Medicare Part D Prescription Drug Coverage

Complete guide to Medicare Part D, how it works with VA prescription coverage, choosing a plan, costs, and the coverage gap (donut hole).

Key Takeaway

Medicare Part D provides prescription drug coverage through private insurance companies. VA prescription coverage is creditable, so you won't face a Part D penalty if you maintain VA coverage. Consider Part D if you frequently use non-VA providers or want backup coverage.

Introduction

Medicare Part D is prescription drug coverage offered by private insurance companies approved by Medicare. It helps cover the cost of prescription medications and is available to everyone with Medicare. For veterans, understanding how Part D works with VA prescription coverage is important for making informed decisions about your healthcare.

This comprehensive guide will explain what Part D covers, how it works with VA prescription benefits, how to choose a plan, costs including the coverage gap, and best practices for veterans.

What Medicare Part D Covers

Part D plans cover prescription medications, but each plan has its own formulary (list of covered drugs) and cost structure.

Prescription Medications

Coverage for prescription drugs from Medicare-accepting pharmacies

Most commonly prescribed medications are covered, though specific drugs vary by plan

Formulary Drugs

Medications listed in the plan's formulary (approved drug list)

Each Part D plan has its own formulary, which may change annually

Tier-Based Coverage

Drugs organized into tiers with different cost-sharing

Lower tiers (generic drugs) have lower copays, higher tiers (brand-name) cost more

Pharmacy Network

Coverage at plan's network pharmacies

Most plans have preferred pharmacies with lower costs, standard pharmacies with higher costs

Important: Part D plans must cover at least two drugs in each therapeutic category, but they don't have to cover every drug. Each plan's formulary is different, so it's important to check if your medications are covered before choosing a plan.

How Part D Works with VA Prescription Coverage

For veterans, understanding how Part D coordinates with VA prescription coverage is crucial. The good news is that VA coverage is considered "creditable," meaning you won't face a Part D penalty if you maintain VA coverage.

Aspect	VA Coverage	Medicare Part D
Coverage	VA formulary medications	Plan's formulary medications
Cost	$5-$11 per 30-day supply (varies by priority group)	Varies by plan and drug tier ($0-$50+ per prescription)
Pharmacy Access	VA pharmacies and mail-order	Network pharmacies nationwide
Creditable Coverage	Yes - considered creditable for Part D	N/A
Coordination	Works independently - no coordination	Works independently - no coordination

Creditable Coverage

VA prescription drug coverage is considered "creditable" for Medicare Part D, which means:

You won't face a Part D late enrollment penalty as long as you maintain VA coverage
You can delay enrolling in Part D without penalty
If you lose VA coverage, you have 63 days to enroll in Part D without penalty

Using Both Systems

You can use both VA and Part D for different prescriptions:

VA-Prescribed Medications:

Get from VA pharmacy - typically lower cost ($5-$11 per 30-day supply)

Medicare Provider Prescriptions:

Use Part D - pay Part D copays (varies by plan and drug tier)

Best Practice:

Use each system's pharmacy for its prescriptions to minimize costs and ensure coverage

Choosing a Medicare Part D Plan

With dozens of Part D plans available, choosing the right one requires careful consideration of your medications, costs, and pharmacy preferences.

Step 1: List Your Medications

Make a list of all prescription medications you take, including dosages and how often you take them.

This helps you compare which plans cover your medications and at what cost.

Step 2: Check Formularies

Use Medicare's Plan Finder tool to see which plans cover your medications.

Visit Medicare.gov and use the Plan Finder tool
Enter your medications to see which plans cover them
Check which tier each medication is in (affects cost)
Look for any restrictions (prior authorization, quantity limits)

Step 3: Compare Costs

Compare total annual costs, not just premiums:

Cost Factors:

• Monthly premium
• Annual deductible
• Copayments/coinsurance
• Coverage gap costs

Use Plan Finder:

The Medicare Plan Finder calculates estimated annual costs based on your medications, making it easy to compare plans.

Step 4: Check Pharmacy Networks

Make sure your preferred pharmacy is in the plan's network, and check if there are preferred pharmacies with lower costs.

Preferred pharmacies typically have lower copays
Standard network pharmacies have higher costs
Mail-order pharmacies may offer 90-day supplies at lower cost

Formulary and Drug Tiers

Part D plans organize medications into tiers, with lower tiers having lower costs. Understanding tiers helps you estimate your out-of-pocket costs.

Tier 1

Preferred generic drugs

Typical Cost:

$0-$5 copay

Examples:

Generic medications like metformin, lisinopril

Tier 2

Non-preferred generic and preferred brand-name drugs

Typical Cost:

$10-$20 copay

Examples:

Some brand-name drugs with generic alternatives

Tier 3

Non-preferred brand-name drugs

Typical Cost:

$35-$50 copay

Examples:

Brand-name drugs without generic alternatives

Tier 4

Specialty drugs

Typical Cost:

25-33% coinsurance

Examples:

High-cost specialty medications

Note: Tier structures vary by plan. Some plans may have more tiers, and specific drugs may be in different tiers depending on the plan. Always check the plan's formulary to see which tier your medications are in.

Coverage Gap (Donut Hole) Explained

The coverage gap, also known as the "donut hole," is a temporary limit on what your Part D plan will cover. Understanding how it works helps you plan for costs.

