The costs of Medicare Part D plans can vary based on location and provider. However, in 2024, the average monthly premium is $55.50. Other costs may include medication copays.
Medicare Part D is the part of Medicare that covers prescription drug costs. Medicare requires that all people ages 65 years and over have some form of creditable prescription drug coverage. Creditable coverage is a health benefit, such as prescription drug coverage, or health insurance plan that meets a minimum set of qualifications.
A person may be able to set up prescription drug coverage through a Medicare Part D plan, a bundled Medicare Advantage plan, or a healthcare plan through their employer.
Choosing Medicare Part D can lead to varying costs, as private insurers administer these plans.
This article explains what types of expenses a person can expect to incur with their Medicare-related Part D prescription drug coverage.
Glossary of Medicare Terms
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare Part D premiums vary depending on the plan a person chooses and their location. To find out more about estimated costs, people can go to Medicare.gov and search for a specific Medicare plan.
However, a base premium applies to Medicare Part D, as well as to Medicare Advantage. For 2024, this base premium is $34.70. The average monthly premium, however, is $55.50.
A note on Part D premiums
Monthly premiums can vary greatly. For example, in 2024, a plan available nationwide may have a monthly premium of less than $1. A drug plan available in Pennsylvania and West Virginia may have a monthly premium of nearly $200.
Medicare can collect the Part D premium from Social Security funds. People may also choose to pay a bill every month or have the health insurance company automatically deduct the money from a bank account.
Read more about Medicare Part D.
Medicare requires that some people whose income is higher than a certain amount pay an additional premium for Medicare Part D.
They call this the income-related monthly adjustment amount (IRMAA). Medicare determines this amount using the monthly adjusted gross income from the enrollee’s most recent tax return.
A person does not pay their IRMAA to the insurance company that holds their plan. Instead, Medicare will often deduct this amount from their Social Security check.
If a person does not receive a check, they may have to pay a bill directly to Medicare or the Railroad Retirement Board.
The IRMAA premiums vary depending on whether a person files as an individual, married filing jointly, or married filing separately.
| Individual tax return | Joint tax return | Married filing separately | 2024 monthly cost |
|---|---|---|---|
| $103,000 or less | $206,000 or less | $103,000 or less | Plan premium only |
| More than $103,000 up to $129,000 | More than $206,000 up to $258,000 | Not applicable | $12.90 plus plan premium |
| More than $129,000 up to $161,000 | More than $258,000 up to $322,000 | Not applicable | $33.30 plus plan premium |
| More than $161,000 up to $193,000 | More than $322,000 up to $386,000 | Not applicable | $53.80 plus plan premium |
| More than $193,000 and less than $500,000 | More than $386,000 and less than $750,000 | More than $103,000 and less than $397,000 | $74.20 plus plan premium |
| $500,000 and above | $750,000 and above | $397,000 and above | $81.00 plus plan premium |
Medicare Part D involves several costs outside the premium, including:
- Deductible: Some Medicare Part D plans do not have a deductible. For 2024, the deductible for a Part D policy should not exceed $545.
- Copayments: Some people may pay a flat rate for medications in certain tiers, such as $5 for generic medications. These count toward their yearly out-of-pocket expenses.
- Coinsurance: A person may need to pay a certain percentage of medication costs. These also count toward a person’s out-of-pocket limit.
- Coverage gap (donut hole): Medicare Part D plans have a coverage gap or donut hole once Medicare and the individual spend a certain amount on drug costs. For 2024, this is $5,030. Once a person reaches the coverage gap, they will pay no more than 25% of the drug cost plus a dispensing fee. However, Medicare will not directly cover costs.
- Catastrophic coverage: When a person has spent $8,000 while in the coverage gap, they move to catastrophic coverage. This means they will not pay anything for prescription drugs for the rest of the year.
Read more about the Medicare Donut hole.
Medicare requires each company selling Part D plans to provide a standardized level of coverage. Each insurer will generate a list of medications that they cover — this is called a formulary.
To work with Medicare, insurance companies must cover at least two of the most commonly prescribed drugs in each drug category or class as generics.
| Tier | Description | Average 2024 drug cost |
|---|---|---|
| Tier 1 | •Tier with the lowest copayment •Includes most generic prescription drugs | •$0 for preferred generic drugs •$5 for other generic drugs |
| Tier 2 | •Tier with a medium copayment •Includes preferred and brand-name prescription drugs | •$47 copayment or •21% coinsurance for preferred brands |
| Tier 3 | •Tier with a higher copayment •Includes non-preferred and brand-name prescription drugs | •46% coinsurance payment •Includes both brand-name and generic drugs |
| Specialty tier | •Tier with highest copayment •Includes very high cost prescription drugs | 25% coinsurance payment |
Sometimes different companies will manufacture medications for the same issues. However, one of them may be more cost or medically effective. In these cases, the more effective medication will become the preferred drug and the less effective one becomes the non-preferred drug.
When a person chooses a Medicare Part D plan, they should carefully review the formulary to make sure that the medications that they take the most are on it.
People taking a brand-name medication should also contact their healthcare professional to see whether they can switch to a generic medication.
Medicare resources
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
Having Medicare Part D can help make a person’s medications more affordable. Medicare requires that a person has some form of drug coverage. Private insurers administer Part D.
Out-of-pocket costs include premiums, coinsurances, and copayments. Once a person with Part D and Medicare has paid $5,030 for medications, the person enters a coverage gap known as the donut hole.
Insurers need to provide Medicare with a formulary of drugs that they cover. They should reimburse costs for at least two generic drugs in every class of medications.
If a person has specific questions about Medicare coverage or Part D plans, they should call 1-800-MEDICARE.