Prescription Drug Coverage: An Overview

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (also known as the MMA) created optional prescription drug insurance through Medicare. It is commonly referred to as Medicare Part D.

This drug coverage is available to everyone who has Medicare, regardless of income, health status or how their prescriptions were previously covered. Private companies provide the insurance coverage, you choose the drug plan and pay a monthly premium. If you have limited income, you may get extra help to cover prescription drugs at little or no cost.

Topics on this page

  1. Types of Part D Plans
  2. Premiums & Plan Costs (includes TrOOP costs)
  3. Covered Drugs
  4. Drug Formularies
  5. Pharmacies
  6. If You Have Medi-Cal & Are New to Medicare
  7. Marketing Rules for Your Protection

1. Types of Part D Plans

Private companies provide Medicare Part D coverage in 2 ways:

  1. Stand-alone prescription drug plans (PDPs)
  2. Medicare Advantage Prescription Drug plans (MA-PDs)

If you are enrolled in original, fee-for-service Medicare, you can enroll in a PDP. These plans only provide prescription drug coverage. In 2024, California has 23 of these plans available.

If you are enrolled in or want to join a Medicare Advantage (MA) plan with prescription drug coverage (MA-PD), you will get your Part D coverage through that plan. The availability of MA plans varies by county — some offer many options and others offer only a few. In addition, not all MA plans have prescription drug coverage. Your options are:

  • Health Maintenance Organization (HMO)

    Some HMOs provide Part D prescription drug coverage and others do not. If your HMO does not, you cannot enroll in a separate Medicare Part D plan. This means you will not have Part D coverage. If, however, you want prescription drug coverage and you want to be in an HMO, you must join an HMO with the prescription drug benefit. You can switch plans during the annual election period (October 15 to December 7 each year).

  • Preferred Provider Organization (PPO)

    Only local PPOs are offered in California in 2024. There are no statewide PPOs. And all the local PPOs offer prescription drug coverage.

  • Special Needs Plans (SNP)

    SNPs are designed for certain individuals, such as those in certain long-term care facilities (like nursing homes), people who are eligible for both Medicare and Medi-Cal, or people with certain chronic or disabling conditions. All SNPs provide Medicare prescription drug coverage.

See also:

Orange County HICAP, a program of Council on Aging Orange County developed this chart and gave CHA permission to post online.

For help finding and comparing plans, your best local resource is the Health Insurance Counseling & Advocacy Program (HICAP), which offers free and unbiased information. Find your local office or call 1-800-434-0222.

You can also visit or call 1-800-Medicare to speak to a customer-service representative. It is important to have your list of medications, Medicare number and the name of your preferred pharmacy available when you call or visit HICAP or the Medicare website.

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2. Premiums & Plan Costs

In 2024, California has 23 stand-alone prescription drug plans with monthly premiums ranging from $0.40 to $188.40. The insurance company or plan sponsor sets the premium in advance — it is not based on your health condition. In addition to the premium, you may also need to pay a deductible and/or a copayment or coinsurance for every prescription.

Note: Certain MA-PD plans may also have 2 separate premiums — one for Medicare Part A and B benefits, and one for Part D prescription drug benefits.

Higher Part D Premiums for Some Beneficiaries with Higher Incomes

If you are enrolled in a stand-alone Part D plan or MA-PD plan and have a higher income (at least $103,000/individual and $206,000/couple), you will have to pay a higher Part D monthly premium. The formula used to determine your premium amount is the same one used for Part B premiums, known as the Income Related Monthly Adjustment Amount (IRMAA). Your income level will be based on income reported to the IRS. IRMAA-related premiums will be either deducted from your Social Security check or billed. This premium is in addition to and separate from the premium paid to your Part D plan.

Below is a chart of the higher Part D premiums for higher income individuals and couples in 2024.

Individual income bracketCouples income bracketAdditional premium
>$103,000 but ≤$129,000>$206,000 but ≤$258,000$12.90
>$129,000 but ≤$161,000>$258,000 but ≤$322,000$33.30
>$161,000 but ≤$193,000>$322,000 but ≤$386,000$53.80
>$193,000 but <$500,000>$386,000 but <$750,000$74.20

Part D Plans’ Standard Benefit Design

The information below shows Medicare’s standard benefit design for all drug plans. Plans can either follow this design, or coverage guide, or offer a variation with different cost-sharing structures. The standard plan has an annual deductible with 4 different cost-sharing phases.

