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Medicare Part D is a type of private, government-regulated prescription drug plan that works with your Medicare coverage. More than 41 million people with Medicare have Part D coverage.
Understanding Medicare Part D
There are two ways to get Medicare Part D coverage:
- If you enrolled in Medicare Part A and Medicare Part B (Original Medicare), you can get Part D coverage by enrolling in a stand-alone prescription drug plan (PDP).
- If you enrolled in a Medicare Advantage (Part C) plan, you can get Part D coverage by enrolling in a Medicare Advantage plan that includes drug benefits. These plans are known as Medicare Advantage Prescription Drug Plans (MA-PDs).
Part D prescription drug coverage is optional. Medicare members aren’t required to enroll in Medicare Part D but they may face consequences, as permanent late fees or delayed coverage, if they don’t sign up for Part D coverage when first eligible.
Medicare Part D prescription drug coverage is provided and coordinated by Medicare-approved private insurance companies. There isn’t one single Medicare Part D plan. Rather, many different insurance providers sell Part D plans. Most Medicare beneficiaries will have several Part D plan options to choose from.
Each Part D Drug Plan maintains a formulary. Like traditional health insurance plans, Medicare Part D policies have a formulary or a list of drugs covered under the plan. Each Part D plan establishes its formulary, so the particular drugs which are covered tend to vary from plan to plan.
Who Is Eligible for Medicare Part D Coverage?
- Anyone eligible for Original Medicare (Part A and Part B) can sign up for Medicare prescription drug coverage (known as Part D) – regardless of income.
- People don’t need to take physical exams to enroll in Medicare Part D. Coverage can’t be denied due to health reasons, pre-existing conditions or multiple medications.
What Does Medicare Part D Cover?
Formulary: Part D drug coverage varies from plan to plan. Each Part D prescription drug plan has its list of covered drugs (known as a ‘formulary’).
Tiered Pricing: Most Medicare Part D plans categorize the prescription drugs they cover into different cost “tiers.” A drug in a lower tier will generally cost less and have a lower copay than one in a higher tier.
Prior Authorization: If you take a medication not included in your plan formulary, your doctor may request a formulary exception – or “prior authorization” – if the medication is deemed “medically necessary.”
What Is NOT Covered by Medicare Part D?
Because each Medicare Part D plan provider establishes its drug formulary, this list is by no means exhaustive. That said, Part D plans typically do not cover:
- Weight-loss drugs;
- Drugs for hair growth;
- Fertility drugs;
- Drugs for erectile dysfunction;
- Over-the-counter drugs and vitamins; or
- Drugs already covered under Medicare Parts A and B (e.g. drugs given during inpatient hospital stays or at the doctor’s office)
How Much Does Medicare Part D Cost?
The cost of Medicare Part D coverage is hard to estimate because Part D premium, deductible, and coinsurance costs will vary from plan to plan.
The total cost of your Part D drug coverage will depend on these variables:
- The particular Medicare Part D plan you choose;
- The specific drugs you take, and whether those medications are included in your plan’s formulary;
- Whether or not you fill your prescriptions at a pharmacy in your plan’s network; and
- Whether you qualify for financial assistance to help you pay for Medicare Part D.
The total cost of Medicare Part D coverage includes the following expenses:
- Premium: Part D plans do not have standard premium amounts. Each one sets its monthly premium prices. Note: some Medicare Advantage plans do not charge an extra premium for prescription drug coverage.
- Annual Deductible: Nearly all Medicare Part D plans require policyholders to meet an annual deductible (no more than $435 in 2020) before their drug coverage kicks in. Deductible amounts vary; however, the federal government sets a maximum amount that Part D deductibles cannot exceed. Deductible maximums are established on an annual basis and can change from year to year.
- Copayments or Coinsurance: You’ll pay either a flat copayment (e.g. $10) or a certain percentage of a drug’s total cost (e.g. 20%) for each prescription you fill during your plan’s initial coverage period. Most Part D plans have three or four different price levels (“tiers”) for drug copays.
