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Big changes are coming to Medicare Part D prescription drug coverage following the passage of the Inflation Reduction Act of 2022, which gives Medicare the power to negotiate for lower prescription drug prices. The act also includes caps on out-of-pocket spending, limits on increases in Medicare Part D premiums and drug prices, and more.
Certain changes will take effect in 2023, while others start as late as 2026.
Medicare Part D plans — which cover prescription drugs and are also known as Medicare drug plans — come with monthly premiums that vary by policy. The national base beneficiary premium for Part D plans is $32.74 per month in 2023 ($34.70 in 2024), according to the Centers for Medicare & Medicaid Services, which calculates this number in part by using the national average monthly bid amount submitted by private insurers.
Depending on the plan you choose, however, your upfront costs might be much higher or lower. In 2023, plan premiums range from $1.60 to $201.10 per month. Additional charges apply if you enroll late, have an extended gap in drug coverage or have a high taxable income.
What is Medicare Part D?
Medicare Part D is Medicare’s prescription drug benefit. It helps cover the costs of outpatient prescription drugs, something that’s not covered by Original Medicare Parts A or B, which cover hospital and outpatient medical insurance, respectively.
While the government provides Parts A and B directly, Part D policies are issued by private insurance companies that have contracts with the federal government.
If you choose Original Medicare, purchasing an additional Part D plan adds important prescription coverage to your overall health insurance protection. Most Medicare Advantage plans include drug coverage; if you have such a plan, you don't need a separate Part D policy. (If you buy a Medicare Advantage plan without drug coverage, you can’t buy a stand-alone Part D plan in most cases.)
Are Part D plans expensive?
In general, no — at least, not compared with standard premiums for Part B, which are $164.90 per month in 2023 for most Medicare recipients. However, these Part D plans aren't premium-free, like Part A generally is, and some can be costly.
Each plan determines its own premium and deductible. While you can have these premiums deducted from your Social Security payment rather than paying an insurance company directly, this generally isn't the best option. Drug insurers typically change which drugs and how much is covered every year. And pharmacies often change their preferred status, making it critical for you to shop every year for a new drug plan or Medicare Advantage prescription drug plan to get your prescriptions covered at the best price.
The process of setting up payments through Social Security and potentially switching plans while using Social Security payment is slow and clunky — it’s more efficient to set up automatic payments with your Part D insurer directly.
In general, plans with lower premiums have higher deductibles. But no plan can charge more than the maximum rate determined by the CMS. The maximum deductible is $505 in 2023 ($545 in 2024). While the upfront premium costs might be lower, the coverage won't kick in until you hit the deductible. However, your drugs are often favorably priced because you have the insurance. You can see your own prescription drug costs, premiums and deductible in Medicare’s plan finding tool.
Plan D costs to keep in mind
As you’re shopping for Part D plans, make sure you understand the costs of what you’re getting.
Premium: The amount you must pay per month for the drug plan.
Deductible: The amount you must pay out of pocket before your insurance plan pays for covered drugs.
Drug costs: If you take regular prescriptions, you’ll be able to see what each drug will cost on the plan, at each pharmacy you select.
Make sure you factor all three levels of costs into your decision — you may find that drug costs are lower on one plan but the amount you spend on the monthly premiums is higher than a comparable plan. Consider the sum of all three parts in your decision.
Are there additional costs for high-income earners?
If your income exceeds a certain amount, you'll pay a surcharge on your Medicare Part D insurance. This surcharge is known as the Part D Income-Related Monthly Adjustment Amount, or Part D IRMAA, and isn't part of the premium you pay separately to the insurance company.
High-income earners must pay the Part D IRMAA whether they choose a Medicare Part D plan or a Medicare Advantage plan that includes prescription drug coverage. The Part D IRMAA is never paid to your insurance company and is usually deducted from your Social Security check. If you aren’t yet collecting Social Security benefits, you’ll pay the additional charge directly to the Social Security Administration.
2023 Medicare Part D IRMAA
In 2023, you'll owe a Part D IRMAA if your modified adjusted gross income on your 2021 tax return was more than $97,000 filing as an individual or $194,000 filing jointly.
The table below has Part D IRMAA details for 2023:
Individual tax return (2021 income)
Married filing jointly (2021 income)
Married filing separately (2021 income)
Monthly Part D cost (in 2023)
$97,000 or less.
$194,000 or less.
$97,000 or less.
Your plan premium.
Above $97,000 up to $123,000.
Above $194,000 up to $246,000.
$12.20 plus your plan premium.
Above $123,000 up to $153,000.
Above $246,000 up to $306,000.
$31.50 plus your plan premium.
Above $153,000 up to $183,000.
Above $306,000 up to $366,000.
$50.70 plus your plan premium.
Above $183,000 and less than $500,000.
Above $366,000 and less than $750,000.
Above $97,000 and less than $403,000.
$70 plus your plan premium.
$500,000 or above.
$750,000 or above.
$403,000 or above.
$76.40 plus your plan premium.
What about the Part D late-enrollment penalty?
Medicare imposes a late-enrollment penalty if you don’t purchase Part D coverage before the end of your initial enrollment period — the seven-month period starting three months before the month you turn 65 — or if you’ve gone 63 consecutive days or more without creditable prescription drug coverage. This penalty is in addition to your monthly premium cost and remains in effect for as long as your Medicare drug coverage continues.
The penalty is 1% of the national base beneficiary premium ($32.74 per month in 2023 ($34.70 in 2024)) per month that you were eligible to enroll but didn’t. There’s no cap on the number of months. If you thought you didn’t need a Part D plan because you weren’t taking any prescriptions, then 72 months later you need an expensive drug, you’ll be hit with a 72% penalty. It’s applied every month for the rest of your retirement.
Here’s how it works:
M = number of full months you were eligible for drug coverage but didn’t have it. NBBP = national base beneficiary premium, which is $32.74 for 2023.
Monthly penalty = (M x 1%) x NBBP.
The result is rounded to the nearest 10 cents. Since the national base beneficiary premium can change every year, the monthly penalty amount you owe may increase over time.
Here's an example:
Suppose that after your initial enrollment period ended, you waited another 24 months before purchasing prescription drug coverage.
Monthly penalty = (24 x 1%) x $32.74. Monthly penalty = $7.86, or $7.90 after rounding.
This may not seem like much, but it adds up to about $95 per year and could get more expensive over time if the national base beneficiary premium rises.
How to avoid the Part D late-enrollment penalty
Enroll in Medicare Part D or a Medicare Advantage prescription drug plan as soon as you become eligible for Medicare.
If you’ve lost your prescription plan, either due to an employer change or because your plan was discontinued, enroll in Medicare drug coverage immediately.
Keep good records of your drug insurance history so you’ll be able to provide proof of continuous previous coverage.
If you think Medicare has penalized you in error, you can request a reconsideration. You’ll have 60 days from the date you receive notification about the penalty to respond, and you’ll need to send the documentation that supports your case. Usually, you’ll receive a decision within 90 days.
Medicare Advantage companies
Get more information below about some of the major Medicare Advantage companies. These insurance companies offer plans in most states. The plans you can choose from will depend on your ZIP code and county.