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What is Medicare Part D?

Part D plans, sometimes referred to as PDPs (Medicare prescription drug plans), provide prescription drug coverage for Medicare beneficiaries who enroll. Original Medicare alone does not provide prescription drug coverage. You’ll have to find prescription drug coverage in one of two different ways: either enroll in a PDP on top of your Original Medicare (Part A and Part B), or purchase a Medicare Advantage plan that includes prescription drug coverage.

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How Does Part D Work?

Part D plans can be divided into four basic parts: the deductible, the initial coverage phase, the coverage gap, and then catastrophic coverage.

Part D Plans Deductible

Your annual deductible resets every year. The Medicare Part D deductible for 2019 is $415. That means that every year, you must spend $415 on your prescriptions before your coverage kicks in. Since you can buy Medicare drug plans from most major carriers, every plan can be a little different. Some plans may waive, reduce, or charge the deductible up front.

Initial Coverage Limit

Once you’ve reached your Part D deductible, you will enter the initial coverage phase. You’ll stay in this phase until you reach a spending limit, which is $3,820 in 2019. During this time, you will be responsible for a copay for every prescription you purchase based on your drug formulary (the list of drugs that your plan covers). 

What is the Donut Hole?

The donut hole is a coverage gap that most Medicare beneficiaries will face in relation to prescription drug coverage. The only people who do not typically fall into this coverage gap are those with LIS/Extra Help. Here’s how it works:

  1. Like most health plans, you’ll have to spend your deductible first. In 2019, this is $415 for most people.
  2. Once you’ve spent $415, you are covered until your spending reaches $3,820.
  3. Once you’ve spent $3,820, you are in the “Donut hole” and will be responsible for 37% of your generic drug costs and 25% of your brand-name drug costs until your spending reaches $5,100.
  4. Once you’ve spent a total of $5,100, you will leave the donut hole and go into what is referred to as “catastrophic coverage.” In the catastrophic phase, you will be covered for up to 95% of your prescription costs.

Medicare is currently working on effectively closing the donut hole in 2020. Check in with us or ask your agent for more information on how Medicare prescription plans are changing.

What Drugs are Covered by Medicare Drug Plans?

Every plan will have a formulary, or a list of drugs that your plan covers. Drug formularies are organized by tiers according to co-payments. For example, a cheap, generic pain killer may be a tier one medication that only costs you $5, whereas a brand-name cancer drug may be a tier three medication that will cost you $30. Any drug labeled as “preferred” will be cheaper. Tiers typically work as follows:

  • Tier 1 - Lowest copayments, mainly generic prescriptions
  • Tier 2 - Moderate co-payments, preferred brand-name prescriptions
  • Tier 3 - High co-payments, non-preferred brand-name prescriptions
  • Tier 4 or “Specialty” Tier - Highest co-payments, high-cost and non-preferred prescriptions

Before you purchase a plan, a licensed agent can help you perform a formulary drug search to make sure the plan you like covers all of your prescriptions.

OTC (Over-the-Counter) Coverage From Part D

While some Medicare drug plans may cover a limited number of OTC drugs, you’ll want to consider a Medicare Advantage plan for OTC coverage. Medicare Advantage plans with prescription drug coverage often include pre-paid cards that can be used to purchase pharmacy products, like cough medications, bandages, first-aid kits, etc. Keep in mind that these cards do not usually cover other pharmacy items such as chapstick, deodorant, soaps, and candy. Pre-paid OTC cards typically have a balance between $50 and $100 per month with no carry-over and can be used at major pharmacies.

How Much Does Part D Cost?

If you choose to invest in a Medicare Advantage plan, your prescription drug premium will be included in your medical premium. If you decide to keep your Original Medicare and enroll in one of many Part D plans, you will have to pay a separate premium. Unless you are eligible for LIS (low-income subsidies), you will be responsible for anything from $13 to $80 per month, depending on your income. Either way, you will likely have co-payments for most of your drugs.

What is the Medicare Part D Penalty and Does it Affect Me?

If you do not enroll in some form of prescription drug coverage during your initial enrollment period, you will be held liable for a late enrollment penalty fee. This is not meant to punish you, but to encourage all Medicare beneficiaries to enroll in Medicare and a form of prescription coverage as soon as possible. In most cases, you’ll probably pay less for your Medicare than you will for an individual healthcare plan - so why wait? Even if you enroll in Part A and B (Original Medicare) on time, you will have to pay the Part D penalty fee if you wait too long to get prescription drug coverage. Medicare Advantage is a great option because you can get all of your required plans in one step!

Low Income Subsidy

The LIS, or Low Income Subsidy program, is a federal prescription drug discount program often called “Medicare Extra Help.” LIS helps Medicare beneficiaries who do not qualify for Medicaid but still need help paying for prescription drugs. Most LIS beneficiaries save almost $4,000 on prescriptions each year! Your co-pays can go from as much as $40 to as little as just $2 for some drugs. Plus, those with LIS have a special enrollment period and can change plans at any time of the year! LIS can also help you pay late enrollment penalty fees if you enroll in Part D or Medicare Advantage too late. It can also help you find more coverage for when you enter the Donut Hole Medicare coverage gap.

