Before the Medicare Part D program started in 2006, thousands of Medicare beneficiaries faced high price tags on drugs and had little help with curbing those costs. But now, Medicare Part D plans, also known as Medicare Prescription Drug Plans, give Medicare beneficiaries prescription drug coverage options.
So if you’re soon becoming eligible for Medicare Part D plans, or thinking about switching your existing Medicare coverage, this Medicare Part D guide will cover all the basics and answer your questions, including:
Medicare Part D is one of the four “parts” of the Medicare program. Under Original Medicare, also known as Medicare Parts A and B, only very limited drug coverage is provided. Any medications covered are generally restricted to medicines that must be administered by a doctor.
So as we mentioned before, the Medicare Part D program was created to help combat the high cost of prescription drugs.
Medicare Prescription Drug Plans (PDPs) are available through private insurance companies. These plans help Medicare beneficiaries with the cost of medications, and are available in 2 forms:
Standalone Medicare drug plans work with Original Medicare. You stay enrolled in Medicare Part A and/or B, and obtain your prescription drug coverage through a Part D plan from a private insurance company.
An MAPD plan is an alternative to the Original Medicare program, and combines all the benefits of Medicare Part A and B with drug coverage. All these benefits are provided by a private insurance company.
Many private insurance companies provide Medicare Part D drug plans, including large nationally known ones and smaller, local companies. You can get Medicare Part D drug coverage in all 50 States.
Medicare Part D eligibility depends on meeting two criteria. To be eligible, you must be either:
1) Enrolled in Medicare Part B, or entitled to Medicare Part A; and 2) Live in the plan service area.
If you qualify for Medicare Part A or are actively enrolled in Medicare Part B, then you can sign up for a standalone Medicare Prescription Drug Plan.
Note: You must have both Medicare Part A and B if you want to enroll in Medicare Advantage.
Medicare PDPs are a great fit for those who are Medicare-eligible and don’t have other creditable drug coverage. Examples of other prescription drug coverage include:
You generally have an initial enrollment window when you first become eligible for Medicare Part D. This first enrollment window is known as your Initial Enrollment Period (IEP), which lasts for seven months that include:
Note: Your IEP lasts for seven months, regardless of whether you’re entering Medicare because you turn 65, or if you will enter due to permanent disability.
If you have other creditable drug coverage, like from an employer or spouse’s employer, then you can delay enrollment into Part D without being subject to a penalty. Be sure that your drug coverage is considered creditable though.
If you enroll in Medicare Part D after your IEP and don’t have other creditable drug coverage, then you will be subject to a late enrollment penalty. You can be subject to this penalty for either of 2 reasons:
Your late enrollment penalty will increase for each month that you go without creditable coverage. So it’s very important to get Medicare Part D drug coverage as soon as you’re eligible, or make certain that your non-Medicare drug plan will satisfy Medicare coverage requirements.
Beyond your IEP, you may qualify for a Special Enrollment Period (SEP) that will allow you to enroll in, or change, your Medicare Prescription Drug Plan. Generally, you’ll qualify for an SEP when you experience abrupt changes in your circumstances. Some common SEPs include:
During a Special Enrollment Period, you generally will only have one chance to enroll in a Medicare Part D drug plan.
Everyone eligible for Medicare can enroll in or switch Medicare Part D plans during the Annual Election Period (AEP), also called the Medicare Open Enrollment Period.
AEP runs from October 15 to December 7 each year. If you enroll in a plan during this window, your coverage will be effective on January 1 the following year. During the Medicare AEP, you can:
If you’re enrolled in a Medicare Advantage plan, you have access to an additional enrollment window: the Medicare Advantage Open Enrollment Period (MA-OEP).
The MA-OEP is from January 1 to March 31 each year. During the MA-OEP, you can:
Medicare Prescription Drug Plans provide coverage for many prescription drugs. These Medicare PDPs are required to cover certain kinds of medications and prohibited from covering others. Generally, medications that are approved for therapeutic use are covered by Part D.
It’s important to know, however, that Medicare Part D plans are not required to cover every drug that’s on the market. Instead, Medicare drug plans are allowed to choose which drugs they will cover. There are certain requirements that plans must use when they create their lists. The list of covered drugs is known as a formulary. Because of this freedom, each plan’s formulary is unique.