  • Phase 1 – Annual Deductible: Your cost-sharing is 100% of drug costs until your deductible is met ($545 in 2024).
  • Phase 2 – Initial Coverage: Your cost-sharing is 25% of your total drug costs until you meet the Initial Coverage limit ($5,030 in 2024 — this is what you and your plan pay combined). Your drug plan pays the other 75% of your drug costs.
  • Phase 3 – Coverage Gap: When your total drug costs exceed $5,575, your cost-sharing is 25% of covered brand name drugs and 25% of covered generics.  Previously, the coverage gap or “donut hole” was so called because you had to pay 100% of your drug costs. But since 2020, your cost sharing is only 25% until you reach Phase 4.
  • Phase 4 – Catastrophic Coverage: You pay nothing. This is a change resulting from the Inflation Reduction Act. Previously, you would have had to pay 5% of the covered drug cost or a copayment for the rest of the year, with your plan picking up the remainder of the costs. Now after reaching the $8,000 threshold, you have $0 costs. Catastrophic coverage begins when you reach the out-of pocket threshold ($8,000 in 2024). The out-of-pocket threshold is the sum of the deductible, the 25% coinsurance during the Initial Coverage period, and your drug costs plus the manufacturer’s discounts during the coverage gap.

Companies may vary from the standard design as long as the beneficiary’s out-of-pocket costs remain the same or lower than $8,000. For example, a company may offer a plan with no deductible, or more coverage and additional drugs for a higher monthly premium.

For more information, subscribe to our fact sheets: Medicare Fact Sheet Subscription Info.

True Out-Of-Pocket (TrOOP) Costs

Not all out-of-pocket expenditures are counted to determine if the threshold is reached. For example, the premium is an out-of-pocket expenditure, but it is not counted. Out-of-pocket expenditures that are counted toward the threshold are called True Out-Of-Pocket costs (TrOOP). These include the deductible and cost-sharing for drugs covered on your plan’s formulary that you purchase at one of your plan’s contracted or network pharmacies. In other words, if you pay for a drug that is not in your plan’s formulary or you don’t buy it at a network pharmacy, your payment is not counted as TrOOP to determine if you have reached the threshold. Only drugs on your plan’s formulary count toward the $8,000 out-of-pocket costs you pay before catastrophic coverage begins.

If you’re in the donut hole, the cost of your covered brand name drug(s) minus the 5% the plan covers is counted toward your TrOOP, not just the 25% you pay. For generics, however, only the amount you pay counts toward your TrOOP.

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3. Covered Drugs

Medicare prescription drug plans (PDPs and MA-PDs) are required to:

  • Cover “all or substantially all” drugs in these 6 categories:
    1. Antidepressant medications
    2. Antipsychotic drug medications
    3. Anticonvulsant medications
    4. Antineoplastic drugs (used by cancer patients)
    5. Immunosuppressant (used by transplant patients)
    6. Antiretroviral (used by patients with HIV).
  • Cover at least 2 options all other drug categories.
  • Make sure you have convenient access to retail pharmacies.
  • Have a process in place for you to get drugs that are not on the formulary when it is medically necessary (see Part D appeals).
  • Provide useful information, such as how formularies work, how to save money with generic drugs, and how to navigate the grievance and appeals processes.

Medicare prescription drug plans (MA-PDs and PDPs) are also required to cover benzodiazepines (including Xanax, Valium and other drugs often used for anxiety and insomnia) and barbiturates.

When choosing a Part D plan, it is important to find one that covers most, if not all, of the prescription drugs you take. If you join a plan that doesn’t cover one of the drugs you take, check with your plan’s transition policy. The plan may cover a drug that’s not on the formulary for 30-90 days while you work with your doctor to find an alternative drug that is covered by the plan. If your doctor believes you need to take your current drug and should not switch to a covered drug, you can contact the plan and ask for an exception. You will probably need to provide information from your doctor explaining why you need the drug. If your plan denies the exception, you can appeal the decision.

