Medicare Prescription Drug Plans (Part D)
Medicare Part D provides coverage for prescription medications. Prescriptions are not covered under Original Medicare Parts A and B, so most people purchase a Part D plan to avoid paying the full cost of expensive medicine. Most Medicare Advantage, or Part C, plans already include prescription drug benefits. If yours does not, you can get prescription drug coverage by purchasing a Part D plan.
Medicare Part D Prescription Drug Plans
Part D Medicare is a prescription drug policy that covers most of the medications your doctor prescribes for you. Part D does not cover over-the-counter medicines. Plans also don’t usually cover drugs for such things as cosmetic issues, weight loss or sexual dysfunction. Each Part D plan has a list of covered drugs, known as a “formulary.” The formulary is typically broken down into groups, or tiers, of drugs, based on their cost. Drugs in a lower tier will usually cost you less than those in a higher tier.
Medicare Part D Coverage
- Deductible – Amount the enrolled pays prior to coverage kicking in.
- Initial Coverage – Your plans pays 75% of your prescription drug costs and the enrollee pays 25% up to the plan limit
- Coverage Gap – This is also known as the Medicare donut hole. The plan will pay 49% for generic drugs and 10% for brand name drugs. For brand name drugs, the manufacturer discounts there costs by 50%, this discount is counted as an enrollee out of pocket cost expenditure. The enrollee pays 51% of the cost for generic drugs and 40% of the cost of brand name drugs.
- Catastrophic Coverage – Once you’ve reached the annual out of pocket threshold, the plan pays for 95% of your drug costs.
Medicare Part D Drug Plan Cost
You’ll pay a premium for your Medicare Part D prescription drug coverage, but the premium amount will vary depending on your plan. In addition, if your income is above a certain amount, you may have to pay a Part D income-related monthly adjustment amount that could range from about $13 to $76, depending on your income.
Some drug plans also have a deductible – an amount you must pay out of pocket each year before your plan begins paying benefits. Deductibles vary from one plan to another, but they cannot be higher than a certain amount. For example, for 2017, no plan can have a deductible greater than $400.
When you pick up a prescription at your pharmacy, several things determine what you will pay:
- Whether the pharmacy is “in network” and accepts your Part D plan
- Whether you have met your deductible.
- Your plan’s coinsurance or copay amounts. Copays are a flat fee that you pay for a particular tier of drugs — $10 per prescription, for example. Coinsurance means you pay a percentage of the cost of your medication, such as 20 percent.
- The type of medication. Some drugs cost much more than others.
- Whether you are in the coverage gap, or “donut hole.” Most Part D plans cover your medications until you and the plan have spent a certain amount. You are then in the “donut hole” and will pay a percentage of the total cost of your medication until you reach another threshold. After that, you pay only a small fraction of your drug costs for the rest of the year.
When comparing Part D plans, it’s a good idea to research deductibles, copays and costs for the medications you currently take.
Medicare Prescription Drug Plans Extra Help Program
When Can I Purchase a Standalone Medicare Prescription Drug Plan
If you are turning 65 and eligible for Medicare for the first time, you have a seven-month window to sign up for Part D. Your window opens three months before the month you turn 65, includes your birthday month, and closes three months after you turn 65.
There’s also an Open Enrollment Period from October 15th to December 7th each year. During this time, you can add a Part D plan, switch from one Part D plan to another, or drop Part D coverage altogether. You may have additional enrollment opportunities if you enrolled in Part B during annual open enrollment, are switching from Medicare Advantage to Original Medicare, or qualify for a special enrollment period based on life events such as moving or losing your employer insurance coverage.
However, if you are eligible for Medicare and go without prescription coverage, you may pay a penalty when you do enroll in Part D. This monthly penalty, based on the amount of time you were without coverage, continues for the entire time you have a Medicare drug policy.
Medicare Part D Penalty
There’s other important aspects to consider as well. You should be aware of the potential Part D penalty. If you don’t have credible prescription drug coverage once you qualify for Original Medicare, you become subject to a penalty. Medicare determines the amount owed by multiplying 1% of the national base beneficiary premium times the number of months you went without Part D coverage. This penalty is deducted from your Social Security benefits for life, regardless of whether or not you choose a plan immediately afterwards.
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