If you’re reading this then you’re hoping to learn more about Medicare Part D. Hopefully this will be just what you’ve been looking for – a bite-sized article that explains Part D in everyday, easy to understand language.
We’ve already covered Medicare Parts A & B (Original Medicare, a federally administered health insurance for people 65 and older, or younger in certain cases – more to come on who qualifies in a future post). If you missed the previous post on Part A you can find it here and Part B can be found here.
Now that we’ve cleared those plates (I wish I hadn’t started this series using courses of a meal as a metaphor, but since I did please bear with me as I continue to clumsily carry us through to our dessert – which will be Medicare Part C).
Medicare Part D – Prescription Drug Coverage
As you’ve probably figured out, Part D is prescription drug coverage. But there are some things you need to know and it won’t be hard at all to explain. The most important thing to understand is that this is NOT part of Original Medicare so you won’t see Part D on your red, white, and blue Medicare Card. It is stand alone drug coverage you’re required to have, but it is administered by private insurance companies. The rule is that you have to have creditable drug coverage so if you are on Original Medicare you will need to find a Part D Plan (PDP) to satisfy this requirement (unless you have coverage elsewhere, like through an employer plan, Tricare, VA, etc.). Medicare sets the guidelines for the minimum acceptable drug coverage. Insurance companies who offer these plans must make sure their plans meet the requirements so you don’t have to worry about figuring that out yourself when you’re looking for one.
Another thing you’ll need to know when shopping for a PDP is that there are many, many plans out there and the one that is best for you is 100% dependent upon your particular needs and what is most important to you. It can be tempting to ask a friend what they have and just go along and get the same thing. DON’T DO THAT! If your friend doesn’t take the exact same prescriptions you take in the exact same dosages then you could have an entirely different experience than your friend, even with the same plan. Besides, your friend may have just asked someone else who asked someone else, etc. till there’s no telling if any of them are in a pan that best suits their needs. This is an area where it pays to do your own research and planning. Don’t worry, an agent who specializes in helping people with their Medicare options will be happy to help you every step of the way, making it easy on you.
Bonus Tip: Talk to an independent agent you can trust who is licensed and appointed to represent several different carriers. A captive agent will only be permitted to enroll you in a plan through the carrier they represent and there might be something else you would prefer more through a different carrier. Keeping all your options open can lead to maximum value for you.
Next thing to understand is that PDPs have some share of cost in the form of premiums, deductibles, copays, and coinsurance. Let’s look at each of these one at a time.
- Premiums are monthly charges for the PDP, which are in addition to your Part B premium
- Deductibles are amounts you pay out of pocket before the plan begins to cover anything.
- Copays are fixed amounts you will be responsible for paying for your prescriptions.
- Coinsurance is a share of cost (similar to a copay) for which you will be responsible and is usually a percentage of the cost of the drug.
Basically, you will pay a monthly premium and any deductible required as well as a copay and the plan will cover the rest for your covered drugs. But not all plans are alike. Monthly premiums vary all over the place and some don’t have any deductible or have a deductible that only applies to certain drugs. (Another great reason to sit down with a trusted independent agent and let an expert help you navigate the selection process). Some drugs may require prior authorization or have quantity limits.
Not to overload your plate here, but there are a few more items of importance to chew over so bear with me (notice how I remembered our meal theme there? Impressive, huh?).
Let’s define some terms you’ll hear when discussing drug plans:
Drug Formulary: A specific list of drugs the plan will cover. Each plan can have a different formulary so be sure if you are looking at one to determine whether or not your scripts are covered that you’re looking at the right one for your plan.
Tiers: Categories of drugs in the formulary. Each drug is ranked in the formulary with the lowest tier, Tier 1, having the lowest share of cost to you, and the highest tier (usually Tier 5), having the most expensive out of pocket share of cost for you.
Bonus Tip: After you choose and enroll in a plan, take that plan’s drug formulary with you when you go to the doctor so that he/she can search for lower tier drugs to prescribe. Keep it in your glove box so you don’t forget!
Now that you know these terms, let’s get a little deeper into the way drug tiers can impact your overall drug costs.
If your plan does have a deductible you should know that many plans only apply the deductible to drugs in higher tiers (Tiers 3 and up, typically). This means the plan you’re looking at with that whopping deductible might actually be a great choice for you. Maybe you only take drugs that are in Tiers 1 and 2 so you won’t have to be concerned about that deductible at all. Of course it’s possible that something could change with your health and treatment plan requiring a prescription in a higher tier, in which case you would have to pay the deductible first. But we can’t predict such things, so as in most things in life, it’s best to make decisions based on what we can reasonably expect, not on what might happen.
There are a few other things to learn about Part D drug plans that could be beneficial to know and for the sake of simplicity I’ll list them below:
- You may qualify for extra help through the Low Income Subsidy, or LIS (offered through Social Security) if your income and assets fall within a predetermined range. Any caring agent specializing in helping people with these PDPs should be willing and able to help you apply and/or at least tell you how to do so. They can also screen you to determine your eligibility. If you qualify, this program will help cover your Part D costs (premiums, deductibles, copays, and coinsurance).
- Total overall costs and coverage for Part D varies greatly between individuals based upon plan, extra help, pharmacies used (standard, preferred, or mail order), prescriptions, and tiers of prescriptions. Again, the easiest way to find out which plan would be most affordable to you is to consult with an experienced, honest, independent agent.
- Coverage is divided into 4 phases: deductible phase, initial coverage phase, coverage gap (often called the donut hole), and catastrophic phase. In a nutshell, the deductible phase is what you would be in until your deductible is paid (assuming you even have one and that the deductible applies to the tiers of drugs you take). The initial coverage phase is the phase in which you pay the normal copays as laid out in your plan. The coverage gap is the phase that begins once the total amount paid by you and your plan for covered prescriptions reaches a certain amount ($4,130 on covered drugs in 2021 but subject to change each year). The catastrophic phase begins once you have spent $6,550 on covered drugs in 2021 (also subject to change annually). During the catastrophic phase you pay no more than 25% coinsurance for covered brand name drugs and 25% for generic drugs.
Wow, we’ve covered a lot about drug plans here and I’ve certainly had my fill of Part D! Hopefully you saved room for our dessert – Medicare Part C will be coming up soon.
Bonus Tip: If you have drug coverage through an employer or union, they will let you know each year whether or not your coverage is considered creditable. Keep the information they send you and talk to your benefits administrator before making changes to your coverage. If you leave your plan you may not be able to get it back!