What Is Part D of Medicare – Medicare Part D consists of all prescription drugs plans available to Medicare beneficiaries. They can be purchased as a stand-alone plan or as part of a Medicare Advantage plan. It’s important to understand how these plans work and when you should enroll to avoid penalties.
How does Medicare’s prescription drug coverage work?
Regardless of which of the two ways you get your drug coverage, it works the same way. Every plan has a premium, drug formulary, pharmacy network, and cost-sharing expenses.
Part D premiums vary based on how much drug coverage you need. Those taking very few generic drugs will have the lowest premiums. Expensive and specialty medications require more coverage and, therefore, a higher premium. If you enroll in a separate Part D plan, your premium will be in addition to any other plans you have. However, if you choose to enroll in a Medicare Advantage plan that includes drug coverage (called an MAPD plan), you will not pay an additional premium.
The drug formulary is a list of prescriptions that are covered by the policy. It is categorized by drug tiers, and each plan usually has four or five different tiers. Drugs in lower tiers cost less than those in higher tiers. The formulary will also indicate which medications the deductible applies to and which ones are waived.
Pharmacies can either be “preferred,” “standard,” or “out-of-network.” Preferred pharmacies will be able to offer you the lowest prices and out-of-pocket costs. You can also use your plan at a standard pharmacy, but you will pay more to fill your prescriptions. You won’t have any coverage at an out-of-network pharmacy unless you are traveling and must get your medications at a pharmacy away from home.
Most plans also include a mail-order option, which may even be cheaper than using a preferred pharmacy.
In addition to your monthly premium, you will have a cost-sharing amount each time you purchase a prescription. This year (2022), the standard deductible is $480. Most plans use this amount, but some have lower deductibles. Oftentimes, the deductible is waived for drugs within the first tier or two of the formulary.
Your copayment or coinsurance expenses will vary depending on your plan, the dosage of your medication, and how often you need it refilled. Plus, if you ever find yourself in the coverage gap (or donut hole), you’ll be required to pay more for medications.
When should I enroll in a Part D prescription drug plan?
You should enroll in Part D around your 65th birthday or when you lose other creditable coverage, whichever comes later. It is very important to enroll as soon as one of these two things occurs.
You are first eligible to enroll in Part D during your Initial Enrollment Period, which begins three full months before your 65th birthday. If you enroll during that time, your coverage begins on the first day of your birthday month. However, if your birthday falls on the first of the month, your coverage will actually start one month earlier.
You can choose to delay Part D enrollment, but only if you have other creditable coverage in place. In most cases, people choose to postpone coverage if they have decided to continue working past age 65 and are covered under their employer’s plan. You can do this without penalty, as long as your current prescription drug coverage is creditable.
What is “creditable” coverage? For prescription drug coverage to be deemed creditable, it must meet these four requirements:
- Pays at least 60% of the prescription cost
- Covers both name-brand and generic medications
- Offers a variety of pharmacies
- Does not have an annual benefit cap amount or has a low deductible
If you are considering postponement, you should speak with your benefits manager or the insurance company to find out if your drug coverage is creditable. The insurance company will also mail or email you this information once each year.
A word of caution! If you are not taking any prescriptions, you still need to enroll in Part D. Many people make the mistake of not obtaining coverage since they don’t “need” it. However, going without it will cause you to incur a penalty that you’ll have to pay for the rest of your life. Fortunately, there are very inexpensive plans for those who are not taking any medications. Enrolling in one of those plans will cost less than the penalty you will face down the road.
Ready to explore your Part D options? Speak with one of our licensed insurance agents. We’ll review your medications and find the plan that leaves you with the least out-of-pocket costs.