Understanding Medicare Part D
In the world of Medicare health plans, one topic stands out: Medicare Part D. Prescription drug coverage plays a pivotal role in your overall well-being, but it can be quite intricate to navigate. In this guide, we'll break down everything you need to know about enrolling, avoiding late penalties, and understanding the specifics of premiums, deductibles, copays, formularies, and the donut hole – ensuring you're well-prepared to make informed decisions on your healthcare journey.
What is “Part D?”
Medicare began to cover outpatient prescription drugs on January 1, 2006. The Part D drug benefit is also known as ‘Medicare RX’. Part D is “privatized” and not issued by Medicare itself; Medicare contracts with private companies to issue this coverage. Beneficiaries must purchase a policy from one of these companies, the plans are both subsidized and and regulated by Medicare, when they are eligible to avoid a Late Enrollment Penalty. There are two plan types for prescription coverage.
PDP|Prescription Drug Plan: these are standalone plans that offer prescription drug coverage only and can be paired with Original Medicare. They do Not offer any hospital or medical coverage.
MA-PD|Medicare Advantage Prescription Drug Plan: Medicare Advantage plans, also known as Part C, offer prescription coverage on many plans in addition to the hospital, medical, and extra benefits.
Components of Part D Plans
Premium: Monthly premium is on of the costs associated with Part D coverage. Standalone plans on average range from $7-$100+ without any subsidy, and Medicare Advantage plans with prescription coverage often have a $0 premium.
Deductible: There is an annual deductible associated with Part D but some plans waive the cost completely or partially. In 2023, the maximum deductible is $505.
Copays: Covered drugs are categorized by “tiers” for cost sharing. Tier 1 and 2 are typically for generic and will have the lowest copays. Tier 3 is for preferred brand name drugs and Tier 4 is usually non-preferred brand name drugs; these tiers have a higher copay. Tier 5 is for specialty drugs and typically has a co-insurance instead of copay. The beneficiary will pay a percentage of the drug’s cost and the plans pays the rest.
Drug Formulary: Each prescription drug plan will have a formulary that states what drugs are covered and at what tier. Plans include both brand-name prescription drugs and generic drug coverage. The formulary includes at least 2 drugs in the most commonly prescribed categories and classes. It is important to check the plan’s formulary to see how your prescriptions will be covered prior to enrolling in a plan.
Coverage: Part D includes 3 coverage stages: Initial, Gap, and Catastrophic. We can expect to see changes to these coverage stages in 2025, but for the time being this is what we have.
Initial Coverage - The initial coverage period begins immediately if there is no drug deductible, and the beneficiary is responsible for a copay or coinsurance and the plan pays the rest of the cost. The initial coverage has a limit (in 2023) of $4,660 total drug costs, and with that being said the initial coverage period depends on your drug costs and your plan's benefit structure.
Gap Coverage - Once the limit of $4,660 (2023) is surpassed, gap coverage begins. This is the stage referred to as the “Donut Hole” because of the temporary limit on what the drug plan will cover for your drugs. Not everyone will reach the coverage gap, and these limits may change from year to year. Although you'll pay no more than 25% of the price for the brand-name drug, almost the full price of the drug will count as out-of-pocket costs to help you get out of the coverage gap. For generic drugs Medicare will pay 75% and you will pay the remaining 25%. Some plans offer additional coverage during the gap.
Catastrophic Coverage - Once the limit of $7,400 (in 2023) out-of-pocket is reached, the catastrophic coverage phase begins. During this phase the plan will pay most or in soma cases all of your covered drug costs for the rest of the year.
Utilization & Restrictions: Plans are permitted to impose restrictions on covered drugs to help control costs. Those restrictions include Prior Authorization, Step Therapy, and Quantity Limits. Prior Authorization requires the prescribing physician to “justify’ or explain to the plan why the medicine is medically necessary. If the Prior Authorization is denied an appeal can be filed. A Quantity Limit is when the plan limits a dosage over a specified period, e.g. x miligrams over 30 days has a quantity limit of 60. Step Therapy may require a trial of a different drug that works similarly or confirmation you have tried similar versions of this drug and that it didn’t work for you. If you are having issues with your drug coverage or any of these restrictions it is possible to file an appeal. Call or schedule an appointment so we can help you get the coverage you need!
Late Enrollment Penalty
Who wants to pay extra for the same amount of coverage? Nobody, right! The Part D Late Enrollment Penalty is a fee that accumulates over the months that a beneficiary goes without drug coverage when they are eligible. The penalty is charged monthly for as long as the member is enrolled in a Medicare Prescription Drug plan. There are exemptions for the Late Enrollment Penalty: creditable coverage, qualify for LIS, or are eligible for a special enrollment because of being impacted by a natural disaster. The penalty (in 2023) is 1% of the national base monthly premium for every month the individual could have been but was not enrolled. The penalty amount is added to the monthly premium and collected by the plan.
Creditable Coverage
It is important to know what counts as creditable coverage, especially to avoid an unwanted Late Enrollment Penalty. Creditable coverage is coverage as good or better than Medicare benefits. Insurers must notify their members every year if their plan is considered creditable coverage. Individuals with creditable coverage are not required to enroll in a Part D plan, but they can voluntarily. Some examples of creditable coverage are TRICARE, Veteran’s (VA) benefits, and Federal employee health benefits program (FEHBP).
Get Help With Prescription Drug Costs
Consider this article by Medicare.gov for links and helpful information about the below mentioned programs.
Speak with an independent broker who can help you find the plan that covers your drugs are the lowest cost.
Consider switching to generics or lower cost drugs..
Choose a plan that offers additional gap coverage.
Pharmaceutical Assistance Programs
State Pharmaceutical Assistance Programs
Apply for Extra Help through Social Security.
Compare pricing with discount and direct to consumer pharmacy programs. e.g. “GoodRX” “CostPlusDrugs.com.
Don't let confusion hold you back from making the best decisions for your healthcare. Reach out to us today for a free consultation. Together, we'll ensure that you have the right Part D coverage that aligns with your needs and budget. Your peace of mind is just a conversation away!"
References
5 ways to get help with prescription costs |Medicare.gov. (n.d.). 5 Ways to Get Help With Prescription Costs |Medicare.gov. https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap/5-ways-to-get-help-with-prescription-costs