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prescription drug coverage

What is Medicare Part D prescription drug coverage?

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Prescription drug coverage – or Medicare Part D – subsidizes the costs of brand-name and generic prescription drugs for Medicare beneficiaries. Medicare recipients choose the coverage by enrolling in either a stand-alone prescription drug plan (PDP) – which covers only prescription drugs – or a Medicare Advantage plan with integrated Part D coverage (MA-PD), which covers prescriptions and other medical expenses.

Part D plan design varies from one plan to another. Plans can have deductibles (the maximum deductible is $480 in 2022), and then there’s an initial coverage phase, during which the plan can require copays or coinsurance of up to 25% of the cost of the drugs. Then there’s the coverage gap (donut hole) phase, during which the enrollee pays up to 25% of the cost of their drugs. Then there’s the catastrophic coverage phase, during which enrollees pay up to 5% of the cost of their drugs, with no limit on how high their spending can be. That will change as of 2024, under the Inflation Reduction Act. At that point, enrollees will no longer be responsible for any out-of-pocket costs during the catastrophic coverage phase.

As of 2022, roughly 50 million Medicare beneficiaries were enrolled in Part D coverage. More than half of them (about 26.7 million) were enrolled in MA-PDs, while about 23.4 million were enrolled in PDPs. There are more than 64 million Medicare beneficiaries, but some do not need to purchase Part D coverage because they have drug coverage from a current or former employer.

Which prescription drug plan should you choose?