Medicare Part D
Every time we think we are getting closer to understanding how Medicare works, they add another part! Medicare Part D is for your prescription drug coverage. That’s right- your prescription drugs are covered under a totally different part of Medicare than your hospital or outpatient coverage! Not only that, you actually have a lot of different Part D Prescription Drug Plans to choose from based on the prescriptions you take. Luckily, Part D plans will significantly help you save money on some of your more costly prescriptions. Taking charge of your healthcare with Part D will help alleviate many of the expenses that come with your prescription cost.
What Is Medicare Part D and How Much Does it Cost?
For starters, Medicare Part D was began at the federal level in 2006. It was created to help those who benefit from Medicare continue their access to any of their prescription drugs. This was done to stop Medicare enrollees from covering the entire cost of their prescriptions and leaving them scrambling to find ways to pay them. There is no automatic enrollment, as this part of Medicare is purely voluntary. Before this part of the program was developed, you would always pay for all your prescriptions out of your expenses. This proved costly for many, as some life-saving medications can prove challenging to afford.
As mentioned before, by enrolling in Medicare Part D, you can get coverage for your medically prescribed drugs, and compare costs based on your preferred retail pharmacies. This will give you a chance to get your prescriptions at a more cost-effective rate. This is highly beneficial as the cost of many prescription drugs can be astronomical, even for a generic brand.
If you wish to enroll in this part of Medicare, you must submit a separate application for Part D, not completed through Social Security. You actually have the ability to review and enroll in Part D plans directly through Medicare, but is important to work with an experienced agent to be sure that you fully understand your plan’s coverage, as well as your cost-share.
When you look into any supplemental private insurance for Medicare Part D, there are a few things it includes. Like most insurance policies, Medicare Part D has a monthly cost that you will pay- this is the premium. On top of this, you will have to take part in the cost-sharing for any expenses you’ll be responsible for when it comes to getting your prescription medications at your pharmacy. If your plan has some form of a deductible, this may be included in your cost-sharing.
Medicare Part D Monthly Premium costs
Your premiums will vary depending on the drug plan you have chosen. Remember that each insurance company will have a different set of rates. While this won’t deviate too much, take into consideration what you need for coverage and how much you are willing or able to spend on a monthly premium.
Each state will have numerous plans for you to choose from in 2021. You may see an average of twenty in many states, so you’ll have some great choices for your healthcare needs. You could see a premium at $10 on the low end to over $160 on others with many plans. This is dependent on the insurance company and your needs. Also, not every insurance provider will cover the same medications. Each one has its list that will be covered in the plan you choose. This allows them to adjust the costs that you’ll be charged for each year. Before deciding on a specific plan, check with the provider, and see if your particular medications are covered in the plan. An agent should be able to assist you.
While a low premium may seem attractive, you do get what you pay for. They may or may not provide you with the coverage you need. That’s why it’s crucial that the plan you choose will cover the drugs that you need for your continued health. The one thing you don’t want to happen is getting tied down with an insurance plan that won’t cover your needs. Getting your medications covered is imperative, so check beforehand to make the wised decision in your purchase.
Another cost to consider the Income Related Monthly Adjusted Amount (IRMAA). This is because if you have a higher income, you may be responsible for paying more for your plan. If you have filed individually with more than $88k or even jointly with your spouse at $176k, you’ll be responsible for paying the extra costs for your coverage. This additional cost is not part of our Medicare premium, and you won’t be paying it to your chosen plan. This cost will be paid directly to Medicare or even the Railroad Retirement Board. If you don’t pay this amount, you will lose your coverage. To see the current 2020 costs for the IRMAA, go here for the cost table.
Cost-sharing is when you pay your share of prescriptions medications at your pharmacy. Essentially, you pay for a portion of your medications, and your insurance carrier pays for a portion of your medications. Your level of cost-sharing is dependent on the Medicare Part D plan you enroll into, so it is very important to understand your amounts based on your prescriptions. Cost-sharing is seen in the deductible, initial coverage, coverage gap (donut hole) and catastrophic coverage stages, although the amounts vary stage to stage.