- Coverage Gap: Once your total drug spending costs (what your plan has paid, plus your deductible and copay expenditures) exceed a certain amount ($4,020 in 2020), you have reached the so-called “Medicare coverage gap,” also referred to as the Medicare “donut hole.” If you spend enough on prescription drugs to enter the coverage gap, your coinsurance costs for brand-name and generics drugs will equal 25% of the drug’s total price. If your spending reaches the out-of-pocket threshold ($6,350 in 2020), catastrophic coverage kicks in for the rest of the year. That will result in significantly lower copays or coinsurance costs for covered medicine.
What Is the Medicare Coverage Gap?
Most Part D prescription drug plans are subject to a coverage gap or donut hole. This had led to higher copays for members until they reached the out-of-pocket threshold for catastrophic coverage. But government reforms eliminated the donut hole in 2019 for brand-name drugs and 2020 for generics.
Medicare beneficiaries who receive financial assistance (such as Extra Help or through a state pharmaceutical assistance program) to help pay for Part D are usually exempt from the Medicare Part D “donut hole.” Instead of entering the coverage gap, those receiving financial assistance are charged a nominal copay for each medication they fill once their drug spending exceeds the coverage gap threshold amount.
What is Extra Help?
Extra Help is a federal program that helps pay for out-of-pocket costs related to a Medicare prescription drug coverage plan. It is also known as the Part D Low-Income Subsidy (LIS) and it is estimated to be worth about $4,900 per year.
Applicants can qualify if their income and assets fall under certain limits. Assets include savings, investments, and real estate (other than your home). (For a more exhaustive list, read this guide from the Social Security Administration). In 2020, eligible individuals may earn no more than $18,735 annually and own no more than $14,390 in assets; for couples, it is $25,365 for income and $28,720 for assets.
Does Part D Relate to Other Medicare Programs?
- Part D and Original Medicare (Medicare Part A and/or Part B): If you have Original Medicare (Part A and Part B), Medicare Part D isn’t automatically included as part of your Medicare benefits package. You obtain Part D coverage by enrolling in a stand-alone prescription drug plan that works alongside your Original Medicare benefits.
- Part D and Medicare Advantage (Medicare Part C): Many Medicare Advantage plans (MA-PDs) include prescription drug coverage. Health maintenance organizations (HMOs) or preferred provider organizations (PPOs) usually administer these plans.
- Part D and Medigap: Although Medigap policies no longer include prescription drug coverage, those who have drug coverage through their current plan can keep this benefit. However, once you enroll in a Part D prescription drug plan, your Medigap insurance policy must remove your prescription drug coverage and adjust your premiums accordingly.
Enrollment Periods: When Can I Sign Up for Medicare Part D?
Part D prescription drug coverage is optional, so you need to “opt into” this coverage. If you sign up for Part D for the first time, you may do so during one of the following three enrollment periods:
- Initial Enrollment Period (IEP): If you sign up for Medicare for the first time, you can sign up for a Part D drug plan at any point during your initial, seven-month enrollment window. Your initial enrollment period begins three months before your 65th birthday. It ends three months after your 65th birthday (or if you’re younger and have disabilities, the month you receive your 25th Social Security disability payment). You can also use your IEP to enroll in a Part D prescription drug plan if you turned 65 while living abroad or in prison.
- Special Enrollment Period (SEP): You may sign up for a Part D plan during a SEP in certain circumstances — for example, if you lose your current drug coverage (such as from an employer or union), or if you turned 65 before moving abroad or going to prison and now require prescription drug coverage upon your return or release. You can also enroll in a Part D plan during a special enrollment period if you already have Part D coverage and subsequently moved your main residence to a location outside your plan’s geographic service area. You do not have to request a SEP in these circumstances; just go ahead and sign up for a Part D drug plan.
- Annual Open Enrollment Period (AEP): If you miss the deadline to enroll in Part D during an IEP or a SEP, then you must wait until the next Annual Open Enrollment Period to enroll in a Part D prescription drug plan. Medicare’s annual Open Enrollment Period runs every year from October 15 to December 7. The newly-elected drug coverage will take effect on January 1. The AEP also serves as an annual opportunity for Medicare beneficiaries already enrolled in Part D to switch from one plan to another.
Final Steps: How Do I Enroll in Medicare Part D?
How can I enroll in Medicare Part D?
Once you decide to join a Medicare Part D plan, there are several ways to enroll. Scroll down to connect with a local, licensed agent online or over the phone.
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