The Basics of Medicare Part D Coverage
When the time comes to consider whether you’ll enroll in Medicare, you’ll have two options: traditional Medicare or Medicare Advantage.
If you opt for traditional Medicare, you won’t have prescription drug coverage, while Medicare Advantage offers drug coverage.
If you choose traditional Medicare, you’ll typically have to pay for prescription drugs yourself. If you want to limit these costs, you can enroll in Medicare Part D, which adds prescription drug coverage to your traditional Medicare plan.
But how does Medicare Part D work, and how do you enroll? In this post, we’ll look at these and other questions.
What is Medicare Part D?
Medicare Part D was established under the Medicare Modernization Act of 2003. It’s also known as the Medicare prescription drug benefit. It’s a voluntary insurance that Medicare beneficiaries can buy to help them cover the cost of prescription drugs.
Part D drug plans are only offered by private insurance companies and are available as stand-alone drug plans (PDP)for people with traditional Medicare only. You can’t buy a Medicare Part D plan when you’re on Medicare Advantage, which offers cover for medical treatments, prescription drugs, and other medical services.
When can you enroll in Medicare Part D?
If you want Medicare drug coverage, you can enroll in Medicare Part D by signing up with the plan you’d like to join. The timing of this enrollment will depend on whether you’re eligible to enroll for Medicare Parts A and B. The initial enrollment for Medicare is a seven-month period that starts three months before you turn 65, includes your birthday month, and ends three months after your birthday.
If you don’t sign up for Medicare Part D when you become eligible, you can sign up during the annual open enrollment period from October 15 to December 7 every year.
If you don’t enroll when you’re eligible, you’ll have to pay a late enrollment penalty, calculated by multiplying 1% of the average monthly prescription premium cost by the number of months you were late in enrolling. This fee will be added to your monthly premium.
You may also be able to apply for Medicare outside these times during a special enrollment period without penalty.
What Drugs Are Covered By Medicare Part D?
Medicare requires that Part D plans cover at least two medications in most prescription drug classes, including:
- Cancer medications
- HIV medications
In addition, most Part D plans cover most vaccines with no copayments.
Medicare Part D drug coverage plans generally don’t cover over-the-counter medications, such as vitamins, supplements, and cosmetic and weight loss drugs. They also don’t cover prescription drugs, such as:
- Medications used in treating anorexia or other weight loss or gain when these conditions don’t form part of another diagnosis
- Fertility drugs
- Medications prescribed solely for cosmetic purposes or hair growth
- Medications prescribed to treat cold or cough symptoms that don’t form part of another diagnosis
- Medications used for treating erectile dysfunction.
It’s important to remember that a Part D plan can change the medications it covers or its pricing at any time for several reasons, including a generic drug becoming available, changes to the price of a brand, or the introduction of a new medication.
It’s essential to review a plan’s list of covered prescriptions before enrolling to make sure that it covers the medications you need.
You should also keep in mind the so-called donut hole, when you and your insurance plan have spent over $4,130 on covered medication. When you reach this threshold, you’ll have to pay for brand-name drugs out of your pocket but not more than 25% of the price.
Once you’ve paid $6,550 in out-of-pocket medication costs in a year, you’ll exit the donut hole. For the rest of that year, you’ll pay no more than $3.70 for generic medications and $9.20 for brand name medications. Put simply, you’ll have a coverage gap between the two thresholds, during which you’ll have to pay for medications yourself.
What Is The Eligibility For Medicare Part D?
You’re eligible for Medicare Part D when you’re eligible for Medicare Parts A and B. Your eligibility for Medicare Part D is based on the following:
- Age: You must be at least 65 years old.
- Disability: If you’ve received Social Security disability benefits for at least 24 consecutive months, you can enroll in Medicare, irrespective of your age. If you have amyotrophic lateral sclerosis (ALS) or end-stage renal disease (ESRD), you’re also eligible for Medicare at any time, no matter your age.
- Citizenship: To enroll in Medicare, you have to be a citizen of the United States or a permanent US resident who has lawfully lived in the US for at least five consecutive years.
It’s important to note that, unlike private health insurance plans, your spouse can’t be covered under your Medicare plan. For your spouse to be covered, they must meet the specific Medicare eligibility requirements. If they do, they may be eligible for some Medicaid benefits based on your work history.
If your spouse is younger than you and doesn’t meet the eligibility requirements, they’ll lose their health insurance once you go on to Medicare. They may, however, be able to buy health insurance through a private health insurance provider.
Also, if you’re approaching 65 and would like to continue with the health insurance coverage you have through your spouse’s plan, you can do so without penalties.
How Much Does Medicare Part D Cost?
When you enroll in Medicare Part D, you’ll have to pay a monthly premium, a yearly deductible, and a copayment for each prescription. Keep in mind that these amounts vary based on the plan and its local availability.
This is the amount you’ll pay to the health insurance provider for your Part D coverage. In 2021, the national average monthly premium for Medicare Part D is $33.06. These premiums vary based on the plan, so some plans may cost as little as $12.18 or as much as $191.40.
It’s also worth noting that your insurer may increase your premium based on your income. Insurers define a high income as $88,000 a year for an individual or $176,000 a year for a couple.
The maximum premium-based income surcharge that a healthcare insurance provider can charge ranges between $12.32 and $77.14. The amount of surcharge you’ll have to pay depends on how much your income exceeds the threshold.
The deductible is the amount you have to pay for covered medications before your Part D plan starts to pay for them. For many plans, the deductible in 2021 is $445 a year. Some plans offer “first dollar” coverage, meaning they will start to pay their share of your medications without you needing to pay any deductibles.
Generally, once you’ve paid your deductible for the year, your Part D plan covers most of the cost of your covered medications. You’re responsible for the rest. This is called copayment or coinsurance. This amount may be no more than 25% of the prescription cost, and the plan can pay no less than 75% of the prescription cost.
Under certain circumstances, you may not be required to pay the normal copayment for a covered medication. These include:
- If you live in a long-term care nursing facility and are enrolled in Medicare Part D and Medicaid, you’ll have no copayments.
- Some plans waive the copayment for certain drugs, such as generic versions.
- Pharmacies may waive the copayment on any drug if you have a low-income subsidy.
Is Medicare Part D a Good Option?
If you rely on prescription medications and you want to save money, this plan can help you keep your medication costs in check. But it’s essential that you choose the right plan for your needs.
Keep the following in mind when thinking about which plan is right for you:
- The monthly premium you’ll pay
- Out-of-pocket costs, such as copayments and deductibles
- The monthly cost of your medications on the plan
- Cost of medications not covered by the plan
- Whether the plan has coverage and quantity limits
- Whether the plan offers extra coverage for high-cost medications
Taking these factors into account will help you decide whether Medicare Part D is a good option for you and if it is, which plan suits your needs.
Frequently Asked Questions
Is Part D mandatory?
No, Medicare Part D is voluntary.
Do I need to purchase a separate drug plan?
Depending on your needs, you may wish to purchase a separate drug plan to cover your prescription medication. Here, your Medicare Part D plan adds drug coverage to your Medicare Parts A and B plans.