PRESCRIPTION DRUG PLANS
Medicare prescription drug coverage is an optional benefit. Medicare offers prescription drug coverage to everyone with Medicare. If you decide not to get Medicare drug coverage when you’re first eligible, you’ll likely pay a late enrollment penalty if you join later, unless one of these applies:
- You have other credible prescription drug coverage
- You get extra help through the state
Generally, you’ll pay this penalty for as long as you have Medicare prescription drug coverage.
To get Medicare drug coverage, you must join a plan approved by Medicare that offers Medicare drug coverage. Each plan can vary in cost and drugs covered.
Medicare Part D
Medicare Part D has distinct coverage phases that determine how much you pay for your medications throughout the year.
- Some Part D plans have a yearly deductible. This is the amount you must pay out-of-pocket for your prescriptions before your Medicare Prescription Drug Plan begins to pay its share.
- Not all plans have a deductible, and for plans that do, not all drugs may be subject to the deductible.
Initial Coverage Phase:
- After meeting the deductible (if your plan has one), you enter this phase.
- During this phase, you pay a copayment (a fixed amount) or coinsurance (a percentage of the drug’s cost) for each covered drug.
- Your plan pays the rest of the cost.
- You remain in this phase until your total drug costs (what both you and the plan have paid) reach a certain amount for the year.
Coverage Gap (Donut Hole):
- After your total drug costs reach the plan’s limit, you enter the coverage gap phase. This phase is often referred to as the “donut hole.”
- Historically, beneficiaries paid a higher percentage of drug costs during this phase, but changes in law have reduced those costs over the years.
- In the coverage gap, you’ll typically pay a fixed percentage of the drug’s price for both brand-name and generic drugs.
- Out-of-pocket costs (including the manufacturer’s discount on brand-name drugs) during the gap count towards moving you out of the coverage gap.
Catastrophic Coverage Phase:
- After you’ve spent a certain out-of-pocket amount on drugs for the year, you exit the coverage gap and enter the catastrophic coverage phase.
- In this phase, you pay a relatively small coinsurance or copayment for your drugs for the rest of the year.
Every year, the exact dollar amounts associated with these phases may change. It’s essential for Medicare beneficiaries to review their Part D plan materials each year and be aware of any changes to understand their potential costs.
Key details about Medicare Part D:
- Coverage: Medicare Part D provides coverage for prescription drugs. Each Part D plan has a specific list of covered drugs, called a formulary. The formulary may be divided into tiers, and drugs in each tier have a different cost.
- Private Plans: Part D plans are offered by private insurance companies that are approved by Medicare. You can get Part D coverage through a stand-alone Prescription Drug Plan (PDP) or as part of a Medicare Advantage Plan that includes drug coverage (MA-PD).
- Enrollment: Enrollment is not automatic. Beneficiaries need to choose and enroll in a Part D plan unless they have equivalent drug coverage from another source (like a current or former employer).
- Costs: Beneficiaries usually pay a monthly premium for the Part D plan. Costs for Part D plans can vary based on the drugs used, the plan chosen, the pharmacy used, and the beneficiary’s income. Some people may qualify for Extra Help, a program to help pay for Part D costs based on financial need.
- Late Enrollment Penalty: If a beneficiary doesn’t sign up for Part D when they’re first eligible and they don’t have other creditable prescription drug coverage, they may have to pay a late enrollment penalty for as long as they have Part D.
- Coverage Gap (Donut Hole): The coverage gap, often referred to as the “donut hole,” is a temporary limit on what the drug plan will cover. Not everyone will enter the coverage gap because it begins after the total yearly drug cost (including what both the plan and the beneficiary pay) reaches a certain amount. After reaching the coverage gap threshold, beneficiaries pay higher out-of-pocket costs for prescription drugs until reaching the yearly out-of-pocket spending limit.
- Annual Election Period: Similar to Medicare Advantage plans, there’s an annual election period (often referred to as “open enrollment”) during which beneficiaries can join, switch, or drop a Medicare drug plan.
- Medication Therapy Management Program: If beneficiaries have multiple chronic conditions, take multiple Part D drugs, and meet certain other criteria, they might be automatically enrolled in a free Medication Therapy Management (MTM) program. This program helps beneficiaries and their doctors make sure the medications are working as intended and are safe.
- Protection Against High Out-of-Pocket Costs: After beneficiaries reach a yearly out-of-pocket limit, they enter a phase called “catastrophic coverage,” where they pay a small coinsurance or copayment for their drugs for the rest of the year.
When considering a Medicare Part D plan, it’s important for beneficiaries to review the plan’s formulary to ensure that their medications are covered and to understand the associated costs.