Medicare Part D plans, often known as Medicare drug plans, are insurance policies that help pay for the cost of prescription pharmaceuticals. Their monthly premiums vary from policy to policy. According to the Centers for Medicare & Medicaid Services, the average monthly bid price submitted by private insurers is used to determine the national base beneficiary premium for Part D plans, which is $33.37 in 2022 and $32.74 in 2023.
However, your initial outlay could be notably larger or lower based on the strategy you select. Monthly plan premiums will be anywhere from $5.50 to $207.20 in 2022, reports the Kaiser Family Foundation. If you miss the enrollment deadline, go without prescription medication coverage for an extended period, or have a high taxable income, you will incur additional fees.
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What is Medicare Part D?
Prescription drug coverage is provided under Medicare Part D. Parts A and B of Original Medicare, which covers in-hospital care and out-of-hospital care, respectively, do not pay for prescription medications used during the out-of-hospital portion of a patient’s treatment.
In contrast to the government’s direct provision of Parts A and B, private insurance companies having contracts with the federal government issue Part D coverage.
If you opt for Original Medicare, supplementing your coverage with a Part D plan is crucial for covering the cost of your prescriptions. If you have a Medicare Advantage plan that includes prescription medication coverage, you may not need a separate Part D policy. (If you purchase a Medicare Advantage plan that does not include prescription drug coverage, you will not be eligible for a separate Part D plan.)
The parts of Medicare
Learn more about Medicare’s coverage details by reading about its many components.
- A of the Medicare Program (hospital insurance).
- Medicaid Coverage B (medical insurance).
- Part C of Medicare (Medicare Advantage).
- Part D of Medicare (prescription drug plan).
Are Part D plans expensive?
Generally speaking, no, not when compared to the normal monthly premiums for Part B of Medicare, which is $170.10 in 2022 (or $164.90 in 2023) for most beneficiaries. However, unlike Part A, which often has no premiums, these Part D plans do have premiums, and some of them can be rather pricey.
Premiums and deductibles are set independently for each plan. If you choose not to pay the insurance provider directly, you can have the premiums subtracted from your Social Security check. It is common practice for insurance companies to alter their drug coverage and associated costs annually. Because pharmacies’ preferred status might change at any time, it’s important to look around for a new drug plan or Medicare Advantage prescription drug plan every year to ensure you’re getting the greatest coverage and pricing for your medications.
Instead of going through the time-consuming process of setting up payments through Social Security and maybe switching plans while utilizing Social Security payment, you can save time and effort by setting up automatic payments with your Part D insurer.
When comparing plans, it’s important to keep in mind that cheaper premiums often mean greater deductibles. Still, no plan is allowed to charge more than the CMS-set cap. The utmost annual deductible in 2022 is $480. While the monthly payment may be less expensive, coverage will not begin until the deductible is met. However, because you have insurance, you may usually get your prescriptions at discounted rates. Medicare’s plan finder allows you to view your prescription drug expenses, premiums, and deductibles.
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Plan D costs to keep in mind
When comparing Part D plans, it is important to know how much you may expect to pay.
- Monthly premium: the sum required to maintain coverage under the prescription plan.
- Your insurance company will only pay for prescription medications when you’ve met your deductible.
- If you need to fill prescriptions often, you can compare the cost of those medications under the plan at any pharmacy of your choosing.
You should consider the total cost of the plan, including monthly premiums, deductibles, and copayments, before settling on a particular option. The total of these three factors should guide your choice.
Are there additional costs for high-income earners?
A surcharge will be added to your monthly premium for Medicare Part D if your income is above a specified threshold. Part D Income-Related Monthly Adjustment Amount, or Part D IRMAA, is a surcharge that isn’t included in the premium you pay to the insurance provider.
Individuals with high incomes are required to pay the Part D IRMAA regardless of whether they enroll in a Medicare Part D plan or a Medicare Advantage plan that also provides prescription drug coverage. Your Social Security payment will be reduced by the Part D IRMAA, which is never given to your insurance provider. You’ll have to fork over the extra money to the SSA on your own if you haven’t started collecting benefits yet.
2022 Medicare Part D IRMAA
If your MAGI for 2020 was more than $91,000 as an individual or $182,000 as a married couple filing jointly, you will have to pay a Part D IRMAA in 2022. (Your current year’s premiums are calculated using your prior year’s tax returns and your two most recent year’s worth of income.)