Medicare Part D Stages of Coverage
Stage One: Deductible
When it comes to your deductibles, specific guidelines are set forth for all plans dealing with Part D on a yearly basis. These are set by the Center for Medicare and Medicaid Services. Because of this organization, all private insurance company plans are instructed to adhere to the sent out guidelines. Medicare sets the yearly threshold for all four stages of these insurance Part D drug plans.
Your deductible is the amount you pay before the insurance carrier begins to pay any portion of your prescription drug costs. The deductible is considered the first stage of coverage in a Part D plan. In 2021, the deductible maximum is $445. Some plans may have lower deductibles than these, but these maximums are common on many plans. Luckily, Medicare sets the cap for the deductibles, so no Part D deductible can be higher than what CMS regulates.
Once you meet your annual deductible on your Part D plan, you will enter the initial coverage stage.
Stage Two: Initial Coverage
During the initial coverage stage, your insurance carrier begins to pay for a portion of your prescription medications. During this stage, you begin to pay either a coinsurance amount or copayment for each of your prescriptions. This amount is determined by the tier level of your medication, as well as the drug plan’s formulary. There are generally 5 prescription tiers: preferred generics, non-preferred generics, preferred brands, non-preferred brands, and specialty medications. The copay or coinsurance will be set based on the tier of the prescription medication. Generally, the higher the medication tier, the higher your cost-share will be.
- Tier One is going to be coverage for preferred generic drugs.
- Tier Two is for your non-preferred generic drugs.
- Tier Three is going to be for preferred brand name drugs.
- Tier Four is for non-preferred brand name drugs.
- Tier Five is going to be for specialty tier medications
Once your total drug cost reaches $4,130 in 2021, you will enter the coverage gap, also known as the donut hole.
Stage Three: Coverage Gap/ Donut Hole
Donut hole sounds sweet, doesn’t it? Don’t be so sure! It is not somewhere you want to be.
Although the donut hole is technically “closed,” this stage still leaves you with a very big cost-share. Once your total drug cost reaches $4,130 in 2021, you will enter the coverage gap. Total drug cost includes what your insurance company has paid for your prescriptions, as well as what you have paid for your prescriptions. It does not, however, include your monthly premium amounts.
Once you have reached the donut hole, you will now pay up to 25% for all of your generic and brand name medications. That’s right, you now are going to be paying for 1/4th of your medication costs! Don’t worry too much, only about 12% of people with Part D plans ever reach the coverage gap, but if you take expensive medications, it is something you want to avoid, if possible. If you do enter the donut hole, it is going to take a bit more spending before you get out.
Stage Four: Catastrophic Coverage
While in the donut hole, Medicare begins to track your True Out-of-Pocket (TrOOP). Your TrOOP includes your deductible, copays/ coinsurances, and the drug manufacturer’s 70% cost. Once your TrOOP has reached $6,550 in 2021, you will enter catastrophic coverage.
Catastrophic coverage sounds even worse than the donut hole, but it is actually much better. When you reach this final stage of your Part D coverage, your cost-share drops significantly. You will now pay $9.20 for brand name prescriptions and $3.70 for generic prescriptions, or 5% of retail costs, whichever is higher. Essentially your plan is now paying 15% of your prescription costs, Medicare is paying 80%, and you are paying 5%. Only about 4% of people with Part D plans make it to this stage, however, so a large portion of people who enter the donut hole never make it out.
At the end of the calendar year everything resets and you are back to stage one!
Extra Help for Those Extra Costs
For those who qualify, the government does provide help for your drug plan costs. This program, the Low-Income Subsidy, is based on your income and how limited your resources are. Applying is easy and can be done at the Social Security office. If your income falls below the Federal Poverty level of 150% within your household size, you may qualify.
