Prescriptions aren’t usually covered by Medicare, but you can buy coverage from private insurance through Part D. Some of the costs you may have to pay for yourself are:
A premium is the monthly cost of your plan.
- A co-payment is a set fee that you pay to a drugstore for each of your medicines after you’ve met any deductible. This fee is based on the rules of your plan.
- A deductible is the amount you have to pay to a store every year before your insurance starts to pay. Coinsurance is the portion of each prescription’s cost that you pay to the pharmacist after you’ve met any deductible.
- You can buy a stand-alone Part D plan or a Medicare Advantage plan that includes drug coverage. You can sign up for this coverage when you sign up for Medicare for the first time or during open enrollment, which runs from Oct. 15 to Dec. 7 every year. Coverage begins on Jan. 1.
- Private companies set their own rates, deductibles, and copayments for Medicare Part D benefits, but they must follow the rules set by the federal government. For instance, Part D plans can choose to charge a deductible, but that deductible can’t be more than $505 in 2023.
- Your Part D costs will depend on what choices are available in your area, the plan you choose, how much it costs for your medicines, how much you’ve spent on drugs so far this year, and even how much money you make.
How much will the Part D rates be in 2023?
In 2023, the average monthly cost for a stand-alone Part D plan is $31.50. But the details of each plan can be very different.
If you choose a Medicare Advantage plan with drug coverage, you’ll usually pay one monthly fee that covers hospital, medical, and prescription drug costs. In 2023, the average monthly payment for people with Medicare Advantage will be $18.
How does late registration affect Part D premiums?
If you don’t sign up for Part D at the right time, you might have to pay a penalty for the rest of your life.
If you didn’t sign up for Part D when you were first qualified and weren’t registered in another plan similar to Part D, which the Centers for Medicare and Medicaid Services (CMS) calls “creditable coverage,” you may have to pay a late enrollment charge.
The way to figure it out is to multiply 1 percent of the national base user rate, which CMS figures out each year, by the number of months you didn’t have creditable drug coverage after signing up for Medicare Part A or Part B. This base recipient premium is different from the average Part D premium, which is also figured out by CMS and which you may come across.
In 2023, the monthly base recipient payment across the country is $32.74.
Also, remember that you can’t join a Part D plan whenever you want. If you missed your initial enrollment period or don’t qualify for a special enrollment period, you’ll have to wait until the open enrollment period from October 15 to December 7. This could add months to your penalty estimate.
How much does Part D cost for people with more money?
Whether they have drug coverage through a stand-alone Part D plan or a Medicare Advantage plan, people with high incomes always pay more for drug coverage.
If you’re single and your adjusted gross income is more than $97,000 or if you’re married filing jointly and your income is more than $194,000, you’ll have to pay a high-income tax on top of your plan’s cost. This extra fee is called the income-related monthly adjustment amount (IRMAA) by the government. In 2023, IRMAA fees will run from $12.20 to $76.40 per month, with higher-income people having to pay more.
You pay your standard plan payment and the Medicare extra. Most people who are already getting Social Security income have the fee taken out of their checks.
Most of the time, the fee is based on your most recent tax return, which for most people in 2023 is from 2021. But if your income has gone down since then because of things like marriage, divorce, the death of a spouse, or retirement, you can fight the high-income surcharge and ask the Social Security Administration, which handles these surcharges, to recalculate your premiums based on your more recent income.
Part D fees for people with a lot of money
If your modified adjusted gross income on your 2021 federal tax return was more than $97,000 for single filers or $194,000 for joint filers, you’ll usually have to pay a monthly Part D surcharge in 2023.
Individual income getting paid as a couple married but filing income separately in addition to the Part D payment, there is a monthly extra.
$97,000 or less $194,000 or less $97,000 or less Nothing.
How much does Part D cost out of pocket?
How much you have to pay on top of the fee relies on whether or not the plan has a deductible, how it covers your medicines, and how much you’ve spent on pills so far this year.
In 2023, Part D plans can have deductibles of up to $505, but many plans don’t have any. If yours does, you’ll have to pay the full cost of your drugs until you hit your deductible.
After that, you’ll either pay copayments, which are dollar amounts that the plan charges you for your medications, or coinsurance, which is a fraction of the cost that the plan charges you for your medications until you and your plan have spent $4,660 by 2023.
Each plan talks with the companies that make the drugs and the shops. Your copays or share rates are based on the prices your plan has arranged and the rules set by Medicare.
How do different levels of prices affect copayments?
For the same drug, different plans can charge different copays. Most plans have between four and five price levels. Preferred generic drugs have the lowest copayments, followed by non-preferred generic drugs. Preferred brand-name drugs have the highest copayments, followed by other brand-name drugs. Plans may charge even more for medicines that aren’t as common.
Most plans have shops they like to use. If you use them, your copayments may be less than what you would pay at other shops in your network.
No matter how a plan costs your medicines, it has to follow the general pricing system that Medicare sets. After you and your plan have spent $4,660 in 2023, you’ll hit the coverage gap, which used to be called Medicare’s “donut hole,” and you’ll have to pay up to 25% of the cost of your medicines.
When your out-of-pocket costs reach $7,400 in 2023, you will have reached the catastrophic level. This is the amount you have paid, not what the insurance company has paid. At that amount, you’ll pay 5 percent or less of the cost of your drugs for the rest of the year. Part D plans, on the other hand, have no out-of-pocket cost limit.
How can I compare how much Part D plans cost altogether?
Using the Medicare Plan Finder, you can check how much the fees and copayments for your drugs cost for all of the plans in your area. Type in your ZIP code, drugs, and amounts to see the copayments for your individual drugs and an estimate of how much you will pay for all of them over the course of a year.
Plans can change their prices and what they cover for Part D from one year to the next. Some of them even change their lists of drugs throughout the year. So, during open enrollment, it’s a good idea to compare your choices every year to make sure you have the best plan.
Keep in mind
If your income and assets are below a certain amount, you may be eligible for the government Extra Help program, which can help pay for Part D rates, deductibles, and copayments. If you get Extra Help, you can switch Part D plans up to once every three months, and you won’t have to pay the late enrollment penalty if you didn’t sign up for Part D when you were supposed to because you had other coverage.
