Medicare Part D Explained: Prescription Coverage and Plans
There are currently 44 million beneficiaries of Medicare in the United States. By 2030, that number is expected to rise to 79 million.
Most people are familiar with Medicare Parts A and B.
However, fewer people know about Medicare Part D. Medicare Part D deals with prescription drug coverage the costs of those drugs.
As you'll see in this article of Medicare Part D Explained, there are mainly two options when it comes to prescription drug coverage. You'll also learn about the various costs.
These costs might include out-of-pocket expenses such as monthly premiums, coinsurance, and copayments. You might also have to pay annual deductibles.
Are you a beneficiary of Original Medicare (Part A and Part B)? If so, you'll be able to get prescription medication benefits via a standalone Medicare Prescription Drug Plan (PDP).
If you have Medicare Part C, you can get the coverage via a Medicare Advantage Prescription Drug plan. Both of these types of Medicare plans are available through private insurance providers. These providers have contracts with Medicare.
Are you interested in learning more? If so, then continue reading and we'll walk you through everything you need to know!
Medicare Part D Premiums
The majority of Medicare Advantage Prescription Drug plans and Medicare Part D Prescription Drug Plans (PDPs) include a monthly premium. This premium varies depending on the insurance provider and plan.
Your monthly premium could include the cost for both your Medicare Part C and Part D coverage. This is the case if you get your prescription medication coverage through a Medicare Advantage Prescription Drug plan. This monthly premium might be in addition to your Medicare Part B premium, which you're going to have to keep paying.
In order to make sure that you don't end up having to pay a late-enrollment penalty, you want to make sure that you sign up for Medicare Part D when you first become eligible to do so. Many beneficiaries are first eligible for Medicare Part D after they have Medicare Part A and/or Part B and they also reside in the service area of a Medicare plan that includes prescription medication coverage.
If you decide to wait to enroll in Medicare Part D and you go without creditable prescription medication coverage for 63 days in a row or more, then you might have to pay a higher premium when you sign up for Part D at a later point. Creditable prescription medication coverage is insurance that is expected to pay as much as the standard Part D benefit, on average.
If you happen to qualify for the Low-Income Subsidy program (also known as Extra Help), then you won't need to pay the late-enrollment fees.
Part D-IRMAA
Some beneficiaries might need to pay an extra fee. This is known as the Part D Income-Related Monthly Adjustment Amount (IRMAA). This fee might apply to you if your adjusted gross income - as reported on your tax returns from two years ago - is higher than a certain amount.
The income threshold for this fee can change by the year. In order to get the most recent information, be sure to check out Medicare's webpage on Part D-IRMAA. This fee is essentially a surcharge on income that's in addition to your plan premium.
If you have to pay this extra amount, then you will pay this directly to Medicare or the Railroad Retirement Board (not your Medicare plan). Social Security will let you know if you have to pay the Part D-IRMAA, based on what your income is.
It's important to remember that the average premiums for Medicare Advantage Prescription Drug plans and Medicare Prescription Drug Plans can greatly vary. For example, one plan might demand a monthly premium of $20 while a different one might require a monthly premium of $90. This is why it's so crucial that you shop around for a Medicare plan that has a premium cost that you feel you can afford.
Varying Costs
It's worth noting that costs can change by plan. It really depends on the list of covered prescription medications on the plan. It also depends on which private insurance provider is offering the coverage.
Medicare Advantage Prescription Drug plans and Medicare Prescription Drug Plans are different when it comes to the specific drugs that they cover. They also differ in the costs that you have to pay, even if the prescription medications are exactly the same.
Medicare plans that include coverage for prescription medications usually place covered drugs into cost tiers. There is different cost-sharing for the medications on each tier.
Prescription medications that land on lower tiers will have lower coinsurance costs and copayments than drugs on higher tiers. You should also remember that formularies might be subject to change. If they do change, then your Medicare plan will notify you.
Other Medicare Part D Prescription Medication Coverage Costs
Medicare plans that come with prescription medication coverage might require that you pay an annual deductible before it starts to cover your prescription medication costs. Your deductible is the amount of money that you will have to pay out of pocket. This is before your Medicare Advantage Prescription Drug plan or Medicare Prescription Drug Plan begins to cover its share of the costs.
The amount of the deductible can change from plan to plan. Also, there are some Medicare plans that don't require you to pay an annual deductible.
After you reach your annual deductible, you still might have to pay for certain out-of-pocket costs. This can be the case even after your Medicare plan has covered its share.
These out-of-pocket costs might include copayments and coinsurance. And if you pay a coinsurance fee, then you'll need to pay for a portion of the cost of the medication.
For example, you might owe a ten percent coinsurance every time you fill a certain prescription. If you need to pay a copayment, then you'll be responsible for paying a certain amount for drugs on a certain tier. This tier is determined by your Medicare plan.
Your cost-sharing might also vary depending on whether you're taking generic drugs or brand-name ones. Generic drugs will usually cost you less than the brand-name prescription ones.
Medicare Part D Coverage Gap (“Donut Hole”) Costs
When going over Medicare Part D, it's important that you understand the coverage gap. This is a temporary limit on what your Medicare Advantage Prescription Drug plan or your Medicare Prescription Drug Plan is going to pay for covered prescription medications.
Every single Medicare plan that includes prescription medication coverage has a coverage gap. However, not every Medicare beneficiary is going to enter that gap. The chance that you're going to reach the coverage gap will depend on the type of drugs that you take and how much they cost.
This includes whether they are generic or brand-name prescription medications and also their dosage.
The coverage gap is also referred to as the "donut hole." You enter the donut hole after you and your Medicare plan have spent a certain amount of money on covered prescription medications. This includes the deductible if your plan has one.
After you enter the donut hole, you will be responsible for more of the costs of your prescription drugs. In the past, beneficiaries who entered the donut hole were responsible for paying 100 percent of prescription medication costs.
However, after the Affordable Care Act was passed, the amount you have to pay has been reduced. This is thanks to the fact that you pay out of pocket in the donut hole through government subsidies and manufacturer discounts. The gap in your coverage will get smaller each year.
After your costs in the donut hole have reached a certain amount of money, catastrophic plan coverage kicks in. Once this happens, you will be out of the donut hole.
You will then only have to pay either a small copayment or coinsurance for covered prescription medications for the rest of the calendar year.
Understanding Medicare Part D Explained
While not as many people might be as familiar with Medicare Part D as they are with Medicare Part A and Part B, that doesn't make Medicare Part D any less important. As we can see, after going over Medicare Part D Explained, out-of-pocket costs can vary greatly depending on the plan and provider that you have.
Do you need help finding the right plan for yourself? If so, then contact us today and see what we can do for you!
