One of the most confusing aspects of Medicare is understanding which part covers which medications. Many patients are surprised to find a prescription denied or billed incorrectly because it was submitted under the wrong Medicare part. Understanding how Parts A, B, and D each cover medications — and where they overlap — can help you catch billing errors before they cost you money.
Medicare Part A: Medications During Inpatient Hospital Stays
Medicare Part A covers drugs that are part of your inpatient hospital treatment. This includes any medication administered to you while you are admitted as an inpatient — antibiotics, pain medication, anesthesia, chemotherapy drugs given during an inpatient stay, and more. These costs are bundled into your hospital bill and covered under Part A benefits.
Part A does NOT cover medications you take at home after discharge, even if they were prescribed during your hospital stay. Once you leave, coverage shifts to Part B or Part D depending on the drug.
Common billing error: Hospitals sometimes bill separately for drugs that should be bundled into the inpatient rate. If you see individual drug charges on your hospital bill for an inpatient stay, that may be a billing error worth auditing.
Medicare Part B: Outpatient and Provider-Administered Drugs
Part B covers a specific category of drugs — those that must be administered by a healthcare provider in a clinical setting, or drugs used with durable medical equipment. This is an important distinction: Part B does not cover drugs you pick up at a pharmacy and take at home.
Drugs typically covered under Part B include:
• Chemotherapy and anti-nausea drugs given in a doctor's office or outpatient clinic
• Injectable drugs for conditions like rheumatoid arthritis, multiple sclerosis, and macular degeneration (e.g., Remicade, Avonex, Lucentis)
• Dialysis drugs administered at a dialysis facility
• Certain vaccines including flu shots, pneumococcal vaccines, and Hepatitis B vaccines for at-risk individuals
• Drugs used with DME — for example, nebulizer medications or insulin used with an insulin pump
Cost sharing: Under Part B, you typically pay 20% of the Medicare-approved amount after meeting your Part B deductible ($257 in 2026). There is no out-of-pocket cap under Part B alone, which makes billing accuracy especially important for patients receiving expensive Part B drugs like biologics.
Common billing error: Part B drugs billed with incorrect HCPCS codes or at higher dosages than administered. For infusion drugs especially, the billed quantity should match your medical record. A difference of even one unit can result in significant overcharging.
Medicare Part D: Prescription Drug Coverage
Part D is the prescription drug benefit that covers most medications you pick up at a pharmacy. Part D plans are offered by private insurers approved by Medicare, and each plan has its own formulary — the list of drugs it covers and at what cost tier.
Part D tiers typically work as follows:
• Tier 1 — Preferred generic drugs (lowest copay, often $0–$5)
• Tier 2 — Non-preferred generics (slightly higher copay)
• Tier 3 — Preferred brand-name drugs (moderate copay or coinsurance)
• Tier 4 — Non-preferred brand drugs (higher cost sharing)
• Tier 5 — Specialty drugs (highest cost sharing, often 25–33% coinsurance)
The $2,000 Part D Out-of-Pocket Cap (2025–2026)
A landmark change under the Inflation Reduction Act capped annual Part D out-of-pocket drug costs at $2,000 starting in 2025. Once you reach this threshold on covered drugs, your plan pays 100% for the rest of the year. This is a major benefit for patients on high-cost specialty medications who previously faced unlimited exposure in the coverage gap.
Also new in 2026: The first negotiated drug prices take effect for ten high-cost medications including Eliquis, Jardiance, Xarelto, Januvia, and Farxiga. If you take any of these, your out-of-pocket cost should be meaningfully lower than prior years.
Extra Help: The Low Income Subsidy Program
Medicare's Extra Help program (also called the Low Income Subsidy or LIS) assists qualifying beneficiaries with Part D premiums, deductibles, and copays. Eligibility is based on income and assets. In 2026, individuals with incomes below approximately $22,590 (or $30,660 for couples) may qualify. If you are eligible and not enrolled, you may be significantly overpaying for medications.
Prior Authorization and Step Therapy: When Coverage Gets Complicated
Many Part D and Medicare Advantage plans require prior authorization for certain drugs — especially brand-name and specialty medications. Some plans also require step therapy, meaning you must try and fail on a lower-cost drug before the plan will cover the prescribed medication.
If your plan denies a drug for lack of prior authorization or step therapy requirements, you have the right to request an exception. Your doctor can submit a coverage determination request with documentation of medical necessity, which the plan must respond to within 72 hours for standard requests or 24 hours for urgent cases.
How COA Auditing Can Help
Medication billing errors are among the most common — and costly — mistakes on Medicare Explanation of Benefits statements. We regularly find drugs billed under the wrong Part, incorrect dosage quantities for infusion drugs, Part D costs not tracked correctly toward the out-of-pocket cap, and prior authorization denials that have strong grounds for appeal.
Based in Marietta, GA and serving patients across the greater Atlanta area, COA Auditing reviews your Medicare EOBs and pharmacy statements to identify errors and recover overpayments. Contact us for a free initial consultation at (214) 901-1965 or coabillings@gmail.com.