How to Choose a Medicare Prescription Drug Plan in 5 Steps

It's important to remember that the drugs covered and the costs you pay under Plan D can change year to year.
Alex Rosenberg
By Alex Rosenberg 
Edited by Dawnielle Robinson-Walker Reviewed by Marcia Mantell
How to Choose a Medicare Prescription Drug Plan in 5 Steps

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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 took effect at the start of 2023, while others start as late as 2026.

» Read more: What the Inflation Reduction Act means for your Medicare coverage

Whether you’re new to Medicare or a beneficiary gearing up for the annual open enrollment period from Oct. 15 through Dec. 7, you’ll want to pay special attention to your prescription drug coverage.

Medicare Part D plans, which are sold by private insurance companies, cover prescription drugs. There are two ways to get a Part D plan: Either you can purchase a stand-alone policy, or you can get prescription drug coverage as part of a Medicare Advantage plan.

People with Original Medicare (Part A and/or Part B) may purchase a stand-alone Medicare Part D plan for prescription drug coverage.

Most Medicare Advantage plans include prescription drug coverage. However, if you sign up for a Medicare Advantage plan that doesn’t provide Part D coverage, you generally can’t purchase separate Part D coverage unless you’re in a specific plan type, such as medical savings account plans or some private fee-for-service plans. If, later, you want to switch to a plan that includes Part D coverage, you’ll likely have to pay a permanent Medicare Part D late enrollment penalty.

In any case, it’s important to know the medications that are covered and understand how the costs can vary from plan to plan.

What Medicare Part D covers

Medicare prescription drug plans cover generic and brand-name drugs. All plans must meet a minimum level of coverage set by Medicare. This means they must all cover certain categories of drugs, such as high blood pressure, cholesterol or asthma drugs, but plans can choose which specific drugs are covered in each drug category.

Each Medicare Part D plan chooses the drugs it covers in what’s called a formulary. A specific formulary may not include your medicine but may include a similar option.

Like formularies, the cost of your drugs can vary from plan to plan depending on copays, tiered pricing and various restrictions discussed below. It’s important to research your coverage options thoroughly to find the plan that best fits your current prescription needs and your budget. “So often people just stick with the coverage they have even when there may be better, less expensive alternatives out there,” says Sue Greeno, a Medicare advocate who recently retired from the Center for Medicare Advocacy. These five steps can help you with your search.

1. Stay up to date with your current plan

Each year by the end of September, your plan will send you an Annual Notice of Change. This is also available on your insurance company’s website by mid-October. Greeno recommends everyone read this document carefully and check for the following critical information:

Just because your Part D plan covers your medicines now doesn’t mean it will next year. Formularies change often. Check the Annual Notice of Change to determine if your insurance company is dropping, substituting or restricting any of your prescription drugs.

Check to see if your plan is making any changes in the cost of the drugs it covers. Copays, coinsurance and deductibles can all change. Most plans have tiered copays, charging more for brand-name drugs than generics, for example. Check if any of the medicines you are taking have changed tiers and how that will affect your out-of-pocket costs.

If you have any questions about the Annual Notice of Change, contact your insurance company directly.

2. Use Medicare.gov to find plans

Because plans can change each year and because new plans become available each year, it makes sense to shop for the best Part D coverage for you during each annual Medicare open enrollment period (Oct. 15 to Dec. 7).

The Medicare.gov comparison tool can help. The tool has features that make it clearer and easier to determine if your medicines are covered, what pharmacies are in-network near you, and what your total out-of-pocket costs will be including copays and deductibles.

These pro tips can help you navigate the comparison tool:

Whether you’re searching stand-alone Part D plans or Medicare Advantage plans (or both), the tool allows you to enter each of your medicines. If you have a My Medicare account, the drugs you have already entered will be entered again automatically.

When the list of available plans pops up, it will automatically sort your options in order of lowest to highest total drug costs including premiums. You can search the plans to see if your drugs are covered and at what price.

Note: Just because you enter the drugs you are taking doesn’t mean that the plans that appear in the search necessarily cover all of them. You need to dig deeper into the search results to confirm that your medicines are covered in each of the plans.

When you enter your medicines, you’ll also be asked to search for up to five pharmacies nearby. You can include mail order as one of your options. The tool allows you to search pharmacies by name, but it will also automatically provide a list of nearby in-network pharmacies. An interactive map allows you to check pharmacies farther from you that may offer lower prices. Drug copays can vary significantly from pharmacy to pharmacy, so you’ll want to take advantage of this tool, Greeno says.

You can use the link at the top of the results page to toggle back and forth between stand-alone Part D plans and Medicare Advantage Part D options in your area. This makes it easier to compare the costs and availability of stand-alone Part D plans to Medicare Advantage with prescription drug plans.

Note: Read the summary results carefully and note if all costs are included, or if some are coming soon.

Many plans have tiered pricing, charging more in copays for brand-name drugs and still more for categories of expensive drugs. There are also tiers for special needs and high-priced drugs and current, less expensive pricing for insulin. Tiers and costs for different types of drugs vary from plan to plan.

The tier system may enter into your price decision. If you take only generics with very low copays that don’t count toward your deductible, you may decide a low-premium, high-deductible plan is the most affordable option. Someone with expensive out-of-pocket prescription drug needs, however, may well opt for the lower deductible, slightly higher premium plan.

3. Look for other restrictions

In addition to tiered pricing, prescription drug coverage may come with other restrictions.

Some plans have coverage caps, or limits on how many pills of a certain medicine they’ll pay for each month and other volume restrictions. In most cases, this works fine. But some patients may find these restrictions eliminate the less expensive bulk mail-order option, or they may need to consult with their physician for other affordable options.

In 2019, Medicare Advantage plans were allowed to implement “step therapy.” With this strategy, patients must try cheaper medicines first before they are allowed to move to costlier drugs.

For many patients, lifestyle changes or less expensive but equally effective medicines can work as well as costlier therapies. But in other cases, step therapy can be a delay in getting the acute care a patient needs. That’s why it’s important to know when step therapy is part of your plan and discuss any concerns with your doctor.

4. Understand the exception process

Many times patients will undergo an unexpected health change well into the calendar year that changes their prescription drug needs, which may include a medication not on their plan’s formulary. In other cases, patients may find a covered drug becomes ineffective, and they need to switch to a more expensive version or one that isn’t included in their plan’s formulary.

In these cases, with the help of their doctors, enrollees can file for an exception. “In most cases insurers will grant the exemption,” Greeno says. But it is another hoop patients have to go through. Be sure to examine how this process works in the Part D plans you're considering.

5. Ask for help

Even people with modest drug needs can find it challenging to compare the various options. You can get help with the process through your local State Health Insurance Assistance Program, so find the SHIP nearest you. Or, as Greeno suggests, check with your local senior center for help. Often staff can assist with open enrollment questions or will know a good resource.

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