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How to pick a Medicare Part D plan

Key takeaways

  • Never pick a Medicare Part D prescription drug plan just because it has a low monthly premium. Instead, pick a plan based on how the prescription drugs you're taking are covered.
  • Pay attention to Medicare Part D plans with special rules that may limit prescription usage or force you to satisfy requirements before you can have a prescription drug.
  • Typically, you can switch Medicare Part D plans each year during open enrollment (October 15–December 7), but some states may have more switching options available.

For most retirees, health care—especially prescription drugs—can be a significant expense. In 2020, the average annual cost of therapy for a single specialty prescription drug was $84,442 per year, nearly 3 times the median income for Medicare beneficiaries ($29,650) and 13 times higher than the average annual price of therapy for brand name prescription drugs ($6,604).1

Whether or not you need coverage when you first sign up for Medicare, it's critical to plan ahead. Most people will need coverage at some point in retirement. If you're uncovered and need prescription drugs, the costs can be crippling. And if you wait to sign up for drug coverage until you need it, you will likely need to pay a much higher insurance premium.

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Those eligible for Medicare have 2 options: A stand-alone Medicare Part D prescription drug plan or an "all-in-one" approach with a Medicare Advantage plan. Here we will focus on Medicare Part D. (For insights on Medicare Advantage, read Viewpoints on Are Medicare Advantage plans really an advantage?)

Either way, it's crucial to consider Medicare drug coverage options carefully.

Your Medicare Part D checklist

Not all Part D plans are created equal. Each plan varies in terms of cost, the drugs covered, special rules, and so on. Just because a friend or family member's Part D plan works for their needs doesn't mean it will work for yours. Instead, do some homework. Here are 5 simple steps to get started.

  1. Make a list of your current prescription drugs, including the dosage, quantity (30-day supply, 60-day supply, etc.), format (ointment, pill), and frequency (how often you take them).
  2. Take your list to the Medicare Plan Finder at It can show you which Part D drug plans are available in your area and which of those plans cover your drugs. (You can also use the Plan Finder each year to check your current Part D plan and see if better options are available.)
  3. Once you find plans that cover your prescriptions, see how much they will cost you. Costs are typically your monthly premium (what you pay to have the Part D plan) and any out-of-pocket amount you pay for a drug. While a Part D plan may cover your prescriptions, you may wind up paying more compared to other plans, depending on which pricing tier the plan places your prescriptions (referred to as a drug formulary).
  4. Your share of the prescription drug costs can fluctuate based on your drug's category (generic or brand). Part D plans usually spell out this information in their plan details. If you want to choose a plan with a low monthly premium, make sure to consider the plan's total cost (premium plus out-of-pocket costs) per year.
  5. Check out the Part D plan's ratings. Medicare gives Part D plans a rating of 1 start (poor) to 5 star (excellent) based on customer service, customer experience and complaints, performance, drug safety, and pricing accuracy. These ratings can help you know how good a job the plan is doing in providing coverage. Keep in mind new plans might not have a rating.

What if I'm not taking prescription drugs?

No one can predict the future. Even if you're a super fit 65-year-old and you're not taking any prescription drugs, you could need a prescription because of a sudden illness or accident. Without prescription drug coverage, you could wind up paying the full cost, which could be hundreds or thousands of dollars.

Even if you don't take prescription drugs currently, if you need them later and you try signing up for a Part D plan late, you could face a penalty of 1% for each month you went without coverage. Not having Part D coverage could be a costly—and long-term—mistake.

You should consider enrolling in a Part D prescription drug plan as soon as you become eligible for Medicare (unless you have creditable drug coverage such as from an employer health plan), regardless of your current prescription drug needs.2

Read Viewpoints on Getting ready for Medicare Part D to learn more about late penalties. 

Navigating Part D restrictions

A Part D plan may also feature restrictions around certain prescriptions. These restrictions are intended to address drug safety and manage prescription drug costs. You'll usually see these drug restrictions on the higher pricing tiers in a drug plan. Here are some common ones:

  • Prior authorization: A plan can require you to get physician authorization and/or insurance company approval before your prescription is covered.
  • Quantity/dosage limits: If your doctor prescribes a prescription drug at a certain dosage or for a certain period that a plan considers outside the range necessary to treat your condition, the plan may not cover the drug. Or, the plan may ask that it be prescribed at a lower dosage or for a shorter period.
  • Step therapy: If your doctor prescribes an expensive drug, the plan may require you to try a similar but lower-priced drug first.

While not every Part D prescription drug plan includes these restrictions, there are steps you can take to avoid them in plans that do. The 2 biggest actions you can take are:

  1. Try a different drug. Ask your doctor if there's a more affordable alternative to a restricted drug or a generic version of the drug. Read Viewpoints on How to save money on prescription drugs to learn more about cost-saving strategies for prescriptions.
  2. Try a different Part D plan. You can switch Part D plans during open enrollment.

Yes, you can switch plans as your needs change

If your Part D plan isn't working for you, there's hope. Each September, plans send out an Annual Notice of Change letter. This letter lets you know about plan changes for the upcoming year, such as cost increases or drugs being added or removed from the plan (or switched to a different pricing tier). Read the Annual Notice of Change letter carefully to see if it makes sense to keep or switch your plan. You can change plans during open enrollment.

Get ready

Before you enroll in a Part D prescription drug plan, find out which plans are available in your area and whether they cover your prescriptions. Compare their overall cost and look for a plan that:

  1. Features the lowest overall cost
  2. Has either no restrictions or minimal restrictions
  3. Best meets your health and financial needs

If the costs to cover your drugs are too high for your budget, contact your local State Health Insurance Assistance Program (SHIP) office about programs available in your state that help with costs. These services are provided at no extra charge to you. (You can also check with your state's SHIP representatives to see when you are allowed to change Part D plans.)

Choosing Medicare prescription drug coverage is a decision you'll have to make throughout your retirement. It's important to map Medicare and prescription drug costs into your overall retirement plan, either on your own or with the help of your financial professional.

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1. Rx Price Watch Report: Trends in Retail Prices of Specialty Prescription Drugs Widely Used by Older Americans, 2006 to 2020; September 2021 2. Unless you have what is known as creditable drug coverage, which is drug coverage that's considered an acceptable substitute for Medicare Part D coverage. An example would be drug coverage under an employer

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