Given the complexities of Medicare Part D and its potential impact on prescription drug costs, you should thoroughly review your health care and prescription needs annually to ensure you are enrolled in the most cost-effective plan. It's essential to compare options, especially with changes in 2025 that cap out-of-pocket expenses at $2,000. This is particularly important if you're balancing multiple forms of coverage, such as VA or TRICARE benefits, to avoid unnecessary costs or gaps in coverage. Always consult with a Medicare specialist, who is a licensed sales agent, to make informed decisions.
Let's dive into some details of Medicare Part D.
Understanding Medicare Part D prescription drug coverage
So what’s Medicare Part D? Also called a prescription drug plan (PDP), Medicare Part D is optional prescription drug coverage offered through government-contracted private insurance companies that helps pay for your prescription drugs. There are two ways to get Medicare drug coverage:
- As a stand-alone plan to in addition to Original Medicare. Plans can vary in cost and coverage.
Note: Medicare Supplement plans (Medigap) don’t include prescription drug coverage. In this case, you’d want to enroll in Part D if you need prescription drug coverage. - Through a Medicare Advantage plan called Medicare Part C. Medicare Advantage plans cover all the benefits of Original Medicare, and many include prescription drug coverage.
If you choose a Medicare Advantage plan that offers prescription drug coverage (such as an HMO or PPO), you can’t also join a separate Medicare Part D plan. If you do, you’ll lose your Medicare Advantage Plan and return to Original Medicare.
Financial help
Medicare Part D can lead to big savings on your prescription drug spending. If you take regular medication, the coverage provided by a PDP can add up. And the more affordable your medications, the less financial burden you carry.
Wide network of pharmacies
Medicare drug coverage plans offer access to an extensive network of pharmacies across the United States. This allows you to find a pharmacy for your needs, no matter where you live. PDPs can have different pharmacy networks, so review your options to be sure your preferred pharmacy is part of the network.
Enrollment periods
Joining or switching your Medicare Part D plan can only be done during enrollment periods. The most common is the Medicare Initial Enrollment Period, or IEP. This is when you’re new to Medicare and starts three months before you get Medicare, includes the month Medicare begins, and continues for three additional months. For more information, go to Medicare.govOpens in a New Window. See note 1
The Medicare Annual Enrollment Period (AEP) allows you to add or change your drug coverage. AEP is from Oct. 15 through Dec. 7 each year.
Medicare also provides Special Enrollment Periods (SEPs), which allow you to enroll or change your drug plan under certain circumstances.
Residency
To enroll in Medicare, you must be a U.S. citizen or a permanent U.S. resident who has lived in the U.S. continuously for five years before applying for coverage. To be eligible for Medicare Part D, you must be enrolled in Medicare Part A and/or Part B, as well as be a permanent resident in the geographic region in your plan’s service area.
What if you don’t enroll?
If you don’t enroll in a Medicare Part D plan, you’ll be responsible for paying for your prescriptions. You can self-pay or use a different form of insurance, such as an employer’s coverage or TRICARE.
If you decide to add a Part D plan later, you may have to pay a late enrollment penalty, and you won’t be able to enroll until the Annual Enrollment Period unless you’re eligible for a special enrollment.
Part D costs and considerations
Medicare Part D premiums are in addition to your Original Medicare premiums. If you’ve chosen an Advantage plan (Part C), your plan may include prescription drug coverage.
Those with higher incomes may have to pay an extra amount in addition to their Part D premium, called Part D Income-Related Monthly Adjustment Amount, or IRMAA. This extra premium cost is deducted from your Social Security check. If you do not yet receive Social Security benefits, Medicare will send you a monthly bill that you must pay to continue your drug coverage.
Annual deductibles
Your Part D deductible is the amount you must pay before your plan begins to pay its share of your covered drugs. Some plans don't have a deductible, and in some plans that do have a deductible, drugs on some tiers are covered before you meet your deductible.
Copayment and coinsurance
Once you’ve met your deductible, you must pay part of the cost of your prescription drugs and the copay, and your plan will pay the rest.
The price you pay for a specific prescription will depend on the drug’s tier. Your copayment or coinsurance might also vary if the drug manufacturer changes the price of the medication, or if a generic version becomes available.
New features starting in 2025
Under the Inflation Reduction Act of 2022, Medicare Part D will see major changes in 2025, including a $2,000 annual cap on out-of-pocket covered prescription drug costs and the elimination of the 5% coinsurance in catastrophic coverage. Premiums can still fluctuate, but increases are capped at 6% per year through 2029. While drug costs are expected to decrease for many, particularly through price negotiation and capped insulin costs, premiums and the cost of new drugs may still vary. Beneficiaries should review their plans annually to ensure cost-effective coverage.
What if I have VA benefits?
Veterans may be eligible for drug coverage through a VA program. You can also opt for a Medicare drug plan, but you can’t use both types of coverage for the same drug at the same time. For more information, visit VA.govOpens in a New Window. See note 1
What if I have TRICARE benefits?
If you’re Medicare eligible and have TRICARE For Life (TFL), you don’t need to add a Medicare drug plan. That’s because TFL provides credible drug coverage through the TRICARE Pharmacy ProgramOpens in a New Window. See note 1 In most cases, this TRICARE drug coverage is all you will need.
With TFL, you must sign up for Original Medicare Part A and Part B to keep your TRICARE drug benefits. Enrolling in Part D should be a well-thought-out decision if you have TFL. Be sure to thoroughly compare Medicare prescription drug plans and costs with the TRICARE drug benefit. There are very few instances where the drug coverage benefits of Part D would outweigh those from TRICARE.
Why should I consider a Medicare prescription drug plan?
We all are likely to need medical care at some point, and that’s especially true as we age into retirement. Original Medicare and Medicare Supplement plans don’t include drug coverage. A Medicare Part D plan can help lower your prescription drug costs and protect against higher drug costs, making it easier to manage your funds in retirement.
When choosing your plan, it’s important to balance the coverage you need against your budget to find the best option for your situation.
Talk to a specialist
If you have more questions about prescription drug plans, the USAA team is ready to help. Speak to a USAA licensed health solutions specialists at 800-531-USAA (8722).