Beneficiaries will receive assistance on the following:
- Paying your premiums for your monthly Part D plan.
- Your deductible.
- It will also help pay for your copays for ant of your prescriptions.
Keep in mind that there are various levels of qualification. The amount of assistance that you get will depend on your subsidy level. A full subsidy will provide you with paying for $100 of your premium. This, however, is based on the year Medicare benchmark.
Enrollment into a Medicare Part D plan is strictly voluntary. Great news, right? If I don’t take any prescriptions, I can save a little bit of money and pick one up when I need it. Unfortunately, that is not the case. Although enrollment is voluntary, if you delay it you will end up with some financial penalties, as well as end up in a strict timeline for your enrollment.
The first aspect of delaying your Part D enrollment is the late penalty. The Part D late penalty is a life-long penalty added to your monthly premium when you decide to enroll into a Part D plan. The penalty is calculated as 1% for every month you delay enrollment that you do not have creditable drug coverage, multiplied by the base modal premium (which changes year to year). Basically, the longer your delay your Part D enrollment, the higher your penalty becomes.
The other aspect to consider is your enrollment timeline. If you do not enroll in Part D when you are first eligible- whether turning 65 or leaving a creditable plan- you must wait until Open Enrollment. Open Enrollment, also known as the Annual Election Period, occurs every year from October 15th– December 7th, with coverage beginning January 1st. This means that you can’t just pick up a Part D plan whenever you need one. Rather, we now have to follow Medicare’s rules and timelines.
How to Enroll in Medicare Part D
You have a couple of choices in your enrollment. You can use a private insurance provider for any direct registration or use an agent who offers specialized Medicare services. An agent will give you an extra resource if you ever need help with your plan. This is especially useful if you have any concerns or questions regarding your medication coverage.
Although utilizing an agent is the most beneficial way to make sure you have a plan that suits your needs, as well as ensure that you fully understand your coverage, you also have the ability to compare plans on Medicare’s website. It is sometimes helpful to input your prescriptions into the Medicare plan finder prior to enrolling into Medicare to give yourself an idea as to what your prescription costs may by under Part D
The Best Time to Enroll
There are only certain times to enroll. One of them is when you are first eligible for Medicare. This Initial Enrollment Period will last seven months, so you’ll have time to consider your options. Remember that this period encompasses the three months before you turn 65, your current birth month, and the following three months. If you become eligible due to a disability, then there is a similar enrollment period for you to get the coverage you need.
The second enrollment period is Special Enrollment Period (SEP). You may be eligible for an SEP if you are over the age of 65 but remained on what Medicare considers creditable health coverage- typically an employer sponsored health plan. If you qualify for an SEP, you can enroll into a Part D plan up to 63 days after you leave your group coverage.
There is also another coverage period that starts on October 15 and runs through December 7. You can enroll or disenroll from your drug plan. Since providers change their benefits, networks, and costs on January 1 of the following year, you get this additional time to make any changes to your healthcare if needed. They will automatically renew if you are comfortable with your current plan. Remember to consider any medication changes you may have been through before you continue with your current plan.
Special Election Periods
Usually, you’re stuck with a plan until the next enrollment period. Fortunately, there are particular circumstances where Medicare will allow you to change in the middle of your coverage year. This is called a Special Election Period. This can be moving to another state or losing any coverage you may have added. Work with an agent to make sure this is something that won’t be rejected as the wrong coding in your plan can cause problems in your coverage. It would help if you also asked your agent about this Medicare Part D coverage. They won’t ask you as it isn’t allowed.
When it comes time to turn 65 or retire off your employer’s plan, you want to make sure you have all the information need to make sure that this part of Medicare is right for you. Your healthcare is crucial to a healthier life and a positive mental state of being. Choosing the right plan for your situation can be challenging and take some time, but getting help is right around the corner. A private agent or Medicare.gov will assist you in finding the right plan for your needs.
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