Information about the IRMAA’s Part D in 2022 is listed in the table below:
A Tax Return for One Person (2020 income) | Joined in marriage and tax filings (2020 income) | Jointly and severally liable (2020 income) | Part D premiums every month (in 2022) |
|---|---|---|---|
A yearly income of $91 000 or less. | less than $182,000 | A yearly income of $91 000 or less. | Your monthly premium. |
Between $109,000 to $140,000. | Increasing from over $182,000 to over $228,000. | This does not apply. | Included in your plan premium of $12.40. |
Priced between $114,000 and $142,000. | More than $228,000 and less than $284,000. | This does not apply. | Add $32.10 to your monthly premium. |
Over and above $142,000, up to $170,000. | Over the range of $284,000 – $340,000. | This does not apply. | Add $51.70 to the cost of your premium for the plan. |
Increased by more than 170,000%, yet still under 500,000$. | Higher than $340,000 and lower than $750,000. | Over $91,000 and below $409,000. | Plan premium on top of the $71.30 monthly payment. |
The equivalent of $500,000 or more. | Over the sum of $750,000. | The equivalent of at least $409,000. | The sum of $77.90, plus the cost of your chosen insurance plan’s premium. |
2023 Medicare Part D IRMAA
If your MAGI on your 2021 tax return was more than $97,000 (single) or $194,000 (joint), you will have to pay a Part D IRMAA in 2023.
Here are the 2023 IRMAA specifics for Part D, as listed in the table below.
Filling Out Your Taxes (2021 income) | Joined in marriage and tax filings (2021 income) | Jointly and severally liable (2021 income) | Part D premiums every month (in 2023) |
|---|---|---|---|
The value of $97, 000 or less. | Reduced to or equal to $194,000. | The value of $97, 000 or less. | Your monthly premium. |
At least $97,000 and no more than $123,000. | Over the range of $194,000 to $246,000. | This does not apply. | Add $12.20 to your monthly premium. |
Over the range of $123k to $15k. | Above $246,000 up to $306,000. | Not applicable. | $31.50 plus your plan premium. |
The range is from $153,000 to $183,000. | Over $306,000 and up to $365,000. | This does not apply. | Your plan premium of $50.70, is extra. |
Over $183,000 and below $500,000. | Over $366k and under $700k. | Priced at more than $97,000 but less than $403,000. | The extra cost of $70 on top of a monthly subscription. |
The equivalent of $500,000 or more. | Over the sum of $750,000. | Higher than or equal to $403,000. | Add $76.40 to your monthly premium. Source: Medicare.gov |
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What about the Part D late-enrollment penalty?
If you don’t sign up for Medicare Part D within the first enrollment period (the seven months beginning three months before the month you turn 65) or if you go more than 63 days without qualifying prescription drug coverage, Medicare will assess a late-enrollment penalty. For as long as you keep your Medicare prescription coverage, you’ll have to pay this penalty in addition to your monthly fee.
For each month you were eligible to enroll but didn’t, you’ll be charged 1% of the national base beneficiary premium ($33.37 in 2022). A maximum number of months is not specified. If you don’t have a Medicare Part D plan but end up needing an expensive medication 72 months later, you’ll be responsible for the whole cost of the medication out of pocket. For the duration of your retirement, it will be applied monthly.
Here’s how it works:
Where M is the total number of complete months in which you were entitled to but lacked prescription drug coverage. The NBBP for 2022 is $33.37 (or the “national base beneficiary premium”).
M times 1% of NBBP per month is the monthly penalty.
The final amount is rounded up to the nearest ten cents. The amount of the monthly penalty you owe may rise over time due to fluctuations in the national base beneficiary premium.
Here’s an example:
Let’s say you decided to wait 24 months after your initial enrollment period finished before finally deciding to buy prescription drug coverage.
The cost of this monthly fine is $33.37 ($24 * 1%). The penalty for each month is $8.01, or $8 if rounded up.
Even though it might not seem like much, this costs a total of $96 annually and might increase in the future if the national base beneficiary premium goes higher.
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How to avoid the Part D late-enrollment penalty
- As soon as you become Medicare-eligible, sign up for either Medicare Part D or a Medicare Advantage prescription medication plan.
- Medicare drug coverage should be applied for immediately if you lose your prescription plan due to a change in employment or plan discontinuation.
- To prove that you have had continuous coverage in the past, it is important to keep detailed records of your prescription insurance claims.
You have the right to request a review of any Medicare penalty you believe was issued in error. You must respond to the penalty notification within 60 days of receiving it and must provide any supporting materials. A determination is typically made within 90 days.
