Understanding Your Prescription Drug Plan Under Medicare Part D

Estimated read time: ~8 minutes

Summary: 
Get your questions about Medicare Part D or the Medicare Drug Plan answered here. Build your knowledge so that you can better understand your prescription drug plan. The older you get, the more likely you will need prescription drugs. And Medicare’s prescription drug coverage, also known as Medicare Part D, can help keep costs down. However, Medicare prescription drug plans can be confusing. So, if your question is, “What does Medicare Part D cover?”, you’ve come to the right place.

Two ways to get Medicare prescription drug coverage

When Medicare was created in 1965, the only drugs it covered were those administered in a doctor’s office or hospital. Then, in 2003, the Medicare Modernization Act established Medicare Part D, which allows consumers to buy a government-regulated, stand-alone prescription drug plan from private insurers.

Today, you have two ways to get Medicare prescription drug coverage:

• Option 1 is buying a Medicare Part D plan. This is available if you are enrolled in Original Medicare (Parts A and B).
• Option 2 is a Medicare Advantage plan that includes prescription drug coverage. You can’t combine a Medicare Advantage plan that has prescription drug coverage with Original Medicare.

You also have the option of going with no drug coverage, but that could be risky. According to the Centers for Disease Control, 89.2% of Americans ages 65 and older used prescription medication during the past year¹.

How and when do I sign up for Medicare Part D coverage?

If you already receive Social Security benefits, you’ll get Medicare Part A and Part B automatically when you’re first eligible. Medicare will send you a “Welcome to Medicare” packet three months before you turn 65.

If you’re over 65 (or turning 65 in the next three months) and not already receiving Social Security benefits, you need to sign up to get Medicare Part A (hospital insurance) and Part B (medical insurance). You won’t get Medicare automatically. Apply online for Medicare here. If you want Medicare Part D drug coverage, you can join a separate Medicare Prescription Drug Plan offered by private insurers.

Sign up for Medicare Part D during your initial eligibility enrollment period (the seven-month window that begins three months before your 65th birthday). If you don’t enroll during this initial eligibility period you may be charged a penalty when you try to sign up later. The late enrollment penalty is a monthly amount added to your Medicare Part D monthly premium that you’re typically required to pay for as long as you have coverage.

What does Medicare Part D cover?

Medicare Part D coverage includes most outpatient prescription drugs. The list of drugs each plan covers is called a formulary and can vary from insurer to insurer. Be sure to check before you choose a plan to make sure your medications are covered.

If you take a drug that’s not covered, you will have to pay more or ask your doctor to switch you to a covered medication.

Generally, Medicare Part D covers a wide range of prescription medications, including but not limited to:

Generic drugs: These are lower-cost alternatives to brand-name drugs and are typically covered by Medicare Part D plans.

Brand-name drugs: Many Medicare Part D plans also cover brand-name prescription drugs, although there may be differences in copayments or coverage levels.

Specialty medications: Some plans may cover specialty drugs used to treat complex or chronic conditions, though coverage may vary. Certain vaccines, such as the flu shot and other preventive vaccines, are often covered by Medicare Part D.

Plans might also use coverage rules such as prior authorization, step therapy and limits on the amount of medication you can get with each prescription to ensure proper use.

What do Medicare prescription drug plans cost?

You may have to pay a premium for your drug plan. The amount of your premium can vary. If your income is above a certain amount, you’ll pay a higher premium. Use Medicare’s Plan Finder to compare plans in your area.

Your plan may also include deductibles, copays and/or coinsurance. These amounts will vary between prescription drug plans. Your deductible is the amount you must pay out of pocket before the plan starts paying for your medications. A copay or coinsurance is the amount you pay out of pocket for your covered drugs after the deductible is met.

In 2025, as part of the Inflation Reduction Act², out-of-pocket spending on prescription drugs is capped at $2,000. This cap will be adjusted annually. In addition, this law also set the price of insulin at $35 per month per covered prescription beginning in 2024.

Doesn’t Medicare Part B cover prescription drugs?

