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How to Get Medicare Part D, and Whether You Actually Need It

Yes, if you have no other drug coverage, you’ll want Medicare Part D.

October 18, 2017 - By Hal Levy - read

Unlike Original Medicare, which has existed since the 1960s, you didn’t grow up with Medicare prescription drug plans. These plans – also known as Medicare Part D – have only been around since 2006. Naturally, you may still have questions, like “do I need Medicare Part D?”

Medicare Part D prescription drug coverage is optional. In spite of this, most Medicare beneficiaries – particularly those with chronic conditions – will still want to get Medicare Part D coverage.

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What Are Medicare Part D Prescription Drug Coverage Plans?

Medicare Part D is a specific type of private, government-regulated prescription drug plan that works with your Medicare coverage. You’re eligible to enroll in a Part D plan if you receive Medicare upon turning 65. You’re also able to enroll if you sign up for Medicare due to a disability.

As of 2017, each state has no fewer than 18 standalone Part D plans available. Nationwide, the average cost of Part D is about $32 per month. Medicare Part D coverage details – including formularies and participating pharmacies – vary between plans. Each plan also sets its own copayments, premiums, and deductible (no more than $400 per month in 2017).

Disappearing Donut Hole: When Part D was first introduced, a coverage gap known as the “donut hole” required enrollees to pay for a significant portion of the cost of drugs once enrollees reached an initial coverage limit, and before a so-called catastrophic coverage phase kicked in. Only once that catastrophic coverage phase began would you be protected from spending more than 5 percent of drug costs out-of-pocket.

From 2019 onward, the donut hole will be banned. There will be no gap between your initial coverage limit and the catastrophic coverage phase, making Part D plans an even better value.

Part D Is Easy to Come By: According to the Kaiser Family Foundation, over 70 percent of Medicare beneficiaries are enrolled in Medicare Part D prescription drug coverage. Some are enrolled through a standalone RX plan, and others through a coverage option like Medicare Advantage that includes Part D.

Are Medicare Prescription Drug Plans Right for Me?

Most people will need Medicare Part D prescription drug coverage. Even if you’re fortunate enough to be in good health now, you’ll most likely need significant prescription drugs in the future. A relatively small Part D payment entitles you to outsized benefits once you need them, just like with car or home insurance.

You could rely on charity care or alternate drug plans, but they come without the stability and consumer protections of federally-regulated Medicare Part D plans. Government programs also provide help with Part D payments for Medicare beneficiaries with limited means.

There are a few circumstances where it doesn’t make sense to get Medicare Part D:

  • If you have a Medicare Advantage policy that includes Part D prescription drug coverage (also called a MA-PD plan), then you won’t need to look for a separate plan.
  • If you have creditable coverage – equivalent prescription drug coverage like that from a large employer, TRICARE, PACE, or the VA – then you may not need Medicare Part D. You can postpone Medicare Part D enrollment without penalty for as long as you maintain your creditable coverage.
  • If you’re in the end stages of a life-threatening disease that Medicare has helped to treat, then it probably won’t be worth it to go through the Part D rigamarole. Medicare Part A covers the drugs you receive in hospitals or hospices.

Premiums: Similarly to Medicare Part B, your monthly Part D premiums may be higher for the year if you listed high income on your tax returns two years ago. However, although this fee is temporary, delaying your Part D enrollment will expose you to a lifelong penalty.

How and Why to Avoid Delaying Your Medicare Part D Coverage:

The late enrollment penalty for Medicare prescription drug coverage is easy to figure out. Unless you have equivalent “creditable coverage”, you’ll need to sign up for a Part D plan within three months after your Medicare Part A or Medicare Part B first becomes effective to avoid permanent penalties.

The permanent late enrollment penalty is 1 percent of the average nationwide Part D standalone premium, multiplied by the number of months you were delayed.

Medicare Part D delay costs table | HealthCare.com

For instance, if you were to delay for nine years before you needed coverage, your Part D premiums would more than double on average! After nine years, you wouldn’t have saved money at all.

Cases for Medicare Part D Prescription Drug Coverage:

Americans between the ages of 65 and 69 take an average of 15 different drugs per year.

Average Beneficiary: With a generous non-Medicare discount drug plan, paying around $10 for a 30-day dose of 15 drugs each, you could expect to pay $1,800 per year out-of-pocket.

Under a Medicare Part D prescription plan, if you paid $50 per month in premiums, used your $400 deductible, and paid for the rest of the drugs under the rules of your plan (likely paying 25 percent of the cost), you’d owe $1,175.

Chronic Conditions: If you have diabetes, for example, you could spend $18,300 out-of-pocket for Humulin R, a common insulin treatment. Or, you could spend $32 per month on a part D plan; $2,115 during your plan’s donut hole phase (which closes in 2020); and $680 of the remaining $13,600 in costs (your 5 percent share once the catastrophic coverage phase is reached) for a total of $3,180 to pay for $18,300 in care.

Common chronic conditions like multiple sclerosis, cardiovascular diseases, and respiratory illnesses have similarly high drug costs that make Part D a huge relief. If you have multiple chronic conditions (which apply to seven out of 10 Medicare beneficiaries), it’s probably a good idea to get Medicare Part D drug coverage.

Taking the Next Steps

You can ask for a free, no-obligation quote for supplemental coverage that meets your needs. If you don’t already have a broker, HealthCare.com can connect you to a local, licensed agent.

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Editor’s Note: Article was updated on February 9, 2018 to account for a law that closes the Part D “donut hole” earlier than planned.