Cost of Medicare Part D in 2023 and How It Works
Find Cheap Medicare Plans in Your Area
Medicare Part D, or Medicare drug coverage, is a type of prescription drug policy that can help you pay for a variety of medications. You can purchase a stand-alone Part D policy and pair it with Medicare Parts A and B.
The average monthly cost of a Medicare Part D plan is $49.
Costs depend on the Part D plan you select, but rates can be higher if you decide to wait and join a Part D plan after your initial enrollment period ends, which is usually about three months after you turn 65.
What does Medicare Part D cost for 2023?
For 2023, the average cost of Medicare Part D plans is $49 per month. The majority of customers only pay this monthly rate, known as your premium, which is one of three possible charges you could pay for Part D. Your Medicare Part D insurance provider sets your monthly plan premium and bills you directly for that amount. Some people are also required to pay a penalty for enrolling late in Part D, and that amount is also part of your bill and is paid to your insurance company.
A third charge, which is fairly rare, is a Part D rate adjustment based on income. If you must pay extra for Part D due to a higher income, that amount goes directly to Medicare, usually through a deduction from your monthly Social Security benefit payment. For railroad retirees, the fees are deducted from your Railroad Retirement Board payment. If you don’t get a monthly benefit payment, Medicare will send you a bill.
Fee type | Who you pay |
|---|---|
| Part D monthly premium | Your insurance company |
| Part D income adjustment, if any | Medicare, via a bill or electronic deduction |
| Part D late enrollment fee, if any | Your insurance company, as part of your monthly bill |
You may also qualify for Part D Extra Help, which could reduce your monthly premium and how much you pay for prescriptions.
How are Medicare Part D rates calculated?
Medicare sets your Part D rate based on your reported income, similar to how Medicare Part B rates are determined. The income you reported for 2021 will be used to set your Part D costs for 2023.
Say you reported a 2021 income of $100,000 and are enrolled in a Part D plan for $50 per month. Based on your income, you would pay the cost of your plan ($50) plus an income adjustment of $12.20, for a total Part D premium of $62.20.
Note that you pay the $50 to your insurance company, while the income adjustment fee ($12.20) goes directly to Medicare.
Individual taxable income | Joint taxable income | Monthly Part D premium |
|---|---|---|
| $97,000 or less | $194,000 or less | Your plan cost |
| $97,001 to $123,000 | $194,001 to $246,000 | $12.20 + your basic plan cost |
| $123,001 to $153,000 | $246,001 to $306,000 | $31.50 + your basic plan cost |
| $153,001 to $183,000 | $306,001 to $366,000 | $50.70 + your basic plan cost |
| $183,001 to $500,000 | $366,001 to $750,000 | $70.00 + your basic plan cost |
| $500,001 or above | $750,001 or above | $76.40 + your basic plan cost |
Medicare Part D late enrollment fee
Like Medicare Part B, Medicare Part D charges a late enrollment fee. This will occur if you decided not to enroll in Part D during your initial enrollment period and did not have other creditable prescription drug coverage during that time.
The late enrollment penalty is a permanent amount that is added to your overall Medicare Part D premium for as long as you have Part D.
In general, the penalty varies depending on how late you decide to enroll. Medicare calculates this amount by multiplying 1% by the number of months that you were not enrolled in a prescription drug plan, then by the national base beneficiary premium, which is $32.74 for the 2023 plan year. (The base beneficiary premium will change year to year, so your penalty will also change going forward.)
For example, if you enroll in Part D exactly 12 months after your initial enrollment period, your penalty will be:
12% x $32.74, or $3.93
This means you will pay $3.93 extra every month that you are enrolled in Medicare Part D. The penalty is part of your monthly premium, and you pay it directly to your insurance provider.
How to avoid the Medicare Part D late enrollment penalty
Fortunately, there are steps you can take to avoid the late enrollment penalty:
- Enroll in Part D or a Medicare Advantage plan with drug benefits as soon as you become eligible.
- If you've lost your prescription plan due to a life-changing event such as an employment change, enroll in Medicare drug coverage within two months of the loss of coverage.
- If it seems you've been penalized in error, request a reconsideration within 60 days of being notified about the penalty. You can typically expect a reply within 90 days.
Medicare Part D cost-sharing phases
Cost sharing refers to the portion of costs paid out of your pocket for services covered by your plan. These costs typically include copays, coinsurance and deductibles but do not include monthly premiums or the cost of noncovered services.
There are four phases of Part D cost sharing:
- Initial deductible. During this time, you pay the full price for prescriptions until your costs reach a certain amount specified in your plan. The maximum deductible for 2023 is $505, but your plan may charge less.
- Initial coverage period (ICP). After you meet your deductible, you enter the ICP. While in the ICP, you pay your normal coinsurance or copays for prescriptions, according to your plan benefits, until total costs (paid by both you and your insurer) reach $4,660.
- Coverage gap or donut hole. This is the time between the initial coverage period and the catastrophic period, during which you pay 25% of the cost of generic and brand-name prescriptions.
- Catastrophic benefit period. The catastrophic benefit period kicks in once you have paid out $7,400 in total prescription costs. You then pay either a copay or 5% coinsurance for prescriptions (whichever is greater) for the remainder of the calendar year.
Out-of-pocket costs charged during the initial deductible and initial coverage periods will vary by plan. During the coverage gap, or donut hole, you pay more for prescriptions until you spend enough to qualify for the catastrophic period.
