How Does Medicare Part D Coverage Work?

What Drugs Are Covered?

Each Medicare Advantage plan with prescription drug coverage or Part D plan has its own list of covered drugs, called a formulary. Our pharmacy department and doctors decide which drugs to include based on quality, safety, and how well they work.

Every drug listed in our formularies is put into a cost group called tiers. For the lowest tier, you pay the lowest copayment. As you take a step up to the next tier, what you pay increases.

Learn more about our plans' drug coverage on our Pharmacy page.

What Is the Coverage Gap?

Medicare prescription drug coverage has 3 different phases of coverage — initial coverage, the coverage gap, and catastrophic coverage.

Initial Coverage

During initial coverage, your prescription drug coverage works like normal health insurance. Once you meet your deductible, you just pay copayments for your drugs based on what tier they fall under, and we pay the rest.

Talk to your doctor about generic drugs for extra savings, or look at ways to save on our plans.

The Coverage Gap

The coverage gap, also called the donut hole, is a temporary limit on what a plan will cover for drugs. It begins after you and your drug plan have spent a certain amount on covered drugs. Not everyone will enter the coverage gap.

What you must pay during this time is going down each year to help close the coverage gap.

Catastrophic Coverage

Catastrophic coverage makes sure you only pay a small coinsurance or copayment for drugs for the rest of the year after you leave the coverage gap.

If you get extra help, you won't enter the coverage gap.

What Is the Part D Late Enrollment Penalty?

The Part D late enrollment penalty is a an amount added to your Part D monthly premium because you didn't sign up for drug coverage when it was available to you. If you go without a Part D plan or a Medicare Advantage plan with drug coverage for 63 days or more in a row after your Initial Enrollment Period (IEP) is over, you might have to pay this penalty.

How Can I Avoid the Part D Penalty?

Join a Medicare Advantage plan with drug coverage or a Part D plan when you're first eligible.

During your IEP, if you sign up for a plan with drug coverage, you won't have to pay a penalty.

Don't go 63 days or more in a row without drug coverage.

After 63 days, you will have to pay a penalty to add drug coverage.

Get covered by a Medicare Advantage plan with drug coverage, a Part D plan, or other creditable prescription drug coverage, like coverage from an employer or union, TRICARE, or the Department of Veterans Affairs, before then to avoid this.

Your plan must tell you each year if your drug coverage is creditable coverage. Keep this information because you might need it to join a Medicare drug plan later.

Tell your plan about any other drug coverage you had.

When you join a Medicare drug plan, they'll send you a letter if they think you went 63 days or more without creditable drug coverage. That letter will also have a form asking about any other drug coverage you had.

Fill this out with the information you saved and return it to your plan by the deadline in the letter to make sure you don't have to pay a penalty.

How Much Is the Part D Penalty?

Your penalty depends on how long you went without prescription drug coverage.

Medicare calculates it by multiplying 1% of the national base beneficiary premium by the number of full, uncovered months you didn't have coverage. This is rounded to the nearest 10 cents and added to your monthly Part D premium.

The national base beneficiary premium changes each year, so your penalty amount might increase each year.


If you don't sign up for 6 months after your IEP, your penalty will be 6% (1% for each of the 6 months) of $35.63 (the national base beneficiary premium in 2017).

0.06 (6% penalty) x $35.63 (2017's national base beneficiary premium) = $2.14

$2.14 rounded to the nearest $0.10 = $2.15

$2.15 = your monthly late enrollment penalty

This number will be re-calculated each year with that year's national base beneficiary premium, and that new number will be added to your premium for that year.

If you get extra help, you won't pay the late enrollment penalty.