Medicare Part B, which pays for outpatient services like doctor visits, only covers certain high-cost medications like chemotherapies and other specialty medications, most of which are administered in a doctor’s office or clinic. You pay a 20% copayment for these drugs. Vaccines for flu, pneumonia and hepatitis B are also covered under Part B with no coinsurance.

Do I qualify for a subsidy?

You might qualify for a low-income subsidy, also called Extra Help, depending on your income and assets. You must live in one of the 50 United States or the District of Columbia. According to the 2025 edition of the official U.S. government Medicare and You Handbook:

If you qualify you will pay no more than $4.90 for each generic drug and $12.15 for each brand-name drug all year (for 2025). You will also get help paying other plan costs and have no late enrollment penalty.

Can’t I get prescription drug coverage through my Medigap plan?

Medigap plans – or Medicare supplement insurance plans – are separate insurance policies that help cover Medicare deductibles and copayments/coinsurance. Some policies used to cover prescription drugs, but that ended in 2006. Ultimately, no, you can’t get prescription drug coverage through Medigap plans.

Making sense of Medicare Part D

As you journey through the complexities of Medicare Part D, it’s important to acknowledge the challenges that come with understanding your prescription drug coverage. We recognize that this journey can feel overwhelming at times, but remember, you’re not alone.

Explore your options, and don’t be afraid to ask questions. At Mutual of Omaha, we’re committed to providing you with the resources and support to help guide you through this process.

FAQs on Medicare Part D coverage

1. What does Medicare Part D cover?

Medicare Part D covers prescription drugs to help you manage medication costs. The coverage for specific medications can vary across plans.

2. How do I find the right Medicare Part D plan?

Use the Medicare Plan Finder Tool to compare different plans based on coverage, costs and participating pharmacies.

3. Which Medicare plan covers prescription medications?

Medicare Part D is specifically designed to cover prescription medications, and you can choose from various plans offered by private insurers. There are also Medicare Advantage prescription drug (MAPD) plans which include prescription drug coverage.

Medicare Part D Glossary

Coverage rules: These are policies put into place to ensure appropriate medication usage.

Deductible: The amount you must pay for prescriptions before the plan starts paying for your drugs.

Extra Help: A Medicare program to help people with limited income and resources pay Medicare prescription drug program costs, like premiums, deductibles and coinsurance.

Initial coverage limit: The amount the prescription drug plan covers until you reach the out-of-pocket limit.

Medicaid: A joint federal and state program that helps with medical costs for people with limited income and resources.

Medicare Advantage: A type of Medicare health plan offered by a private company that contracts with Medicare. Medicare Advantage plans provide all your Part A and Part B benefits. Many also cover prescription drugs—these plans are called Medicare Advantage prescription drug plans (MAPD).

Medigap (Medicare supplement insurance): Medicare supplement insurance is provided by private insurance companies to fill “gaps” in Original Medicare coverage. Some Medigap policies sold before January 1, 2006, had prescription drug coverage. Policies sold on or after January 1, 2006, don’t have prescription drug coverage.

Modified adjusted income: Your household’s adjusted gross income with any tax-exempt interest income and certain deductions added back.

Out-of-pocket cost Prescription drug costs that you must pay on your own because they aren’t covered by Medicare or other insurance.

Prior authorization Approval that you must get from a Medicare drug plan before you fill your prescription in order for the prescription to be covered by your plan.

Step therapy The plan requires that you try certain less-expensive drugs on the plan’s formulary before moving up a “step” to a more expensive drug.

¹ Centers for Disease Control (April 21, 2023). Mortality and Morbidity Weekly. “QuickStats: Percentage of Adults Aged ≥18 Years Who Took Prescription Medication During the Past 12 Months, by Sex and Age Group — National Health Interview Survey, United States, 2021.” https://www.cdc.gov/mmwr/volumes/72/wr/mm7216a7.htm

² Centers for Medicare and Medicaid Services (Sept. 10, 2024). “Inflation Reduction Act and Medicare.” www.cms.gov/inflation-reduction-act-and-medicare

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