How Does Medicare Drug Coverage Plan Work?


The Medicare drug coverage plan, also known as Medicare Part D, is a form of insurance that covers a portion of your prescription costs. Anyone eligible for Medicare can enroll in this coverage plan. It covers both brand-name and generic type medications. Though sponsored by Medicare, these plans are sold by private insurance companies so costs will vary.

Any category of medication covered under Medicare is also covered under the drug coverage plan. There are, however, specific categories of drugs not covered under Medicare, some of which include barbiturates, benzodiazepines, fertility and over-the-counter smoking cessation drugs. As these plans are issued by private insurance companies, some companies may offer to cover medications not covered by Medicare as an added benefit to their customers.

Drug Coverage Plan Options

Medicare drug coverage plans can be purchased as a single plan, or as part of a Medicare Advantage Plan. Single plans are called Prescription Drug Plans (PDP), and only provide coverage for medication costs. Medicare Advantage Plans, also known as Medicare Part C, typically include a prescription plan along with health insurance coverage. Eligible persons must enroll in a drug coverage plan in order to covered. The enrollment period runs from November 15 to December 31.

For those under the traditional Medicare model, enrollment in both Medicare Part A and B is required to be eligible for the drug coverage plan. Participants will pay a monthly premium for Part D in addition to the premium requirements under Medicare Part B. Those looking to enroll in a Medicare Advantage Plan can opt to have drug plan coverage, however premium costs will be higher. Individuals with limited income may be eligible for both Medicaid and Medicare coverage. Information regarding eligibility requirements for low-income individuals is available through the Social Security Administration Office.

Drug Coverage Plan Costs

Drug coverage plans typically require participants to pay an annual deductible along with co-payments, and will list an annual coverage limit. Annual coverage limits are set at $2,700.00. Premium costs will vary depending on which type of plan you choose. Annual deductible amounts average around $295. Once the deductible is paid, participants pay 25 percent of all prescription costs up to $2,700.

As these plans are issued by private insurance companies, specific brands of drugs may, or may not be covered depending on which company you go with. Some companies may cover only certain brand name drugs, while others may mostly cover generic brand medications. Each company establishes their own list of covered drugs. These lists are based on standard drug classifications. Companies may pick and choose at their discretion provided all Medicare approved categories are covered.