Example
In the below scenario, the sample insurance plan charges the maximum deductible of $505, then a member coinsurance of 30% for each prescription, with the plan paying 70%, during the ICP.
Initial deductible
-
Who pays
- You: 100%
-
What you'll pay
- $505
-
What the plan pays
- $0
Total spent: $505
Initial coverage period (ICP)
-
Who pays
- You: 30%
- Plan: 70%
-
What you'll pay
- Up to $1,246.50 plus the $505 deductible already paid, for a total of $1,751.50
-
What the plan pays
- $2,908.50 in plan payments
Total spent: $4,660
Coverage gap or donut hole
-
Who pays
- You: 25% of drug cost and a part of the drug dispensing fee
- Plan: 75% of generic drug price, 5% of brand-name price
- Manufacturer: 70% discount toward brand-name drugs
-
What you'll pay
- $2,740
-
What the plan pays
- Plan payments are not applied toward donut hole costs. Only member fees (shown above) and the manufacturer's 70% discount "payments" are applied to the total out-of-pocket cost during this phase.
Total spent: $2,740
Catastrophic benefit period
-
Who pays
- You: Copay or coinsurance
- Plan: The balance after your payment
-
What you'll pay
- Either 5% coinsurance or a copay of $4.15 (generic) or $10.35 (brand), whichever is greater
-
What the plan pays
- The remainder of the drug cost
Total spent: All prescription costs for the remainder of the calendar year
Buying brand-name drugs helps you reach the catastrophic benefit period sooner. This is because while you pay just 25% of the charge, almost the full price of any brand-name drug counts toward your gap amount. With generic drugs, only the amount you pay (your 25%) counts toward the gap amount.
What is Medicare Part D?
Medicare Part D is the prescription drug portion of Medicare that helps members pay for brand-name and generic prescription drugs.
Medicare Part D plans are handled by private insurance companies. All policies are required to provide a standard level of coverage, meaning they pay for a core set of prescription drugs.
Outside the core set of prescriptions covered by Part D, coverage and cost sharing will vary from provider to provider. Before enrolling, review plans to find out whether your drugs are covered and how much you'll be required to pay out of pocket.
If you need coverage for a specific medication, it is important to view the plan's drug formulary carefully to see if the drug you need is covered. You can find coverage information in the insurance company's plan documents or by visiting the Medicare.gov Part D comparison tool.
Within the formularies, Medicare Part D provides coverage tiers that group drugs with similar costs and copays. Tiers often specify "preferred" versus "nonpreferred" brand-name drugs. If a drug falls into the nonpreferred category, it is because the insurer found that a generic or preferred version would serve the same need at a lower cost.
Nonpreferred drugs typically incur the highest copays, whereas generics will have low copays through your Part D plan.
Other Medicare parts
Read more about the other Medicare parts and Medigap plans and what they cover:
Medicare Part D eligibility and enrollment
You must first enroll in Medicare A and B before you can apply for Part D. To qualify for Part D, you must fall into one of the below categories:
- Be over the age of 65
- Have a disability if you are under the age of 65
- Have end-stage renal disease
- Have Lou Gehrig's disease (ALS)
How do I choose a Medicare Part D plan?
When choosing a Medicare Part D policy, consider these possible scenarios:
Before you begin your search, compile your list of prescriptions and the dosage for each and have that handy for reference.
I need coverage for a specific drug
If you need coverage for a very specific drug, then enrolling in Medicare Part D is typically the best option. In this case, you should carefully review the drug documentation, called a formulary, for every plan you're considering, to confirm the drug you need will be covered.
I take a lot of generic drugs
If you rely mostly on generic drugs, then adding Part D when you enroll in Original Medicare may make the most sense. Review the tier lists for each plan, and pick a policy with small copayments for generic, lower-tier drugs.
I don't have drug costs now, but I want coverage for the future
In this case, browse for a drug plan to pair with your Original Medicare policies. Try to find a plan with a lower monthly rate since you do not need expansive coverage right now. If your prescription needs increase later, you can change to a policy with a higher level of benefits, usually during an open enrollment period. When you switch, you won't incur any late enrollment penalties as long as your coverage continues without a break of 63 days or more.
I want a simplified experience where I get my drug coverage and medical benefits from one plan
If you are looking for a policy where all your costs are grouped together and a plan that comes with extra benefits, then Medicare Advantage, also called Medicare Part C, may be best for you. Make sure the Part C plans you are comparing specifically offer drug coverage.
Frequently asked questions
Can I get help with drug costs even if I have Medicare Part D?
Even if you have Medicare Part D, you may be able to reduce costs through a program called Extra Help, which assists with premiums, deductibles, copays and coinsurance. With Extra Help, you are not subject to late enrollment fees or costs related to the Part D donut hole.
You also can search for a Pharmaceutical Assistance Program in your state using this Medicare.gov resource.
What can I do to avoid Part D late enrollment penalties?
To avoid late enrollment fees, join a Part D plan (or a Medicare Advantage plan with drug coverage) when you first become eligible. Even if you don't take prescriptions now, you'll have coverage when you need it without paying a penalty. Similarly, enroll in Part D or Medicare Advantage as soon as you lose other creditable drug coverage. Keep records of your prior coverage to share with your insurance company upon request.
Methodology
Cost, eligibility and enrollment information for Medicare Part D was sourced from Medicare's website, Medicare.gov, as well as from the Centers for Medicare & Medicaid Services (CMS). Specific areas of focus were sections on how to get prescription drug coverage as well as costs for Medicare drug coverage.
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