Medicare beneficiaries can get prescription drugs covered through Medicare Part D. The plan is entirely optional, but for Medicare enrollees with high medication expenses, having prescription drugs covered can make for significant savings.
It’s essential to understand your options before it’s too late. If you don’t enroll as soon as you’re eligible, you may be charged a late-enrollment penalty. Plus, the sooner you enroll, the sooner you can start enjoying the benefits.
What is Medicare Part D?
Medicare Part D is an optional benefit offered to all Medicare beneficiaries. The program provides prescription drug coverage and gives enrollees a discount on prescription drug medication.
Medicare prescription drug coverage is available in two ways:
- If you have Original Medicare, you can get coverage by enrolling in a stand-alone Medicare Prescription Drug Plan.
- If you have Medicare Advantage (Medicare Part C), you can get prescription drug coverage by enrolling in Medicare Advantage Prescription Drug plans.
Open enrollment for Medicare Part D coverage in 2022 begins on October 15, 2021, and ends on December 7, 2021.
What Does Medicare Part D Cover?
Whether you get Medicare Part D coverage as a stand-alone plan or as a Medicare Advantage Prescription Drug Plan, the included coverage varies.
Both cover the cost of prescription drugs, but Medicare Advantage Prescription Drug plans also include other medical services such as in-home care or occupational therapy.
List of Prescription Drugs Covered by Part D
When you enroll in a prescription drug plan, you want to ensure the medication you take is included in the coverage. Each Medicare Part D plan has its own list of covered prescription drugs (the formulary).
The insurer’s formulary includes both brand-name prescription drugs and generic drugs. In addition, at least two drugs in the most commonly prescribed categories are included in the formulary to help people with different medical conditions access the medication they need.
The formulary might not include your specific medication; however, a similar drug is available in most cases. Suppose you or your prescriber believes none of the drugs included in the formulary match your condition. In that case, you can apply for an exception and get your medication included in the coverage.
Generic Drugs Covered by Part D
Generic drugs are copies of brand-name drugs and are the same in terms of dosage, strength, intended use, consumption, and quality. Sometimes, there may not be a generic drug for you to take in place of your brand-name drug. In which case, talk to your doctor to see if there is another generic drug that will work just as well.
Prescription Drug Tiers
Medicare Part D uses a tiered formulary system to determine how much they will pay. The tiers range from low cost, which includes lower-cost brand-name or affordable generic drugs, to high-cost tiers, including more expensive medications.
Therefore, some Medicare recipients will be on a more expensive plan than others, depending on the type of prescription they need.
An example of an insurer’s prescription drug tiers:
- Tier 1: The lowest copayment with the most generic prescription drugs
- Tier 2: Mid-range copayment with brand-name prescription drugs included on the formulary list.
- Tier 3: Higher copayment with brand-name prescription drugs not included on the formulary list.
- Specialty tier: The highest copayment with the most expensive prescription drugs
Suppose your drug is in a higher tier and your doctor doesn’t advise you to take a similar medication on a lower tier. In that case, it is possible to apply for an exception and get the drug included on a lower-priced tier.
Am I Eligible for Medicare Part D?
You are eligible for Medicare prescription drug coverage if:
- You’re enrolled in Medicare Part A and/or Part B
- You live in the service area of a Medicare plan that includes prescription drug coverage.
When Can I Enroll in Medicare Part D?
Suppose you are eligible for Medicare Part D. In that case, there are time frames during which you can enroll in a stand-alone Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan:
- The Initial Enrollment Period is your earliest opportunity to enroll, starting three months before you turn 65.
- The Annual Election Period is your annual opportunity to enroll or make changes to your Medicare Part D coverage (October 15 to December 7). During this time, you can enroll in a Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan for the first time, switch Medicare plans, or disenroll from your plan.
- The Medicare Advantage Open Enrollment Period is another annual period for those enrolled in a Medicare Advantage plan. Between January 1 and March 31, you can enroll in a Medicare Prescription Drug Plan.
- If you have a qualifying life event, you can enroll during a Special Election Period. Examples of qualifying events include moving outside your current plan’s service area, losing Medicaid eligibility, or moving into a nursing home.
Late Enrollment Penalty
Even if you’re not taking prescription medications right now, it’s a good idea to enroll in Medicare Part D straight away.
