Signing up for Part D coverage is optional, but if you don’t sign up when first eligible or if you don’t already have “creditable” coverage, you may have to pay a permanent late enrollment penalty.
Part D plans are the part of Medicare that provides coverage for prescription drugs. To sign up for a Part D plan, you need to be enrolled in Part A and/or Part B. Signing up for Part D coverage is optional, but if you don’t sign up when first eligible or if you don’t already have “creditable” coverage, you may have to pay a permanent late enrollment penalty. “Creditable” coverage is drug coverage from an employer or elsewhere that has been approved by Medicare. Even if you aren’t currently taking any drugs, we recommend signing up for a Part D plan to avoid any future penalties.
You can get Part D coverage through two common avenues: either as a standalone Prescription Drug Plan or as part of a Medicare Advantage Plan. The standalone option will cost you monthly and will often include a deductible, while most Medicare Advantage plans include the Part D coverage at no extra cost. As a bonus, most Advantage plans do not have a deductible for their Part D coverage.
Keep in mind that every Prescription Drug Plan has its own list of covered drugs. This list is called a “formulary.” The formulary will tell you which medications are covered, how much you’ll pay, and if there are any special rules for any particular drug. Your plan’s formulary may also change annually. If this happens, you will get an “Annual Notice of Change” letter from your plan provider.
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Before enrolling in a plan, you should ensure that all or most of your drugs are covered. You may want to consider paying a little extra for a plan that covers all the medications you’re taking to save money in the long run.
Speaking of special rules, below is a list of rules that are very common in most formularies.
Generally, you will see prior authorizations for extremely expensive medications and quantity limits for drugs with high addiction potential. This isn’t a rule, but more so a common theme of when these coverage rules are applied.
Part D is a section of Medicare that can change annually. Sometimes a Prescription Drug Plan can make changes to the prescriptions they cover or change the copay they are covered at. For this reason, we recommend doing a review of your drug coverage during the Annual Enrollment Period every year to confirm all your medications are covered for the upcoming year and that you won’t have any surprises when paying for your prescriptions.