How does Medicare Part D Work? [VIDEO]

Learn all about Medicare prescription drug coverage (Part D).

Medicare Part D, or prescription drug coverage, is an important part of your Medicare plan. Watch this video to understand the four stages of Medicare Part D and get some money saving tips along the way.


When looking to buy a Medicare plan, it’s important to understand how Medicare Part D works. Medicare Part D is your prescription drug coverage. It’s available to everyone with Medicare parts A and or B, but it’s only offered through private health insurance plans. So, you’ll have to enroll in it separately.

So, how does Medicare Part D work? Well, there are four Part D stages, and each stage is like a stepping stone throughout the year.

The Four Phases of Medicare Part D

1. Deductible phase

First, is the deductible stage. Most Medicare part D plans have a deductible, or a certain amount of money before the plan kicks in. So, that means you’ll pay 100% of your prescription costs until you reach your deductible.

2. Initial coverage phase

Once you’ve met your deductible, you move into the initial coverage stage. In this stage, your Medicare Part D plan helps to cover some of those costs. So, you typically pay a copay (a set amount of money) or coinsurance (a certain percentage of the cost for your meds).

You only move onto the next stage if you and your plan have spent a certain amount on covered medicines. This amount may change each year.

3. Coverage gap phase

If you reach the amount discussed above, you’ll enter the coverage gap stage, also known as the donut hole. During this stage you’re responsible for 100% of your prescription costs. It’s kind of like that first deductible stage, but here you get a discount.

In the coverage gap, you’ll pay a certain percentage for brands and a different percentage for generics (and these discounts change each year). Some plans offer additional coverage in the gap, which can save you money. So, be sure to check if your plan offers additional coverage. It’s important to know when you have reached this stage. Keep track of your prescription spending, so you’re not surprised the next time you visit the pharmacy.

4. Catastrophic phase

You leave the coverage gap and enter the catastrophic stage, if you’ve spent a certain amount of money for covered medicines. This is called your year-to-date out-of-pocket costs, and like before this amount changes each year. Usually people who use high priced medicines are more likely to reach this stage. Here you either pay a coinsurance or a set copay (whichever is greater) for you medicines.

And that’s it, those are the four stages of Medicare Part D. It’s not as bad as it looks.

If you have more questions, please attend a meeting or contact us. We’d love to help!