Medicare Part D
What is Medicare Part D Prescription Drug Coverage?
Medicare Part D Plansare coverages provided by private insurance companies that have received approval from the Centers for Medicare and Medicaid Services (CMS) to offer a plan.
Pard D covers all of the Medicare-approved drugs, although each company offering these products has its own pricing for the medications covered on the formulary (list of drugs), and they all negotiate with the retail and mail order pharmacies separately.
There are no standardized Medicare Part D plans. Costs can vary considerably among them.
Do I need a Medicare Part D Prescription Drug Plan?
If you do not purchase a Medicare Part D Prescription Drug plan when you are eligible, you may pay a late penalty with your monthly premium once you do get one.
If you have prescription drug coverage through an employer group or retiree plan that is considered creditable coverage, you don’t have to enroll in a Medicare Part D plan until your coverage ends. COBRA coverage does not count as creditable coverage.
What Does Medicare Part D Cover?
Under Medicare Part D, prescription drug plans are available from private, Medicare-approved insurance companies, so benefits and cost-sharing structures differ from plan to plan. However, the Center for Medicare and Medicaid Services (CMS) sets minimum coverage guidelines for all Part D plans. These rules require all plans to cover medications to treat most illnesses and diseases.
Each Medicare prescription drug plan uses a formulary, which is a list of medications covered by the plan and your costs for each. Most plans use a tiered copayment system. Prescription drugs in the lowest tiers, usually generic medications, have lower copayments. Brand-name and specialty medications in the higher tiers cost more out-of-pocket.
Medicare Part D only covers prescription drugs that are FDA approved. Experimental medications are generally not covered.
How Much Does a Medicare Prescription Drug Plan Cost?
These plans are private plans, which means each insurance company determines costs for its plans. Generally, you will pay a combination of the following out-of-pocket costs for your Medicare Part D coverage:
- Monthly premiums
- Annual deductible
- Copayments (flat fee you pay for each prescription)
- Coinsurance (percentage of the actual cost of the medication)
How Do I Choose a Medicare Part D plan?
According to the Kaiser Family Foundation, the average Medicare beneficiary has 30 stand-alone Medicare Part D prescription drug plans to choose from in 2022.
It’s important to shop to find the one that’s right for you. In addition to monthly premiums and deductibles, you should definitely compare plan formularies, especially if you take daily medications.
The monthly premium for a Medicare Part D prescription drug plan can range between as little as $10 per month, up to $120 per month.
Some plans use a pharmacy network. If you have a pharmacy you really like, make sure it’s part of the plan’s network. Look for other benefits, such as mail-order pharmacies that can help save money out-of-pocket.
When can I enroll in a Medicare prescription drug plan?
You can enroll in a plan at any time during your Medicare Initial Enrollment Period, which starts three months before your 65th birthday month, includes your birthday month, and extends for three additional months. If you get Medicare because of a disability, you can generally enroll in Medicare Part D after you are on Social Security disability for 24 months.
You can change your prescription drug coverage each year during the Fall Open Enrollment Period (October 15th through December 7th). If you get Medicare Part D as part of your Medicare Advantage plan, you can also make changes during the Medicare Advantage Open Enrollment Period, which runs from January 1st through March 31st.
It’s important to enroll in a plan when you are first eligible to avoid a late enrollment penalty with your monthly premium. If you go without creditable prescription drug coverage and you don’t enroll in Part D when you are first able, you’ll pay a penalty of 1% of the national base premium for each month you go without coverage. You pay this penalty for as long as you have Medicare Part D coverage.