What Is Medicare Part D?

Prescription drug coverage is an important part of any health plan. For those who have a Medicare Advantage plan like BlueCHiP for Medicare, prescription drug coverage is available through Medicare Part D.

Medicare Part D is a prescription drug plan that covers prescription drugs that aren’t included under Medicare Part B coverage. It is optional, but Medicare enrollees may have to pay a penalty to the government if they don’t enroll in it when they are first eligible. Those enrollees can avoid a penalty if they already have prescription coverage that is at least as good as Part D through another health plan, such as:

  • An employer’s or union’s retiree health plan
  • The Veterans’ Administration

If an enrollee does have other coverage, their health insurer will let them know if it’s at least as good.

How does Part D work?

Whether someone has a standalone drug plan or gets Part D coverage as part of their Medicare Advantage plan, it works the same way. The drug plan has a list of covered drugs—called a formulary—that divides covered drugs into tiers. Members pay the same copayment (copay) or coinsurance for all drugs in each tier. (For example, they might pay a $3 copayment for drugs in tier 1, or a 25 percent coinsurance for drugs in tier 4).

Part D has three different stages of benefits, and drug coverage may change depending on which stage an enrollee is in:

  1. Initial coverage – An enrollee pays their plan’s copays or coinsurance for all covered drugs based on which tier the drug is in. They continue to pay until their total drug costs reach the initial coverage limit, which is set by the Centers for Medicare and Medicaid Services (CMS) and changes every year. Total drug costs are the combined costs paid by both the enrollee and the insurance company.
  2. Coverage gap (often called the “donut hole”) – Once the initial coverage limit is reached, this is the next stage. Some health plans offer prescription drug coverage during the coverage gap, but many do not, so enrollees should check their plan’s coverage details.
  3. Catastrophic coverage – This begins when a member’s out-of-pocket costs, including costs paid by the health plan, reach a certain amount (also set by CMS and changes every year). Once a member reaches this stage, they pay either a copay or coinsurance for their prescriptions, and the health plan pays the rest.

Learn more

Watch our Medicare 101 video or visit Medicare.gov/Part-D to learn more about how Part D coverage works.

Last updated: 01/01/2018

H4152_2018web5 Approved

Blue Cross & Blue Shield of Rhode Island is an HMO plan with a Medicare contract. Enrollment in Blue Cross & Blue Shield of Rhode Island depends on contract renewal.

* Blue MedicareRx (PDP) is a Prescription Drug Plan with a Medicare Contract.

Anthem Insurance Companies, Inc., Blue Cross and Blue Shield of Massachusetts, Inc., Blue Cross & Blue Shield of Rhode Island, and Blue Cross and Blue Shield of Vermont are the legal entities which have contracted as a joint enterprise with the Centers for Medicare & Medicaid Services (CMS) and are the risk-bearing entities for Blue MedicareRx (PDP) plans. The joint enterprise is a Medicare-approved Part D Sponsor. Enrollment in Blue MedicareRx (PDP) depends on contract renewal.