Medicare Drug Plan Explained

Medicare Drug Plans are not as complicated as they seem. If you know the answers to these questions, selecting a Medicare Drug Plan will be a simple process. To assist you, we have simplified the process of searching across the web for each answer. The answers to most of your questions are all here in this brief article. Let’s review each one and help you understand your options for your prescription needs.

What is Medicare Part D Prescription Drug Coverage?

Part D is a prescription drug plan for seniors.  When someone turns 65 years old, most individuals are automatically enrolled in Original Medicare. What you may not be aware of is that Original Medicare, parts A and B, does not automatically enroll you in Medicare Drug Plans. You must enroll in one of these Medicare Drug Plans on your own.

Medicare Part D is the prescription portion of Medicare. Medicare Drug Plan options exist because Medicare itself is limited in what it covers for prescriptions. People often purchase a Medicare Drug Plan to help pay for the medication they take that is prescribed by a doctor. If they did not have one of these Medicare Drug Plans, then they would have to pay for their medications out of pocket.

What types of Medicare Drug Plan Options Are Available?

Medicare Drug Plans come in two forms: A standalone Medicare Part D plan that can be purchased through an independent insurance company, and as apart of a Medicare Advantage plan. Standalone Medicare Drug Plans can only be purchased if you have Original Medicare. Often times Medicare Advantage plans include prescription drugs. Referred to as MAPD or Medicare Advantage Prescription Drug Plans, they combine medical and prescription under one plan.

What Medications are Covered Under Medicare Part D?

Medicare Drug Plans all have a list of covered drugs, called a formulary. This list will vary from company to company, and can change from year to year. The formulary determines what drugs are covered by your Medicare Part D plan.  It is wise to review your plan documents each year and see if your plan covers your prescription. If not, consider switching Medicare Drug Plans to find one that covers the drug you are taking.

How Does Medicare Part D coverage work?

All Medicare Drug Plans function in five phases: Your premium, the deductible, the initial coverage period, the donut hole, and catastrophic coverage. All are subject to change every year. Read your Medicare Drug Plan documents as well as Medicare mandates with each new enrollment period.
Premiums vary among Medicare Drug Plans. Therefore, it is smart to shop around. There is no minimum or maximum amount set as a standard. Most Medicare Drug Plans have a deductible that needs to be met before the actual coverage begins. This deductible for the year 2017 cannot exceed $400. Once your deductible is met, Medicare Drug Plans move into their initial coverage phase. This is where you pay your copay or coinsurance until you reach the lower threshold of the donut hole.

What is the gap “donut hole?”

The Medicare Drug Plans donut hole is basically a period where you are required to pay 40% of brand name drug cost, and 51% of generic cost. For the year 2017, you are out of the donut hole once you have paid $4950 in out of pocket expenses.

After you have paid a total of $4950 for your Medicare Drug Plans out-of-pocket costs, then you have reached catastrophic coverage. From here you will again pay your copay or coinsurance for the remainder of the year. Each year, Medicare Drug Plans coverage resets, and you start over again.

Will the Donut Hole Be Eliminated?

With the passing of the Affordable Care Act (ACA) one of the components included was the reduction of expenses for seniors in the donut hole and plans to ultimately eliminate the coverage gap altogether by 2020.  Once the donute hole is closed, the standard cost for medications will be 25% of retail.

Am I eligible for a Medicare Part D Prescription Drug Plan?

You are eligible for Medicare Drug Plans if you have Part A and/or Part B of Original Medicare. You also must live in the area where the Medicare Drug Plans are issued.

When am I able to sign up for Medicare Part D coverage?

There is a window of three months before, the month of, and three months after your Medicare starts where you can enroll in any one of the Medicare Drug Plans you chose. If you wait beyond that window, there could be a late enrollment penalty, unless you can show proof you had qualified prescription coverage during the period in question. You can also sign up for Medicare Drug Plans during the Annual Election Period that is from October 15 through December 7 of each year.

There is also a period of time to make changes to Medicare Drug Plans. It is called a Special Election Period. A few circumstances that could allow you to make a change to Medicare Drug Plans would be: You moved out of your current coverage area, you become eligible (or ineligible) for enrollment in Medicaid or Tricare-type insurance, and if your Medicare Drug Plans change the contract it has with Medicare are several examples.

What does Medicare Part D cost?

As we have discussed, Medicare Drug Plans vary between companies. This includes premiums. It may require a little bit of shopping around to find the one that would best suit your needs. It would also be a good idea to have a list of your prescription drugs handy. A low premium on Medicare Drug Plans isn’t worth much if your medication is not in the company’s formulary list.  The average cost of Medicare Part D is $34 (that is the national average premium).  Other cost involved with Medicare Part D are co-pays, deductibles, and coinsurance.  The most a plan can charge in 2018 for their deductible is $405.

Can I get help with a Medicare Prescription Drug Plans cost?

Medicare Drug Plans offer assistance, called Low-Income Subsidy for those who are eligible. If you meet certain requirements, you may be automatically qualified. You may still apply for another program, called Extra Help, to assist with your Medicare Drug Plans costs such as premiums, deductibles, and shared costs.

You may automatically qualify for help with Medicare Drug Plans. Extra Help is automatic if you are qualified for Medicare and you receive full coverage under a Medicaid program, you are enrolled in a Medicare Savings Program, or receive Social Security benefits.

To qualify for Extra Help, your annual income must be limited to $18,210 for an individual or $24,690 for a married couple living together while your resources must be limited to $14,100 for an individual or $28,150 for a married couple living together.

A great resource that lays out Medicare extra help income limits 2018, and what Medicare extra help covers, see the Social Security Extra Help Guide.

Medicare Part D Enrollment

There are several ways to enroll in a Medicare Part D plan.  One of the easiest ways is to work with a broker like us who can compare plans with you, and facilitate your enrollment.  Another way, if you prefer to go at it alone is to use the Medicare Part D Plan Finder.  The video below shows how you can use this tool to help you with the process of comparing drug plans and even enrollment.

If you have general questions, schedule a call with Randy, or send us a message.