Prescription Drug Plans

Medicare Part D is a federal program administered through private insurance companies. These companies offer retail prescription drug coverage to Medicare beneficiaries. Beneficiaries can enroll in a standalone Part D drug plan that goes alongside their Original Medicare benefits, or they can choose a Part D drug plan that is built-in to a Part C Medicare Advantage Plan.

Medicare part D is simply insurance for your medication needs. You pay a monthly premium to an insurance carrier for your Part D plan. In return, you use the insurance carrier’s network of pharmacies to purchase your prescription medications. Instead of paying full price, you will pay a copay or percentage of the drug’s cost. The insurance company will pay the rest.

4 Stages to a Part D Drug Plan


  • In 2023, the maximum allowable Medicare Part D deductible is $505.
  • Plans may charge the full Part D deductible, a partial deductible, or waive the deductible entirely.
  • Some plans do not have a deductible for Tier 1 and Tier 2 drugs.
  • You will pay 100% of the network discounted price for your medications until you have satisfied the deductible. After that, you enter the Initial Coverage Stage.

Initial Coverage

  • During this stage of Part D drug coverage, you will pay a copay for your medications based on the plan’s drug formulary.
  • Each drug plan separates the covered medications into pricing tiers, and your co-pay may vary by tier and by the type of pharmacy you use such as a preferred retail pharmacy, a standard retail pharmacy, or by mail order.
  • Common tiers are:
      • Tier 1: Preferred Generic
      • Tier 2: Generic
      • Tier 3: Preferred Brand
      • Tier 4: Non-Preferred Drug
      • Tier 5: Specialty Tier
  • Each tier has a cost-share amount which may either be a set dollar amount or a set percentage amount you pay each time you fill your prescription.
  • In 2023, you will remain in the Initial Coverage stage until the shared total spending by both the insurance company and you reaches $4,660.

Coverage Gap (or “Donut Hole”)

  • After you’ve reached the initial coverage limit for the year ($4,660 in 2023), you enter the coverage gap.
  • During this gap in prescription drug coverage, you may pay more for your drugs. You will pay a maximum of 25% of the plan’s cost of your brand name drugs and no more than 25% for generics and the plan pays the rest.
  • In 2023 your gap spending will continue until your total out-of-pocket drug costs reaches $7,400.

Catastrophic Coverage

  • This coverage stage begins when you reach the $7,400 coverage gap limit.
  • In this stage, you pay $4.15 for generics or $10.35 copay for brand-name drugs, or 5% of your prescription costs, whichever is greater.

Your plan’s benefits, formulary, pharmacy network, provider network, premium and/or copayments/co-insurance may change on January 1st of each year. Medicare gives you an annual election period during which you can change your plan if you desire to do so.

All insurance agents at Heartland Insurance train extensively to carefully analyze your potential drug spending in the coming year. We can help you find a plan that offers you the lowest possible annual drug spending.

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