Certain types of drugs are not covered by any standard Medicare drug plan. However, certain enhanced drug plans may cover some of these drugs. These excluded drugs include:

  • Drugs used for anorexia, weight loss and weight gain
  • Fertility drugs
  • Drugs used for cosmetic purposes and hair growth
  • Cough and cold medicines
  • Prescription vitamins and mineral products
  • Over-the-counter (OTC) drugs

If you are on full Medi-Cal and need a drug that is excluded by Part D, check to see if Medi-Cal covers the drug. For more info, see the Medi-Cal section.

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4. Drug Formularies

Medicare drug plans cover both generic and brand-name drugs. Each plan has a list of drugs it covers, called a formulary. This list must always meet Medicare’s minimum requirements (for example, plans are required to include at least 2 drug options in each drug category), but it is not required to include all prescription drugs (see Covered Drugs). In certain circumstances, Medicare may allow plans to change their formularies during the year. Two examples are:

  1. If a new generic version of a covered brand-name drug becomes available
  2. If new FDA or clinical information shows a drug to be unsafe

In general, however, plans cannot discontinue or reduce the coverage of a drug you are currently taking. If a formulary change is made that affects you, the plan must let you know at least 60 days before the change takes place.

If your doctor thinks you need a drug that is not on your plan’s list, or feels a formulary change will have an adverse effect, you or your doctor can apply for an exception with your plan. If the plan denies you, you can appeal the decision. Learn more about Part D appeals.

Note: Medicare prescription drug plans use a system of tiers to apply a copayment to a particular drug. Generic drugs on a plan’s preferred list usually have the lowest copayment while drugs on the plan’s non-preferred list are on a higher tier with higher copayments.

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5. Pharmacies

Prescription drug plans must contract with pharmacies in your area, but not all pharmacies contract with all plans. Make sure the networked pharmacies in the plan you choose are conveniently located for you to access. You can check a plan’s pharmacy network on the Medicare Prescription Drug Plan Finder at, or call the plan’s customer service department. Many plans also allow you to receive prescriptions through the mail, often at a lower cost.

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6. If You Have Medi-Cal & Are New to Medicare

If you have full Medi-Cal and you’re newly eligible for Medicare, coverage for most of your drugs will switch from Medi-Cal to Medicare Part D (see our section on Medi-Cal & Prescription Drugs).

If you have not yet chosen a Part D plan, you will be assigned to one. If you are not assigned to one, you can still receive your drugs through the Low Income Newly Eligible Transition (LI NET) Program for drugs you need immediately. If you encounter problems obtaining drugs, contact your local HICAP office. Note: Your Part D drug plan may be required to reimburse you for drug costs you incur during this delay/gap of coverage minus copayments of up to $4.50 for generics and up to $11.20 for brand-name drugs in 2024.

If you have Medicare and then qualify for Medi-Cal, you may experience some delay in getting Extra Help (a.k.a. the Low-Income Subsidy or LIS) to help pay for your Part D plan costs. Your Extra Help benefits are effective the same date you become eligible for Medi-Cal. Thus, if you have a Medicare Part D plan then become eligible for Med-Cal, your copayment for covered drugs should decrease to $4.50 for generics and $11.20 for brand name drugs or less. If you are charged higher copayments for covered drugs, tell the Medicare Part D plan that you now qualify for Medi-Cal.

For more information, see our sections on Medi-Cal Part D’s Extra Help/Low-Income Subsidy (LIS) program.

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7. Marketing Rules for Your Protection

Part D plans and their agents/brokers must comply with many marketing rules to protect you and prevent marketing fraud. A few key rules/protections include that plan representatives:

  • Are not allowed to come to your home and give you information about their drug plan unless you invite them.
  • Can not call you at home if your phone number is listed on the National “Do Not Call” Registry.
  • Are not allowed to call you and ask for your Medicare number, Social Security number and other private information. They may only ask you for this information if you call them.

If you find a plan or representative that does not comply with these rules, report your complaint to your plan and 1-800-MEDICARE. Also call our California Senior Medicare Patrol (SMP) at 1-855-613-7080. You can email us at send in a complaint via our Medicare Issues and Complaints form, because we track such cases as part of our Medicare advocacy efforts.

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