Medicare Part D
Medicare Part D is a component of Medicare, a federal health insurance program, and is created to provide prescription drug coverage and help reduce its costs for it. Part D is available for people of age 65 or older and younger people with certain disabilities or End-Stage Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS). It is sold by private insurance companies and it is not mandatory to have this type of insurance plan, but it is available for all enrollees who have Original Medicare (Parts A and B).
Medicare Part D explained
There are two main ways for purchasing prescription drug coverage:
- Medicare Part D: this is a stand-alone plan provided by the overall Medicare federal program
- Medicare Advantage (Part C): most Medicare Advantage plans include Part D in their coverage
Each of those plans has its formulary – a list of covered medications. All plans must cover determined categories of medications but specific drug prescriptions in each category can vary from plan to plan. In 2022, there are 766 drug plan options for Medicare enrollees.
What is covered under Part D?
All drug plans must cover a minimum of two drug prescriptions in each category and medications like:
- Antineoplastic (cancer)
- Antiretroviral (HIV and AIDS categories)
- All commercially available vaccines which are medically necessary for preventing illness (like the shingles vaccine)
However, if some prescription medication isn’t covered under your drug plan and your doctor thinks it is necessary for you to have it you can ask your health care provider for it to be entered into your plan.
What are the costs of Part D insurance policies?
Prescription drug costs are subject to change each calendar year, but monthly premiums will cost you approximately 34$. Your costs can depend on the IRMAA or Income Related Monthly Adjustment Amount which is an extra cost if your income falls under a certain point. This cost is detached from your Part D monthly premium and you pay it directly to Medicare (not to your Medicare Part D Plan).
Except for the monthly premiums, you will be responsible for deductibles, copayments, coinsurance, and coverage gaps (also known as donut holes).
- A yearly deductible is an out-of-pocket cost that you are responsible for each year before your Medicare-covered plan starts to cover all costs. Deductibles are set by the government and are subject to change each calendar year.
- Copayments or coinsurance is the amount you are responsible for after your deductible has been met. Coinsurance stands for the percentage of what you need to pay and copayment is a fixed cost. For example, you will pay 10$ in copayment or you may owe 20% of coinsurance for drug prescriptions after your plan is covered for its share.
- A coverage gap or donut hole stands for a temporary increase in your out-of-pocket costs and it can kick in after you and your policyholder spend certain amounts on prescription drugs and other following costs. Once that amount is reached, you must cover at least a portion of your medications out of pocket. The out-of-pocket limit is a term used to describe the maximum amount paid out of pocket during a given year under most plans. When you surpass that amount, your coverage resumes. As a result, the term “donut hole” was conceptualized. The donut hole has been closing year after year underneath the Affordable Care Act (ACA), but it isn’t entirely gone. When you reach the amount of $4330 in 2022 you enter in coverage gap which means you need to pay 25% of prescription-covered medications. This phase lasts until you reach the True-out-of-pocket limit which is 7050$.
- Catastrophic phase coverage begins once you surpass the TROOP limit and your drug plan covers all your costs. During this phase, you’ll be responsible for 5% of out-of-pocket costs.
What is Medicare Part D Extra Help?
Extra Help is designed as financial aid for Medicare Part D insurance plans. If you have a low income and are not able to cover limits that are set yearly, you become suitable for Medicare Part D Extra Help. If you are enrolled in a state insurance program like Medicaid which is designed to help those with lower income status, you are immediately eligible for Extra Help. The benefits help with monthly premiums reduction and lower copayments and coinsurance on medications. How high your level of Extra Help will depend on how much you need it.
Part D eligibility
Not everyone with Medicare qualifies for Medicare Part D coverage. To be eligible for it, you must first meet certain criteria, like you already need to have Original Medicare before you apply for Part D coverage. But, the difference is that you only need to be enrolled in Part A or Part B (not both) to get drug prescription coverage.
Also, there are several combinations for Part D coverage plans. As already mentioned you can combine Part A with part D alone, or Part B with part D alone. Also, you can have Parts A and B alongside Part D as well as Parts A and B in combination with Medicare Supplement Plan and Part D. One more possibility is if you have Medicare Advantage which usually offers Part D in their plans.
Besides that, You can’t enroll in both a Medicare Advantage Prescription Drug plan and a standalone Medicare Part D plan because Medicare does not allow you to have two types of prescription drug coverage. In other words, you need to choose one or another.
Part D enrollment periods
You can enroll in Medicare Part D when become eligible for Original Medicare. This means that you can get your drug prescription coverage in the Initial Enrollment Period which lasts seven months (begins 3 months before your 65th birthday and ends three months after). If you don’t choose to enroll in the first period you may need to pay a late enrollment penalty (in addition to the Part D monthly premium each month) if you change your mind in the future. However, this is only valid if you never had valid drug coverage.
You are also able to enroll in Part D during the Annual Enrollment Period which happens each year between the 15th of October and the 7th of December and your plan will become effective on the 1st of January the following year. If you had credible drug coverage before but you lost it you can get a Part D plan in the Special Enrollment Period.
However, the best time to enroll is the Initial Enrollment Period if you haven’t had credible drug coverage before, especially for those seniors who use medications on daily basis.
How to choose a Part D plan?
First, you need to see what plans are available in your living area because some drug coverage plans can differ from state to state. Each plan needs to have its formulary of medications they offer so it is good to check it closely and choose a plan that can cover most of your prescribed drugs and also fits in your budget.
However, the benefits of a drug coverage plan differ so to be sure the best option is to talk to a licensed Medicare Insurance broker who can help you choose a plan that best suits your needs.