Medicare Part D - Prescription Drug Plans
Medicare Part D plans are offered through private insurance companies that are contracted by Medicare, so costs and availability may differ between carriers and by location.
Part D plans include stand-alone Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug (MAPD) plans.
Medicare requires that all beneficiaries have some sort of creditable drug
coverage, which includes Part D plans and employer health coverage.
Hence, it is recommended that beneficiaries enroll in a Part D plan when
they are first eligible to avoid any late enrollment penalties.
Medicare Part D Coverage
Each Medicare Prescription Drug Plan has its own list of covered drugs
(called a formulary). Many Medicare drug plans place drugs into different
"tiers" on their formularies. These formularies include coverage of certain
generic and brand-name drugs. Drugs in each tier have a different cost. A drug in a lower tier will generally cost you less than a drug in a higher tier. In some cases, if your drug is on a higher tier and your prescriber thinks you need that drug instead of a similar drug on a lower tier, you or your prescriber can ask your plan for an exception to get a lower copayment.
A Medicare drug plan can make some changes to its formulary during the year within guidelines set by Medicare. If the change involves a drug you’re currently taking, your plan must do one of these:
Provide written notice to you at least 60 days prior to the date the change becomes effective.
At the time you request a refill, provide written notice of the change and a 60-day supply of the drug under the same plan rules as before the change.
All plans must cover certain categories of drugs, but which drugs are covered in each category may differ between insurance company and by plan. All plans must cover at least two drugs per each drug category and most drugs in the anti-psychotics, anti-depressants, immunosuppressants, cancer, and HIV/AIDS categories.
Keep in mind that if you fill a prescription that is not in your plan's formulary, then you may be responsible for the full retail cost of the drug.
2 ways to get drug coverage
Medicare Prescription Drug Plan (Part D). These plans (sometimes called "PDPs") add drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) Plans, and Medicare Medical Savings Account (MSA) Plans.
Medicare Advantage Plan (Part C) (like an HMO or PPO) or other Medicare health plan that offers Medicare prescription drug coverage. You get all of your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) coverage, and prescription drug coverage (Part D), through these plans. Medicare Advantage Plans with prescription drug coverage are sometimes called “MA-PDs.” You must have Part A and Part B to join a Medicare Advantage Plan.
Medicare Part D Costs
Because plans have the opportunity to set their own monthly premiums, the costs associated with Part D plans may differ by insurance company. In general, each plan requires payment of a monthly premium in addition to your Part B monthly premium. A small number of individuals may be responsible for a higher monthly premium based on income.
Other costs may include the following:
Yearly deductible: The amount that you must pay before
your plan coverage begins. The government sets a
maximum deductible that may change each year, and
some plans charge no deductible.
Co-payments and coinsurance: You are
responsible for paying these amounts for
your medications after you have paid
your plan deductible (if required).
Coverage gap, or “donut hole” : After you
and your plan have spent a certain amount
on medications, you may enter the coverage
gap, in which you pay all costs for prescription
drugs out-of-pocket. There are discounts on the
costs of brand name and generic drugs in the
coverage gap. Once you have paid up to a
certain amount out-of-pocket, your plan begins
catastrophic coverage, during which you pay only a small copayment or coinsurance while your plan covers the rest of the costs.
Part D Enrollment and Eligibility
To be eligible to enroll in Medicare Part D, you must be eligible for and enrolled in Original Medicare, Part A and Part B, and you must also reside in the county of the plan that you wish to join.
If you qualify for a Medicare Part D plan, you have the option of enrolling during a few different enrollment periods, including your Initial Election Period, also known as Initial Enrollment Period or IEP and the Annual Election Period, also known as the Annual Enrollment Period or AEP.
It is recommended that those without creditable drug coverage enroll in a Part D drug plan during the seven months of their Initial Enrollment Period, which begins three months before the month that they first become eligible for Medicare. Enrolling during this time ensures that you will not face a late enrollment penalty.
Those that wish to enroll in or switch Part D plans may do so during the Annual Enrollment Period, which lasts from October 15 to December 7 of each year.
Creditable Coverage and Penalities
The types of insurance listed below are all considered creditable prescription drug coverage. If you have one of these types of insurance, in most cases, it will be to your advantage to keep your current coverage.
The Federal Employee Health Benefits (FEHB) Program
Veterans' Benefits - Veterans Affairs (VA) program
TRICARE (military health benefits)
Indian Health Services
The late enrollment penalty is an amount added to your Medicare Part D monthly premium. You may owe a late enrollment penalty if you go without Part D or creditable prescription drug coverage for any continuous period of 63 days or more after your Initial Enrollment Period is over. Learn how to avoid the late enrollment penalty.
The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($33.13 in 2015) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.
The national base beneficiary premium may increase each year, so your penalty amount may also increase each year.