If we know one thing about prescription drugs, they can be expensive. But they’re also often critical to your health, whether they’re for the treatment of a condition or maintaining your current health status. That’s why the Medicare program offers prescription drug coverage.
In 2019, people in the United States spent an estimated $1,126 on prescription drugs. That’s double the per capita spending of the “comparable country” average. Since then, many prescription drugs, especially not those protected under the Inflation Reduction Act of 2022, have only increased in price.
Prescription drug coverage helps keep medications affordable for those with insurance. There are several different ways the Medicare program helps cover prescription drugs. Each has their own function and importance, and it’s worth knowing what is covered under which part of the Medicare program.
Medicare Part D Drug Coverage
We’ll start Medicare Part D, since that’s the most common way that beneficiaries receive prescription drug coverage. Stand-alone Medicare Part D plans are offered by private carriers but are approved by the federal government. Costs and coverages differ from carrier to carrier.
The general costs for Medicare Part D include an annual deductible, an initial coverage limit, and an out-of-pocket threshold. The exact costs can change each year and differ from plan to plan, but there is a standard limit and a True Out-of-Pocket limit that leads into catastrophic coverage once you meet it, lowering your costs. You’ll also owe a copay for covered prescription drugs. How much you’ll owe depends on the tier the prescription is placed in your plan’s formulary.
Some medications may not be on your plan’s formulary, which means they aren’t covered by the plan. In that case, you can submit an exception.
Part D plans usually also have a network of pharmacies, or preferred pharmacies, where you may be able to get your prescriptions at a lower cost through your plan.
Medicare Part B Drug Coverage
Medicare Part D isn’t the only way to receive drug coverage through the Medicare program. In some cases, Medicare Part B can cover prescription drugs, though these cases are rarer. You’ll most often have these drugs covered if they’re administered in an outpatient setting, like at a doctor’s office or a hospital’s outpatient care facility. You won’t be giving these drugs to yourself; they’ll usually be given by a piece of durable medical equipment or under the supervision of your doctor. Part B will also cover some drugs if they’re given as part of outpatient home health care services. Furthermore, coverage for beneficiaries with End-Stage Renal Disease was expanded in 2023 to increase access to immunosuppressive drugs under Part B (now called Part B-ID).
The costs you owe that are associated with these drugs vary based on the type and cost of the drugs. In some cases, once you meet your Part B deductible, you’ll owe a copay of anywhere from 0 percent to 20 percent of the drug’s price. Many of these out-of-pocket costs are tightly controlled by the government since many of the drugs covered by Part B are for critical or chronic health conditions.
Medicare Part A Drug Coverage
Medicare Part A covers inpatient care, which includes stays at hospitals, senior care facilities, and other types of care centers. Drugs that are administered as part of your care at these facilities will be covered under Medicare Part A. Specifically, once you meet your Part A deductible, they’ll be covered by your daily inpatient coinsurance.
Medicare Part C Drug Coverage
Medicare Part C (also known as Medicare Advantage) covers everything that Original Medicare covers and can include additional coverage. Sometimes, these plans include drug coverage similar to Part D stand-alone plans. You’ll have a formulary, network, and many of the same drug costs and limits. Medicare Advantage plans may also offer additional over-the-counter drug benefits, too.
It’s worth keeping in mind that Medicare Advantage plans are only required to cover what Original Medicare covers. Since this doesn’t include Part D drugs, not every Part C plan offers prescription drug coverage outside the scope of Parts A or B. We suggest that if you’re choosing to enroll in a Medicare Part C plan, you find one that includes prescription drug coverage. Without creditable coverage (a stand-alone Part D plan or Medicare Advantage plan with drug coverage would be considered this), you may face a late enrollment penalty when you do sign up for drug coverage (one percent added to your premium for each month you go without creditable coverage). This can quickly add up, so don’t go without drug coverage if you can help it.
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Medicare insurance’s drug coverage may seem complicated and can quickly get confusing since the many of the types of drugs and coverages can overlap. A good rule of thumb is if the drugs are administered by a trained professional in an inpatient or outpatient setting, they’ll be covered by Parts A and B (Original Medicare), respectively, or potentially by a Medicare Advantage plan. Any other medications would be covered by a Medicare Part D or Medicare Advantage plan with drug coverage if they’re in your formulary. If you’re ever unsure, don’t hesitate to ask your doctor or meet with a licensed insurance agent to discuss what coverage you receive and what out-of-pocket costs you can expect.