What is Medicare Part D?
What benefits does Medicare Part D cover?
Medicare Part D plans cover a variety of prescription medications, both generic and brand-name. Which specific medications are covered by each plan are detailed in the plan’s formulary, or drug list. Drug formularies usually include at least two different medications in each category of commonly prescribed drugs.
If your specific medication isn’t included in your plan’s formulary, you will probably be able to find a similar drug to substitute it. If you or your health care provider considers that your plan offers no appropriate drug to replace it, you can request an exception. In this case, your plan may agree to cover your medication.
Medicare drug plans are allowed to change their drug lists over the course of the year if drug treatments change, new drugs become available, or new medical information is released. Therefore, you should always stay up-to-date on your plan’s drug list.
There are also medications that Part D drug plans are not required to cover. These include weight loss/gain medications, erectile dysfunction medications, and over-the-counter drugs. However, some plans may choose to cover some or all of these medications.
Medicare drug plans are required to cover all drugs within certain “protected” classes. These drugs include:
- Cancer drugs
- HIV/AIDS drugs
If you have to take any of the drugs mentioned above, you can be assured that your Medicare drug plan will include coverage for them.
Drug plan formularies are divided according to drug tiers. Most plans organize their drug tiers in the following manner, though some plans may have different guidelines for setting their drug tiers:
- Tier 1: Preferred generic prescription medications
- Tier 2: Non-preferred generic prescription medications
- Tier 3: Preferred, brand-name prescription drugs
- Tier 4: Non-preferred, brand-name prescription drugs
- Tier 5: Specialty tier, or very high-cost medication
In general, the higher the tier, the higher the copayment/coinsurance you will be responsible for paying.
If you are prescribed a drug in a higher tier and you and your physician consider that you need that specific drug instead of a similar drug in a lower tier, you may request an exception. This would allow you to pay a lower coinsurance or copayment for the drug in the higher tier.
What are the different types of Medicare Part D plans?
“Stand-Alone” Drug Plans
First, you can purchase a “stand-alone” drug plan that only offers prescription drug coverage. These plans are available for people enrolled in Original Medicare, and you must sign up through a private insurance company.
Each state offers its own unique drug plans, and it is important to do your research in order to find which one is the best option for you.
Medicare Advantage Plans with Drug Coverage
You also have the option to enroll in a Medicare Advantage plan that includes drug coverage. Many Medicare Advantage plans include drug coverage, but not all of them, so be sure to enroll in a plan that does if you would like those benefits.
How much does Medicare Part D cost?
There are four stages of Medicare Part D coverage that affect how much you need to spend out-of-pocket on your medications over the course of the year:
- Deductible: You will have to pay the cost of your medications, even with a Medicare Part D plan, until you reach your yearly deductible. In 2021, the maximum Part D deductible is $445, though plans may have lower deductibles.
- Initial Coverage: Your initial coverage starts after you have reached your deductible. This is when your insurance company begins to pay for a portion of your prescription medications. You will either pay coinsurance or a copayment for your prescriptions during this time. After your total drug cost reaches $4,130 (the amount set for 2021), you will move into the coverage gap, or donut hole, stage.
- Coverage Gap/Donut Hole: Once you reach this stage, you will be responsible for paying 25% of the cost of your generic and brand-name medications. As mentioned, you reach the coverage gap once your total drug costs have reached $4,130 (that includes both what you and what Medicare pay for medications, but not the price of your monthly premium). Not many people reach this threshold, but if you take especially expensive medications, it is a possibility that you should keep in mind.
- Catastrophic Coverage: To get to the catastrophic coverage stage, you have to reach $6,550 (the amount set for 2021) in True Out-Of-Pocket (TrOOP) costs. This amount includes your monthly premium, coinsurance/copays, and the drug manufacturer’s 70% cost. Once this happens, what you pay drops significantly. Now you will only have to pay $3.70 for generic drugs and $9.20 for brand-name medications, or 5% or retail price, whichever is higher. It is even more unlikely to reach this stage of drug coverage than the donut hole stage.
Once the calendar year ends, your Medicare Part D status resets and you return to the initial deductible stage. It is also important to keep in mind that you will be responsible for paying a Part D monthly premium for your Medicare drug coverage.
How do you enroll in Medicare Part D?
As we mentioned, you cannot sign up for Medicare Part D in the same way that you enroll in Medicare Part A and B. You must either sign up for a “stand-alone” drug plan or enroll in a Medicare Advantage plan that offers drug coverage.
A licensed insurance agent here at Medicare Plans Direct can help you find the Medicare Part D drug plan that is right for you. Don’t hesitate to get in contact with us if you are seeking Medicare advice.