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How does Medicare drug coverage work?

Medicare drug coverage (Part D) helps pay for prescription drugs you need. Even if you don’t take prescription drugs now, you should consider getting Medicare drug coverage. Medicare drug coverage is optional and is offered to everyone with Medicare. If you decide not to get it when you’re first eligible, and you don’t have other creditable prescription drug coverage
(like drug coverage from an employer or union) or get Extra Help, you’ll likely pay a late enrollment penalty if you join a plan later. Generally, you’ll pay this penalty for as long as you have Medicare drug coverage (see pages 83–84). To get Medicare drug coverage, you must join a Medicare-approved plan that offers drug coverage. Each plan can vary in cost and specific drugs covered. Visit Medicare.gov/plan-compare to find and compare plans in your area.

There are 2 ways to get Medicare drug coverage (Part D):

1. Medicare drug plans. 

These plans add Medicare drug coverage (Part D) to Original Medicare, some Medicare Cost Plans, some Private Fee-for-Service plans, and Medical Savings Account plans. You must have Part A and/or Part B to join a separate Medicare drug plan.

2. Medicare Advantage Plans or other Medicare health plans with drug coverage. 

You get your Part A, Part B, and Medicare drug coverage
(Part D) through these plans. Remember, you must have Part A and Part B to join a Medicare Advantage Plan, and not all of these plans offer drug coverage.

In either case, you must live in the service area of the plan you want to join and be lawfully present in the U.S. Both types of plans are called “Medicare drug coverage” in this handbook.

When can I join, switch, or drop a plan?

You can join, switch, or drop a Medicare drug plan or a Medicare Advantage Plan with drug coverage during these times:

• Initial Enrollment Period. When you first become eligible for Medicare, you can join a plan. See page 17.
• Open Enrollment Period. From October 15 – December 7 each year, you can join, switch, or drop a plan. Your coverage will begin on January 1 (as long as the plan gets your request by December 7).
• Medicare Advantage Open Enrollment Period. From January 1 – March 31 each year, if you’re enrolled in a Medicare Advantage Plan, you can switch to a different Medicare Advantage Plan or switch to Original Medicare (and join a separate Medicare drug plan) once during this time. See page 71.
  If you have to pay a premium for Part A and enroll in Part B for the first time during the General Enrollment Period, you can also join a plan from April 1 – June 30. Your coverage will begin on July 1.

The late enrollment penalty is an amount that’s permanently added to your Medicare drug coverage (Part D) premium. You may owe a late enrollment penalty if at any time after your Initial Enrollment Period is over, there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other creditable prescription drug coverage. You’ll generally have to pay the penalty for as long as you have Medicare drug coverage.Note: If you get Extra Help, you don’t pay a late enrollment penalty.
3 ways to avoid paying a penalty:
1. Enroll in Medicare drug coverage (Part D) when you’re first eligible.Even if you don’t take drugs now, you should consider joining a separate Medicare drug plan or a Medicare Advantage Plan with drug coverage to avoid a penalty. You may be able to find a plan that meets your needs with little to no monthly premiums. See pages 5–9 to learn more about your choices.
2. Enroll in Medicare drug coverage (Part D) if you lose other creditable coverage.

Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, Indian Health Service, the Department of Veterans Affairs, or individual health insurance coverage. Your plan must tell you each year if your non-Medicare drug coverage is creditable coverage. If you go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage, you may have to pay a penalty if you sign up for Medicare drug coverage later.
3. Keep records showing when you had other creditable drug coverage, and tell your plan when they ask about it.

If you don't tell your Medicare Plan about your previous creditable prescription drug coverage, you may have a penalty for as long as you have Medicare Coverage.

(Source: 2022 Medicare and You Handbook Pages 79,80,83)