Every Medicare drug plan formulary is organized into tiers. Each tier includes certain kinds of drugs in the following manner:
Medicare Part D covers many vaccines, including:
Note: While Medicare PDPs do not cover flu or COVID-19 vaccines, they are covered by Part B.
The amount you pay for a medication changes during the year, depending on your coinsurance, copay, and how much you and your plan have paid for prescriptions.
Your costs change as you move through four coverage stages. The 4 stages are:
You begin each year at the first coverage stage and move through them as the year progresses.
Note: Only drugs on your plan’s formulary count against these coverage stages, so it’s very important that you find a Part D plan that covers your medications.
You pay a monthly premium to the insurance company for Medicare Part D coverage. In exchange, you pay less for many prescription drugs than if you paid cash at the pharmacy.
You will likely pay some or all of these costs under Part D:
If your plan has a Medicare Part D deductible, you’ll pay the full price for medications until you’ve met the deductible. For 2021, the maximum Part D deductible is $445. While many PDP plans don’t have an annual deductible, most do, and the average 2021 Medicare Part D deductible across all Part D plans is expected to be around $345.
For those plans without deductibles, you would pay a copayment or coinsurance amount for medications starting with your first prescriptions.
Premiums for higher-earning Medicare beneficiaries can be higher. Thanks to IRMAA (Income Related Monthly Adjustment Amount), you can expect to pay higher premiums for Medicare Part D coverage if you are single and have an adjusted gross income over $88,000, or if you file jointly and have gross income greater than $176,000.
The additional cost of Part D coverage increases in several income bands:
While your Medicare drug plan can help with the cost of medications, you may still find prescriptions to be unaffordable. While there are several possibilities for obtaining lower-cost medications, the first place you should look is the Extra Help Program, also known as the Part D Low Income Subsidy program.
Extra Help is provided and designed to help people with limited incomes pay for the costs of prescription drugs, including:
Extra Help benefits are available for those with limited means - both an overall asset or resource limit and an income limit. These limits depend on your marital status.
The resource limit does not count the value of your personal residence, vehicles you own, or certain other assets. But the income limits are:
Depending on the level of Extra Help you receive, you can expect to pay significantly less on prescriptions. At the full subsidy level, you’d pay no more than $3.70 for each generic drug filled, and no more than $9.20 for each brand name drug prescription filled.
One of the 2021 changes to Medicare is the Part D Senior Savings Model. This program is a voluntary agreement between CMS and Medicare Part D plan sponsors. And it’s intended to bring down the cost of insulin for millions of Medicare beneficiaries.
Not all Part D plans are participating, but there is at least one participating plan in every state. Enrollees in participating Medicare Part D plans, including both standalone drug plans, and MAPD plans, will pay no more than $35 for a one-month supply of many kinds of insulin. This is expected to save people an average of $446 per year.
When finding Medicare prescription drug coverage, the first thing to understand is how you’re receiving your Part A and B benefits.
As an example, if you’re enrolled in Original Medicare, combined with a Medicare Supplement plan, then you’ll want to look for standalone Prescription Drug Plans.
But if you’re enrolled in a Medicare Advantage plan or will be, then you’ll want to look for MAPD plans.
But it’s important to know that you typically can’t have a Medicare Advantage plan and a standalone Prescription Drug Plan at the same time, so make sure you know your circumstances.
Once you know what kind of Medicare Part D drug plan you need, you can start to compare Part D plans. You should pay close attention to such details as:
Tip: Every Part D plan has a different formulary, and two different plans can assign the same medication to two different tiers. So it’s important to look up your medications to get a feel for anticipated out-of-pocket costs for your medications.
Also, if you take insulin, look for a Medicare Part D plan that participates in the Senior Savings Model. This alone can save you hundreds of dollars per year in insulin costs.
Medicare prescription drug plans are available to help lower the burden of prescription drug prices for Medicare beneficiaries. Some of our final Part D takeaways include:
You can also call 800-620-4519 to get help from a licensed insurance agent and discuss your Part D options.
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