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Medicare Part D

Enacted in 2003 as part of the Medicare Modernization Act and implemented in 2006, the Medicare Part D prescription drug program is a federal program designed to help Medicare beneficiaries afford their prescription medications.  Also known simply as  Part D, this prescription insurance is offered by private insurance companies that have contracts with the federal government.  Any consumer who is eligible for Original Medicare, Part A and/or Part B, and permanently resides in the service area of a Medicare Prescription Drug Plan, can sign-up for a Medicare Part D plan.  Part D coverage is optional.  However, if you don't enroll in Part D plan as soon as you're eligible and go more than 63 days without other creditable coverage, you will be subject to a late-enrollment penalty if you do enroll later on.  Since Part D plans are not available year-round (unless you have a qualifying special election period) delayed enrollment in Part D also means that you may run the risk of not being able to get coverage when you need it most: by having to wait until the next annual enrollment period (October 15-December 7) and new calendar year effective date of January 1.

Essentially there are two ways you can get Medicare Part D coverage:  either through a stand-alone Medicare Prescription Drug Plan (PDP)  if you prefer to keep Original Medicare,  or through a Medicare Advantage plan which usually combines the benefits of not only  Medicare Parts A and B,  but also Part D, into one plan, known as a MAPD plan. Premiums, formularies (the list of covered drugs), deductibles and  copays will differ from insurer-to-insurer and region-to-region, so it pays to shop around at least every few years to make sure your drug plan is meeting both your medical and financial needs. 

The Part D drug program is not without it's limitations, however, and one of those limitations is called the coverage gap or "Donut Hole."  Intended to slow the explosive growth of Medicare costs and drive smarter drug utilization decisions by insurance companies, physicians and patients, the "doughnut hole" phase of the Part D program is when your drug coverage transitions from fixed-dollar copay  or co-insurance amounts, to cost-share percentages based on the price of the drug.  The thresholds at which beneficiaries may enter and leave these various phases are outlined below and will change from year-to-year.  The good news is that due to the availability of low-cost generics most Americans never reach the doughnut hole, and, the government is working on addressing the Coverage Gap issue through the year 2020.  To learn more, please visit the Medicare bulletin "Closing the Coverage Gap: Medicare Prescription Drugs are Becoming More Affordable" "by clicking here.

For a more detailed breakdown and explanation of the Part D program's coverage stages--which are universal to all PDP or MAPD plans--please see below.  If you can't afford your prescription medications, please see the link to our Rx Assistance page to learn more about the available public & private sources of prescription assistance.

Stages of the Medicare Part D Program

Annual Deductibe

In this drug payment stage:

  • If your plan has a deductible--and not all plans do--you pay the total cost of your drugs until you reach the deductible amount set by your plan.
  • If your plan does not have a deductible, your coverage starts at the "initial coverage" stage in the next column.

Initial Coverage Stage

In this drug payment stage:

  • You pay a co-pay (fixed dollar amount) or co-insurance (percentage of the drug's total cost) and the plan pays the rest.
  • You stay in this stage until the value  of the medicine  that has been dispensed to you (not just what you have paid out of your own pocket) reaches $3,820 in 2019.  This threshold typically changes every year.

Coverage Gap (Doughnut Hole)

After your total drug costs reach $3,820 in 2019:

You pay:

  • 25% of the cost for brand name drugs in 2019
  • 37% of the cost for generic drugs in 2019

You stay in this stage until your out-of-pocket costs of what you've paid in co-pays, deductibles & co-insurance in the initial stage, and the cost-share you've paid in this stage, totals $5,100 in 2019.  Again, this threshold also changes every year, and these totals do not include your plan premium costs.

Catastrophic Coverage

After your total out-of-pocket costs reach $5,100 in 2019:

Catastrophic coverage kicks in and you pay only a nominal co-pay or co-insurance amount for the rest of the plan year.  Then, at the start of the new calendar year, the coverage phases start over again on January 1.