Medicare Part D (medicare prescription drug coverage) helps cover the cost of prescription drugs. It is run by medicare approved private insurance companies that follow rules set by Medicare. Part D may help lower your prescription drug costs and help protect against higher costs in the future. Each Medicare drug plan has its own list of covered drugs (called a formulary). Many Medicare drug plans place drugs into different “tiers” on their formularies. A drug in a lower tier will generally cost you less than a drug in a higher tier.
There are 2 ways to get Medicare prescription drug coverage:
- Medicare Prescription Drug Plans (PDPs): These plans (sometimes called “PDPs”) add drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) plans, and Medicare Medical Savings Account (MSA) plans. You must have Part A and/or Part B to join a Medicare Prescription Drug Plan i.e. Part D.
- Medicare Advantage Plans: MA plan (like HMOs or PPOs) or other Medicare health plans that offer Medicare prescription drug coverage. You get all of your Part A, Part B, and prescription drug coverage (Part D), through these plans. Medicare Advantage Plans with prescription drug coverage are sometimes called “MA-PDs”.
When Can You Join Or Switch To A Medicare Drug Plan
- When you first become eligible for Medicare, you can join during your Initial Enrollment Period.
- If you get Part B for the first time during the General Enrollment Period, you can also join a Medicare drug plan.
- During Open Enrollment, between October 15–December 7 each year. Your coverage begins on January 1 of the following year, as long as the plan gets your request during Open Enrollment.
- If you want to drop your Medicare prescription drug coverage (Part D) and you don’t want to join a new plan, you can do so during the Open Enrollment Period. The Open Enrollment Period is between October 15–December 7 each year.
- You can’t drop your Medicare drug plan outside the Open Enrollment Period unless you meet certain special circumstances (Special Enrollment Period).
- During 5-Star Special Enrollment Period (December 8–November 30), you can switch to a medicare prescription drug plan that has 5 stars for its overall star rating. You can only use this special enrollment period once during this time-frame.
Medicare Drug Plans Coverage Rules
Medicare Drug Plans have certains coverage rules which you need to review before purchasing the plans.
- Prior Authorization: You and/or your prescriber must contact the drug plan before you can fill certain prescriptions. Your prescriber may need to show that the drug is medically necessary for the plan to cover it.
- Quantity Limits: There are limits on how much medication you can get at a time.
- Step Therapy: Step therapy is process of trying lower-priced medications before taking a step up to one that costs more. (e.g. trying low-cost generic drugs before costly branded drugs)
Costs For Medicare Drug Plan Coverage
These are costs associated with medicare prescription drug plans:
- Monthly premium
- Yearly deductible
- Co-payments or coinsurance
- Costs due to the coverage gap
- Costs if you pay a late enrollment penalty
Most drug plans charge a monthly premium that varies by plan. You pay this in addition to the Part B premium. If you’re in a Medicare Advantage Plan (like an HMO or PPO) or a Medicare Cost Plan that includes Medicare prescription drug coverage, the monthly premium may include an amount for prescription drug coverage. There may be additional premium for higher income consumers – read our guide to understand Part D premiums by income.
This is the amount you must pay before your drug plan begins to pay its share of your covered drugs. Many drug plans don’t have a deductible. The Part D monthly premium varies by plan and higher-income consumers may pay more. The annual deductible for a standard Medicare Part D Prescription Drug Plan is a maximum of $400.
Co-payments or coinsurance
These are the amounts you pay for your covered prescriptions after the deductible (if the plan has one). You pay your share and your drug plan pays its share for covered drugs.
Cost in the coverage gap
Most Medicare drug plans have a coverage gap (also called the “Donut Hole”). This means that after you and your drug plan have spent a certain amount of money for covered drugs, you have to pay all costs out-of-pocket for your prescriptions up to a yearly limit. Once you enter the coverage gap, you pay 40% of the plan’s cost for covered brand-name drugs and 51% of the plan’s cost for covered generic drugs until you reach the end of the coverage gap. This means there’s a temporary limit on what the drug plan will cover for drugs. Not everyone will enter the coverage gap. Once you and your plan have spent $3,700 on covered drugs, you’re in the coverage gap. This amount may change each year.
Costs if you pay a late enrollment penalty
The cost of the late enrollment penalty depends on how long you didn’t have creditable prescription drug coverage. Currently, the late enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium”. That penalty is added to your monthly Medicare Part D premium. If you disagree with your penalty, you can ask for a review or reconsideration.
Important Points For Medicare Drug Plan
- If your Medicare Advantage Plan includes prescription drug coverage and you join a Medicare Prescription Drug Plan, you’ll be dis-enrolled from your Medicare Advantage Plan and returned to Original Medicare.
- Call your benefits administrator before you make any changes, or sign up for any other coverage. If you drop your employer or union coverage, you may not be able to get it back.
- If you’re in a Medicare drug plan and take medications for different medical conditions, you may be eligible to get services, at no cost to you, through a MTM (Medication Therapy Management) program. This program helps you understand your medications and use them safely.
- If you drop out of a Part D plan during Open enrollment, you need to notify the plan that you want your coverage to end on Dec. 31. Otherwise, it will carry over into the new year and you will continue to be responsible for paying its premiums.
- Part D works with other insurance like Employer or union health coverage, COBRA, Medicare Supplement Insurance (Medigap) policy with prescription drug coverage, Medicaid, Supplemental Security Income Benefits, State Pharmaceutical Assistance Program, Long-term care facility, HUD housing assistance, Food stamps, Health Insurance Marketplace.