Medicare coverage typically comes in several parts. There’s Original Medicare Parts A & B, which covers hospital care and doctor’s visits, and Part C, which refers to Medicare Advantage Plans. In this article, we’ll look at Medicare Part D, which offers prescription drug coverage.
Enrolling in Part D is optional, and you can choose to get prescription drug coverage either through Medicare Advantage, or through a standalone plan. But if you wait to enroll in Part D, and you don’t have alternate coverage, you may have to pay a late enrollment penalty.
What is Medicare Part D?
Medicare Part D covers prescription drugs that are self-administered – that is, taken at home rather than provided at a hospital. Not all prescription drug plans cover all drugs, so you’ll need to make sure that the drugs you take are covered by the plans you enroll in.
The base premium as of 2019 is $33.19 per month, and depending on your plan, you may also have additional copays, coinsurance, and a deductible.
Many people choose to enroll in Part D when they first sign up for Original Medicare, but you might choose to wait if you already have prescription drug coverage, such as through your employer, spouse’s employer, or Veteran’s Administration plan.
If you don’t have appropriate coverage, then you’ll be charged a late enrollment penalty when you sign up, which is 1% of the premium for each month you didn’t have coverage. So it’s a good idea to get covered even if you don’t currently take prescription drugs.
Each prescription drug plan has a formulary, or list of drugs that they cover. These are usually broken down into tiers, based on the cost of each drug. Tier 1 drugs are generic drugs that have the lowest copay. Brand-name drugs may be in Tier 2 or 3, while Specialty drugs have their own tier and have the highest copay.
If your drug isn’t on the list, then you may be able to take a similar drug that your insurer covers. If your insurer stops covering a drug that you currently take, they must give you notice and allow you to switch to a different plan.
Part D plans must also cover some vaccines when “medically necessary”, such as the shingles vaccine, but not the flu or pneumonia vaccines, which are covered by Part B.
The standard premium for Part D is $33.19 per month, but this amount can vary based on your plan and your income level. For people earning more than $85,000 per year, it’s an extra $12.40. If you earn more than $750,000 per year, you may pay an extra $77.40 per month. You can also choose to have your premium deducted from your Social Security payments each month.
If you choose to enroll in a Medicare Advantage plan that includes prescription drug coverage, your Part D premium will be included in the payments you make to your plan.
You’ll also be responsible for paying your deductible, or the amount you have to pay before your coverage kicks in. By law, this can’t be more than $415 per year, although many plans have a lower deductible and some have no deductible at all.
Most plans have a copayment or coinsurance based on the tier system. Some generic drugs may have a $0-10 copay, while speciality drugs have a copay of $100 or more. You may also have to pay coinsurance, or a percentage of the cost of the drug, which can be no more than 25% of the retail cost.
You’ll typically pay less if you get your drugs from a “preferred” pharmacy, or one that’s in the drug plan’s network. Or, you may be eligible for a mail-order program.
Rules and Regulations
You aren’t required to have Part D coverage, however, if you enroll now, you’ll avoid potential penalties and gaps in coverage later. If you don’t have acceptable alternate coverage, such as from an employer, then you may have to pay the late enrollment penalty and you may not be able to enroll immediately when you do need coverage.
You can only apply for coverage during your Initial Enrollment Period, which includes the month of your 65th birthday, and the three months immediately before and after it. You can also apply during the open enrollment period from Oct 15 – Dec 7 each year.
As of 2019, you can apply for Medicare Advantage plans during an open enrollment period from January to March, and some of these plans may include Part D coverage.
Outside of these dates, you’ll only be able to enroll under special qualifying circumstances, such as the loss of other creditable drug coverage.
To search for a Part D plan, you can use the Medicare Plan Finder tool to find plans available in your zip code. You can also provide more detailed information, such as the drugs you currently take, to see plans that are the best fit for you.
All plans are required to offer two medications from each class of drugs, but many plans will offer more for some categories. Most Part D plans cover:
- HIV/AIDS drugs
- Seizure drugs
- Chemotherapy drugs
Part D generally doesn’t cover over-the-counter drugs, weight loss drugs, or drugs for fertility, sexual dysfunction, or cosmetic issues, such as hair loss.
How Part D Works Alongside Other Insurance
You may already have insurance that is equal to, or better than, the Part D prescription drug plans available to you in your area. If you have coverage through one of the following plans, you’re probably better off keeping that coverage instead of switching to a Part D plan:
- TRICARE (military benefits)
- Veterans’ Benefits
- Federal Employee Health Benefits
- Indian Health Services
Since those plans are all “creditable coverage,” you won’t be penalized if you switch to Part D later if for some reason you change your mind.
Other plans may or may not qualify as creditable coverage. If you get coverage through an employer or a union, they should let you know every year whether or not it is creditable. If you have coverage through a Medigap plan, it is unlikely to be creditable.
You may also be eligible for help through the State Pharmaceutical Assistance Program in your state, which could help you cover your premiums or other costs.
Who Qualifies for Medicare Part D?
Most people become eligible for Medicare Part D during their initial enrollment period when they first turn 65. You may become eligible at an earlier age if you have a disability and receive Social Security Disability Insurance for at least 24 months, or if you have End-Stage Renal Disease.
You must also be a U.S. citizen or permanent resident for five years in a row, and live in the area that your prescription drug plan covers.
You may be eligible to sign up or change your plan outside of the open enrollment period under some conditions, such as if you move, lose your alternate coverage, or want to upgrade from a lower-quality plan to a 5-star plan that’s available in your area.
As of 2018, 43 million Americans are enrolled in a Medicare Part D plan, and 13 million are eligible for the Low-Income Subsidy.
Benefits of Medicare Part D
Medicare Part D is especially helpful to people who currently take prescription drugs, expect to need prescription drugs in the future or have trouble affording their prescription drugs. Even with a premium and copay, your total costs are likely to be lower than if you pay out of pocket, and you may qualify for additional assistance to cover the cost of your drugs.
If you take multiple drugs for several conditions, you may be eligible for a Medication Therapy Management (MTM) plan, in which a pharmacist will sit with you to explain what each of your drugs is for, and to assess how they are working. You’ll leave with a written action plan to make sure that you’re taking them consistently and effectively.
How Part D Is Changing
Each year, the government makes some changes to Medicare that can affect your premiums and out-of-pocket costs, even if you’re already enrolled. For 2019, the changes include:
- a $10 increase in the deductible (to $415)
- a $70 increase to the initial coverage limit (to $3,820)
- a $100 increase to the out-of-pocket threshold (to $5,100)
- slight changes to the monthly charge for high-income earners
They’ve also lowered the shared cost for some brand-name and generic drugs above the initial coverage limit. While these changes might not seem like a lot, it’s always a good idea to look at how they affect your current plan and the amount you pay for prescription drugs.
Even if you don’t take prescription drugs now, consider enrolling in a plan now to avoid having to pay a late enrollment penalty later.
If you need help, reach out to the team at The Medicare Store to get your questions answered. Send us a message on our contact form and we’ll arrange for a call or in-person visit with one of our licensed insurance agents to help you find the plan that’s right for you.