans by:
- lowest monthly premium (this is the default that will pop up)
- lowest yearly deductible
- lowest drug plus premium cost
In general, out-of-pocket costs will vary based on:
- where you live
- the plan you choose
- medications you take
Plans decide how much you will pay on an annual basis for out-of-pocket costs like:
- Copays: These are set amounts you must pay for prescriptions, doctor visits, or other services as your share of costs.
- Deductibles: These are set amounts you need to pay to the service provider for medications or other health services before Medicare starts to pay.
- Coinsurance: This is usually a percent you pay as your share of costs after deductibles. This is higher for specialty drugs in higher tiers.
- Premium: This is a set amount you pay monthly to your insurance provider.
Tips for choosing a Medicare prescription drug plan
When selecting a Medicare plan (original Medicare or Medicare Advantage), consider these questions:
- What medications do you take and are they covered?
- What would your premiums and other out-of-pocket costs be?
- Is your doctor and pharmacy on the plan?
- If you live in more than one place during the year, does the plan have coverage?
- Do you need referrals to see specialists?
- Do you need extra coverage or help with out-of-pocket costs (Medigap)?
- Do you want bonus services, such as dental, vision, etc.?
You can find help choosing and enrolling in a Medicare plan by:
- calling 1-800-MEDICARE or visiting Medicare.gov
- calling the Social Security Administration at 800-772-1213 or visiting their website
- contacting your state’s health insurance assistance program (SHIP)
Medicare has several parts, and they all cover different categories of prescription drugs depending on meeting certain criteria. Part D has the broadest outpatient prescription coverage.
Most states have lots of plans to choose from depending on where you live. Costs vary based on your specific needs for coverage and individual factors like your income history.
It’s important to make sure the plan you choose suits your healthcare needs because you can’t change plans for 1 year.
Before making a final choice, visit the Medicare.gov or call the insurance provider to get more details on drug coverage.