Initial Coverage Phase

You pay copayments, plan pays the rest

Threshold:

Up to $5,030 in total drug costs (2024)

Your Cost:

Copayments only (varies by plan and drug tier)

Coverage Gap (Donut Hole)

You pay a percentage of drug costs

Threshold:

Between $5,030 and $8,000 in total drug costs

Your Cost:

25% of drug costs (for both brand-name and generic drugs in 2024)

Catastrophic Coverage

Plan pays most costs, you pay small copayment or coinsurance

Threshold:

After $8,000 in out-of-pocket costs

Your Cost:

Greater of 5% coinsurance or small copayment (whichever is higher)

Coverage Gap Example

If your total drug costs reach $5,030 in 2024, you enter the coverage gap. During the gap, you pay 25% of the cost for both brand-name and generic drugs. Once you've spent $8,000 out-of-pocket (including what you paid and what manufacturers paid for brand-name drugs), you reach catastrophic coverage and pay only 5% coinsurance or a small copayment.

For Veterans: If you primarily use VA pharmacy, you may never reach the coverage gap because VA prescriptions don't count toward Part D's coverage gap threshold. The gap only applies to medications purchased through your Part D plan.

Late Enrollment Penalty

If you don't enroll in Part D when you're first eligible and don't have creditable coverage, you may face a permanent late enrollment penalty.

How the Penalty Works

The penalty is 1% of the national base beneficiary premium ($34.70 in 2024) for each month you delay enrollment without creditable coverage.

Example:

If you delay enrollment by 12 months without creditable coverage, you'd pay 12% more (1% × 12 months) = $4.16 per month extra. This penalty is permanent and added to your Part D premium for as long as you have Part D.

Good News for Veterans:

VA prescription coverage is creditable, so you won't face a penalty as long as you maintain VA coverage. However, if you lose VA coverage, you have 63 days to enroll in Part D without penalty.

Creditable Coverage

Creditable coverage is prescription drug coverage that is expected to pay, on average, at least as much as Medicare's standard Part D coverage. Having creditable coverage allows you to delay Part D enrollment without penalty.

VA Prescription Coverage is Creditable

VA prescription drug coverage meets or exceeds Medicare's standard, making it creditable.

You can delay Part D enrollment without penalty while you have VA coverage
If you lose VA coverage, you have 63 days to enroll in Part D without penalty
You can enroll in Part D at any time if you have VA coverage (no penalty)

Other Creditable Coverage

Other types of coverage that are considered creditable:

Employer or union group health plan with prescription coverage
TRICARE prescription coverage
Federal Employee Health Benefits (FEHB) with prescription coverage
Other Part D plans

Cost Assistance Programs (Extra Help)

The Medicare Part D Low-Income Subsidy (LIS), also called "Extra Help," provides financial assistance to help pay for Part D costs.

What Extra Help Covers

Extra Help can significantly reduce your Part D costs:

Pays for all or part of your Part D premium
Reduces or eliminates your annual deductible
Lowers copayments for prescriptions
Provides coverage gap protection

Eligibility for Extra Help

You may qualify for Extra Help if your income and resources are below certain limits:

2024 Income Limits (Individual):

Up to $22,590 per year (or $30,660 for married couples)

Resource Limits:

Up to $17,220 in resources (or $34,360 for married couples)

Automatic Qualification:

You automatically qualify if you have Medicaid, Supplemental Security Income (SSI), or a Medicare Savings Program

How to Apply for Extra Help

You can apply for Extra Help in several ways:

Online at ssa.gov (Social Security Administration website)
Call Social Security at 1-800-772-1213
Visit your local Social Security office
Apply when you enroll in a Part D plan (some plans help with application)

Best Practices for Veterans

Following these best practices can help you make the most of both VA and Part D prescription coverage.

Use VA pharmacy for VA-prescribed medications - typically lower cost

Consider Part D if you frequently see non-VA providers who prescribe medications

Enroll in Part D during your Initial Enrollment Period to avoid penalties if you lose VA coverage

Review Part D plans annually during Open Enrollment (October 15 - December 7)

Check if your medications are covered before choosing a Part D plan

Compare total annual costs, not just premiums, when choosing a plan

Keep records of your VA prescription coverage to prove creditable coverage

If you lose VA coverage, enroll in Part D within 63 days to avoid penalty

Consider Part D for backup coverage when traveling away from VA facilities

Use Medicare Plan Finder tool to compare plans and estimate costs

When to Enroll in Part D

Understanding when to enroll helps you avoid penalties and get coverage when you need it.

You Have VA Prescription Coverage

Important

You may not need Part D immediately, but consider enrolling during your IEP to avoid penalties if you lose VA coverage

You Frequently See Non-VA Providers

Part D may be valuable if non-VA providers prescribe medications not available through VA

You Want Backup Coverage

Part D provides backup coverage if you lose VA coverage or need medications when traveling

You Don't Have Creditable Coverage

Important

Enroll during your Initial Enrollment Period to avoid late enrollment penalty

Related Resources

Medicare Enrollment Guide

Learn when and how to enroll in Medicare.

Read Guide

Coordinating Medicare and VA Benefits

Learn how Part D works with VA prescription coverage.

Read Guide

Understanding VA Healthcare Benefits

Learn about VA prescription drug coverage.

Read Guide

Frequently Asked Questions

Find answers to common Part D questions.

View FAQ

Need Help Choosing a Part D Plan?

Our expert advisors can help you understand Part D options, compare plans, and determine if Part D makes sense for your situation, especially when coordinating with VA prescription coverage. Get personalized guidance tailored to your needs.

Schedule Free Consultation Call (557) 777-4405