You may have noticed by now that Original Medicare (the coverage that all Medicare users have) does not include prescription drugs. Even though it isn’t included in your initial plan, you will encounter penalty fees if you do not purchase a prescription drug plan during your initial eligibility period (up to three months before and after your 65th birthday).
There are a couple ways for you to get the prescription drug coverage that you need.
Medicare Advantage plans encompass Original Medicare (parts A and B) and additional coverage for costs such as dental care and prescription drugs.
Note: Even though Medicare Advantage includes supplemental pieces, it is not the same thing as Medicare Supplements.
If you have Original Medicare (not Medicare Advantage), you can also get your prescription drug coverage with a Part D-only plan. Prescription drug plans, or PDPs, can also be purchased as an addition to an MSA (Medicare Savings Account), or PFFS (private-fee-for-service) plan.
Each individual plan will have a formulary, or a list of all the prescription drugs that are covered. The list is often divided into tiers according to cost. Keep in mind that your out-of-pocket drug costs will vary according to the plan you choose, whether or not your pharmacy is in your network, and whether or not you are eligible for Medicare Extra Help. Costs will also depend on your premium, deductible ($400 max in 2017), copayments, and coinsurance.
The donut hole is a limit on what your prescription drug plan will cover, and it applies to all Medicare clients who don’t have Extra Help. In 2017, the donut hole limit is $3,700.
How It Works: You will pay for 100% of your drug costs until you hit your deductible, which will be $400 or less. Once you spend your deductible, you will only pay a small percentage of your drug costs…but once you hit $3,700, you will need to pay much more for your prescription drugs (typically 60% for brand name drugs and 49% for generic).