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Prescription Drug

If you need prescription drug coverage and are approaching retirement age, a prescription drug coverage policy paired with Original Medicare benefits would be perfect for you. Although Original Medicare itself does not include prescription drug coverage benefits, you can purchase said benefits through their Part D prescription drug coverage program.

This is everything you need to know about Medicare’s prescription drug coverage option.

What Is Part D?

Part D of Medicare is the component of the Medicare system that helps members pay for their prescription medications. The drugs that are covered under any given policy will vary, but typically you will have access to at least two drugs for each major category of illness. This coverage is not automatically initiated when you enroll in Medicare, therefore you will need to apply separately.


Prescription Drug Plans - How Do They Work? Video Transcript

Prescription Drug Plans - How Do They Work?

Have you ever heard of the word “doughnut hole” and get completely confused when it comes to prescription drug coverage?

Hi, I'm Jessica Mannion at My Healthcare Direct, and today I'm going to be going over how prescription drug plans work, whether you are on original Medicare and purchase a separate standalone prescription drug plan or you're on a Medicare Advantage plan. The prescription drug plan works very similar. 

In many cases, prescription drug plans have an annual deductible, just like with major medical insurance, where you have to meet that deductible. 

First, before your insurance starts to pay for covered services, in this case, prescriptions. It is

important to note that most prescription drug plans require you to meet a deductible, if your prescription is classified as a tier 3, 4, or 5.


To make this easy. let's start by actually imagining a doughnut. Say you're taking a prescription

that is classified as a tier 4 drug. Before your plan will start to cover the cost of that prescription,

you will first need to meet that annual deductible.

In 2021, the average cost of a standalone prescription drug plan deductible could go as high as 445 USD. Think of it as the cost to get the doughnut.

Initial Coverage Level / Initial Coverage Phase

Once you have purchased the doughnut, you get to start to eat one side of it. This is where you start to pay for your prescription at a set copay or percentage in what is called the “initial coverage level” or “initial coverage phase.”

For example, let's say I was taking a tier 4 prescription drug. Once I've met my annual deductible, then I could either pay a copay of, say, 47 USD a month or a percentage such as 40% of the original retail cost of the drug.

Initial Coverage Limit / Doughnut Hole

Once you have eaten through one side of the doughnut, you have reached what is called the “initial coverage limit,” and you have entered into the infamous “doughnut hole.” This means that once both you and the insurance company have paid up to 4,130 USD. including your annual deductible in 2021, you will then be responsible for paying 25% of the prescription drug cost. 

TROOP and Catastrophic Coverage

Once you have reached 6,550 USD, that is when you have reached your “TROOP” or “true out-of-pocket cost.” This is when you reach the other side of the doughnut, also known as your “catastrophic coverage.” It is at this point that your prescription drug costs dropped to approximately 5% of the retail cost or approximately 3.70 USD for generic drugs and 9.20 USD for brand-name drugs for the rest of the calendar year.

So, what payments contribute to your troop or true out-of-pocket cost?

  • Your annual deductible
  • the amount that you pay during the initial coverage phase
  • the 25 you were responsible for while you were in the doughnut hole
  • as well as the 70% doughnut hole discount that is covered by the manufacturer 

All count towards your true-out-of-pocket cost.

If you have any more questions on how prescription drug plans work, feel free to give us a call

at 888-959-1028. You could also check out our website at

and you can also like us on Facebook.


Part D Benefits

Your Part D coverage will provide you with affordable access to the drugs you need to treat diagnosed illnesses. Part D plans are offered by private insurance companies, therefore you may discover that there are a number of different benefits structured available to you. In most cases, you can find plans that have one generic drug and one brand name drug for each major category. Specialty drugs are also available under some plans, but not all of them. Speak with an insurance agent to determine which Part D policy is best for you.

We can help!

Part D Enrollment

Enrolling in Part D benefits is easy, as all you need to do is submit an application once you become eligible. Upon acceptance, you will be able to choose from a variety of different plans. The Initial Enrollment Period, which begins three months before you turn 65 and ends three months after, is the best time to enroll. During this period, insurers cannot enforce underwriting requirements and you are more likely to find better rates.

Furthermore, enrolling during the Initial Enrollment Period can also help you avoid lapses in coverage, as the only other time you can enroll is during the soonest Open Enrollment Period. These occur annually and in some states, multiple times a year. If you are unable to rely on either of these options, you can also check to see if you qualify for a Special Enrollment Period. These are only granted under certain circumstances, so check with an insurance agent to see if you can use one to enroll sooner than usual.

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