Understanding how all the parts of Medicare coverage work can be challenging to understand at first. Medicare Part D may be one of the most challenging because of the wide variances in coverage and costs from one plan to another. Here’s what you need to know to understand how Medicare Part D coverage works.
Medicare Part D is the prescription drug benefit component of Medicare. It must be added on to Original Medicare (Part A or B) or it can be included as part of a Medicare Advantage Plan.
Medicare Part D coverage is offered through insurance and other private companies that have been approved by Medicare. Based on the individual plan, it covers a variety of brand name and generic prescription drugs, as well as some over the counter medications.
Medicare Part D provides beneficiaries with various plan options, allowing you to choose the plan that best meets your needs.
There are many factors to consider when selecting a Medicare Part D Prescription Drug Plan. The Centers for Medicare and Medicaid Services recommends comparing the following when selecting a plan:
All plans will include coverage for brand name and generic drugs within different drug classes; however, each plan varies on the specific medications it will cover. These lists of covered medications are called formularies [link to formularies blog] and each plan has it’s own formulary.
If you already take medication you’ll want to ensure your plan covers the prescriptions you’ll need. If you currently do not take medication, you’ll want to think about the future - you may anticipate needing medication in the future or you may just want to protect yourself from higher copays in the event that you fall ill.
There are a few options you can pursue if you’re ideal plan doesn’t cover your existing prescriptions. You can read more about that here [link to formulary blog].
Each plan has a different monthly premium. The Medicare Plan Finder Tool allows you to view and compare various plan premiums within your service area. You can also view the anticipated costs of specific medications within each plan.
Plans have preferred pharmacies. Make sure to compare the pharmacy locations covered by the plans you are considering.
In addition to the distance to the pharmacy, don’t forget to consider their hours of operation as well.
Some plans also allow for mail order, which may be more convenient than traveling to a physical pharmacy to pick up your prescriptions.
Plans also have service areas. If you are a “snowbird” or frequent traveler, make sure the plan you select will cover you in the locations you stay in for extended periods.
The Medicare Plan Finder Tool provides customer ratings on a 5-star scale. You can view overall ratings for individual plans in terms of customer service, complaints and changes in the drug plan’s performance, experience, and drug safety and accuracy of drug pricing.
Most plans charge a monthly premium. The monthly premium varies across plans and is charged in addition to the Part B premium. Medicare Advantage and Medicare Cost plans may have a monthly premium that includes an amount for prescription drug coverage.
Based on your reported income you may be subject to an Income-Related Monthly Adjustment Amount (IRMAA). This adjustment amount will be added to your monthly premium. Social Security will notify you by mail if your income is subject to an IRMAA.
The plan you choose may or may not charge a yearly deductible. If it does, you’ll have a set amount you’re required to pay for your medications before your plan begins paying. In 2020, the yearly deductible cannot exceed $435.
Copayments (also called coinsurance) are the amount you pay for your drugs after you reach your yearly deductible. The copayment is calculated by subtracting the amount your plan pays towards a specific drug from the total amount of the drug.
During the year you may enter the Coverage Gap or “Donut Hole [link to donut hole blog].”
This happens when you and your plan reach a nationally set spending threshold.
Because of recent legislation, the coverage gap is closing. This means you won’t have to pay entirely for your prescriptions while in the coverage gap. Your plan will continue paying a portion of both brand name and generic prescriptions until you leave the coverage gap.
Your plan will send you an Explanation of Benefits (EOB) each month you have a prescription filled letting you know how close you are to reaching the coverage gap.
In 2020 the threshold to enter the coverage gap is $4,020 and $6,350 to leave the coverage gap. In addition, while in the coverage gap drug manufacturers will give a 70% discount, and plans will pay 5% on covered brand name drugs and 75% on covered generic drugs.
Catastrophic Coverage isn’t as scary as it sounds. Catastrophic Coverage kicks in immediately once you leave the Coverage Gap. Catastrophic Coverage significantly lowers your copayments for the rest of the year.
Medicare Part D Coverage has a lot of eligibility qualifications [link to eligibility blog] and options to consider. Making the right choice is crucial to your health care plan. The team at Plan Advisors is expertly trained in all aspects of Medicare coverage to help you make the most informed decisions. The first choice is easy - reach out to a trusted Medicare advisor to get started today!