To have LIS, you must have either a Part D plan or Medicare Advantage. LIS qualifications are based on your and your spouse's’ income and assets. The limits change every year; an agent can help you find out if you’re eligible. Thousands of seniors out there don’t even know that they are eligible! We can help.

Prescription Savings

The two biggest ways to save money on your prescription drugs are through mail-order deliveries and prescription savings cards.

Believe it or not, most pharmacies offer mail-order prescriptions with no delivery fee! When you order online instead of visiting a physical pharmacy, the pharmacy saves money because they don’t need to have as many employees in the store and they don’t have to keep as many medications in stock. You can still call your pharmacist to ask questions about your prescriptions, but you don’t have to leave your house, and your pharmacist doesn’t have to keep your medication in stock. Everybody wins!

Prescription discount cards are something you should definitely take advantage of. They are NOT insurance, they work more like coupons. Some pharmacies may not allow you to use both your insurance plan and a prescription discount card together, but you can still use the card to save a lot of money. Click below to download our Rx discount drug card:

How Part D Works With Other Insurance

TRICARE/VA Drug Coverage and Part D

If you have TRICARE or Veteran’s Affairs benefits, you might already have some prescription drug coverage. If you have Part D, you usually can’t use Part D and TRICARE/VA at the same time. You may still want a Part D plan if you live too far from a VA facility, use a non-VA doctor or pharmacy, reside in a non-VA nursing home, or if you qualify for the Extra Help program. The Extra Help program only works if you have a Part D plan, and it’s a great way to save on prescriptions.

Medicaid and Social Security

If you have Medicare but also have either Social Security benefits or Medicaid, your prescription coverage will still come from Medicare. Therefore, you will need either Medicare Advantage with prescription coverage or a Part D plan. If you have full Medicaid and live in a nursing home, you will most likely have 0 costs for your prescription drugs. Those in assisted living facilities may have a small co-payment.

Medicare Part D Enrollment Period

To be eligible, you must already have traditional Medicare (Medicare Part A and Part B) and live in a service area of a plan that provides prescription drug coverage. However, you are only able to enroll during certain parts of the year.

IEP - Initial Enrollment Period for Part D

The Part D initial enrollment period begins three months before the day you turn 65 and ends three months after your birthday. This is when most people will need to select a form of prescription drug coverage If you do not enroll in either a Part D plan or a Medicare Advantage plan during your IEP, you will be charged a late enrollment penalty fee.

AEP - Annual Enrollment Period

The Annual Enrollment Period runs from October 15 through December 7 of every year. If you neglect to enroll in a Part D or Medicare Advantage plan with prescription drug coverage during your IEP, you can select a plan during AEP instead. If you decide later that you do not like Medicare prescription drug plans and want to switch from a Part D plan to a Medicare Advantage plan, you can do that during the Annual Enrollment Period as well.

SEP - Special Enrollment Period

Certain circumstances may allow you to enroll in a prescription drug plan or Medicare Advantage plan outside of the Annual Enrollment Period. If you move to a new plan service area, are released from jail, lose or gain Medicaid eligibility, gain or lose a job, or if your plan is discontinued, you will have 60 days to change plans. Additionally, if you are eligible for Medicaid or another savings program (like SPAP, Extra Help/LIS, or a Special Needs Plan), you can always change plans during any time of the year.

5-Star Special Enrollment Period

Through satisfaction surveys, healthcare providers, and overall plan benefits, Medicare can assign each Part D and Medicare Advantage plan a star rating (one through five, five is the highest). These ratings are updated every fall. If, after the new ratings are released, you discover that you have access to better Medicare prescription drug plans than what you had previously, you are permitted to make one change outside of the Annual Enrollment Period.

Medicare Part D Plan Finder

The best Medicare Part D Plan Finder tool is a licensed agent in your area. We happen to have thousands of agents across 38 states, so chances are high that there is someone in your area who can come out and help you search through your Medicare options. Our agents can help you look through your healthcare needs, like what doctors you visit regularly and what prescriptions you are taking, and your finances, like how much you can afford to pay every month, and then help you find the best Medicare prescription drug plans in your area.

How To Apply for Medicare Part D

Just like Original Medicare, if you do not enroll in one of the available Medicare drug plans when you are first eligible (the period from three months before you turn 65 through three months after), you will be responsible for a late enrollment penalty fee.

If you need help enrolling, applying for low-income subsidies, or sorting through your options, you can set up a free appointment with one of our agents. Our agents are licensed to sell from several different carriers, so there will be no bias in their assistance.

Call to schedule your appointment at 1-844-431-1832, or request a call from Medicare Plan Finder!

Have questions? Ask a Benefits Advisor!