The first opportunity to enroll in Medicare Part D is once you have Medicare Part A and/or Part B, which is possible three months before your birthday month and three months after. If you don’t enroll in Medicare Part D during this period, you could face a late-enrollment penalty that is permanently added to your premiums when you enroll.
How Much Does Medicare Part D Cost?
The cost of Medicare Part D fluctuates depending on many factors, including the state you live in, income, and the type of plan you choose. So, what it costs for you will be entirely different to a friend or relative.
According to CMS, the average basic premium for Medicare Part D will be $33 in 2022, a 4.9% increase from the $31.47 average premium in 2021.
You can find the best plan by comparing all of your options. Just because a plan has the lowest monthly premium doesn’t mean it’s the most affordable. Low premiums often come with more out-of-pocket costs until you meet the deductible.
Part D Premium in 2022
If your income is above a certain amount, you will pay an income-related monthly fee in addition to your Medicare Part D premium. The chart below shows how much you can expect for coverage depending on your income level.
|Initial coverage limit||$4,430.00||$4,130.00||+ 7.3%|
|Out-of-pocket threshold||$7,050.00||$6,550.00||+ 7.6%|
|Minimum copay (catastrophic portion of benefit)|
|Generic/preferred multi-source drug||$3.95||$3.70||+ 6.8%|
|All other drugs||$9.85||$9.20||+ 7.1%|
Part D Deductible in 2022
The deductible is the amount of money you must pay each year for prescriptions before your Medicare Part D plan begins to pay its share. Just like premiums, deductibles vary from plan to plan.
Some have high deductibles that take enrollees months to reach, while others have no deductible, meaning enrollees get help from their plan right away. In 2022, the initial deductible will be $480, an increase of $35 in 2021.
Copayments & Coinsurance
Most Medicare Part D plans require enrollees to pay a copayment or coinsurance on prescription drugs; this amount will depend on the plan you choose and the type of medication you are buying.
For example, a copayment is a fixed amount of money, for example, a $5 fee on low-tier prescriptions and perhaps $40 and above for higher-tier medications. Coinsurance is a percentage of the cost; for example, a 20% fee on all prescription drugs would cost you $70 for a $350 prescription.
Part D plans sometimes require coinsurance, but at other times they may need a copayment. Before you enroll in a plan, check what costs you will be required to pay for your current medication.
Medicare Part D Donut Hole – The Coverage Gap
The Medicare Part D coverage gap, also known as the donut hole, is the coverage phase with a temporary limit on drug coverage.
The gap begins when you spend a certain amount on prescription drugs within a year. In 2022, the coverage gap starts once you and your plan have spent $4,130 on covered drugs.
When you enter the coverage gap, you will be responsible for 25% of drug costs. This percentage was much higher in previous years, but enrollees may still notice a slight increase in prices during the coverage gap.
For example, you may be used to paying a $15 copayment for a drug during the initial coverage period. However, as soon as you reach the coverage gap, the same drug will cost you $25 (25% of $100).
The coverage gap ends when you spend $6,550 in out-of-pocket costs in 2022. After this amount has been reached, you move from coverage gap to catastrophic coverage. During catastrophic coverage, you pay significantly lower copays or coinsurance for your covered drugs for the remainder of the year.
Donut Hole Snapshot
Coverage Gap for Brand-Name Prescription Drugs
Once you enter the coverage gap, you’ll pay up to 25% for your plan’s brand-name prescription drugs. Whether you buy your prescription at a pharmacy or order through the mail, this is a fixed percentage you will be accountable for.
Although you will only pay up to 25% of the cost, 95% of the drug cost will count as out-of-pocket costs, meaning you will reach catastrophic coverage much faster.
Coverage Gap for Generic Drugs
Medicare will pay 75% for generic drugs during the coverage gap, and you will pay the remaining 25%. Unlike brand-name drugs, only the amount you pay will count toward getting you out of the coverage gap. Therefore, with generic drugs, it will take much longer to get out of the coverage gap.
Applying for Medicare Part D
Finding the right Medicare Part D plan is all about striking the perfect balance between premiums, out-of-pocket costs, and star rating. If you would like a licensed agent to help find the best prescription drug coverage in your area, get in touch with us.