There are different parts of Medicare to help cover specific medical needs. These include:
Covers inpatient hospital stays, hospice care, some home health care, and care in a skilled nursing facility.
Covers doctors’ visits, medical supplies, outpatient services, and preventative care.
Also known as Medicare Advantage, Part C is an “all-in-one” bundle plan that is an alternative to Original Medicare and usually includes Medicare Parts A,B, and D under one plan.
Covers some prescription drugs and can be offered through private insurance companies.
This article will specifically cover Medicare Part D – including what types of drugs the plan pays for, how much it costs, and how to enroll in it.
There are two types of Medicare plans that offer Medicare Part D: Original Medicare and Medicare Advantage. Below is more information on each option.
Medicare Part D is an optional prescription drug coverage benefit that some people may choose to add to their healthcare plan. The drug plans vary in pricing and coverage. Each plan may be different in how many or what kinds of prescription drugs are covered as well as the cost and pharmacies a person may have to use to obtain their medications.
The number of people using Medicare Part D has significantly increased since 2006. According to the Kaiser Family Foundation, an estimated 22 million people had Medicare Part D in 2006. This number doubled to an estimated 44.9 million people in 2019.
A Medicare Advantage plan is a bundled plan that offers Medicare Part A, Part B, and Part D. At a minimum, the plans provide the same prescription coverage as traditional Medicare Part D.
Insurance companies sell slightly different Medicare Part D plans. Generally, a Medicare Part D plan will cover the following:
A formulary: This is the list of drugs that are covered under that specific plan. The drugs may be listed as their name-brand or generic equivalent. Typically, a Medicare Part D formulary will cover at least two drugs in each major category (like drugs for blood pressure or diabetes), so a person can usually find a medication that is covered.
Tiers: A Medicare Part D plan will usually separate drug costs into different “tiers.” Drugs that are in higher tiers are usually more expensive than drugs in a lower tier. Copays for an individual taking a lot of medications in higher tiers are usually more expensive.
Exceptions: Individuals can apply for an exception to certain medications they may need. If the insurance company approves it, they will likely pay less than the usual co-payment.
For individuals with specific medication needs, it is crucial to guarantee adequate prescription drug coverage to ensure access to these necessary drugs. When reviewing potential plans, those seeking insurance should first reference the plan’s formulary. If the medication is covered by one plan and not the other, this could be a determining factor when choosing a plan.
If medications are not covered by any plan (or no one plan covers all drugs), getting a plan that offers prescription drug coverage in the “coverage gap” is an option. This is where an insurance company will pay a portion, or all, of certain medications that were not originally covered. However, plans that offer to cover in a coverage gap are usually more expensive than those that do not.
Sometimes, Medicare Part D plans will offer coverage in certain “tiers.” This means paying little to no co-pay when individuals choose generic prescription equivalents over the name-brand options.
Choosing a plan will depend upon prescription drug usage and insurance budget caps. Ideally, the goal is to strike the perfect balance of coverage and affordability.
Those who qualify for Medicare are eligible for Medicare Part D. Some of the people who can qualify or are eligible for Part D include:
All those who are eligible for Medicare should enroll in a Medicare Part D plan; they do not have another form of insurance that covers prescription medications. Even if they do not take medications regularly now, getting coverage is crucial within the enrollment period is crucial. Otherwise, costs could go up if Medicare Part D coverage is added outside the enrollment period.
Medicare has an enrollment period for the Medicare Part D plan. The following provides information about when – and how – to enroll in a Medicare plan.
The initial enrollment period to apply for Medicare is age-based. Individuals can enroll in Medicare starting three months before the month they turn 65 up until three months after they turn 65. For example, someone born in July can start enrolling in April. Their enrollment period would end on October 31st.
The only exception is if the birthday is on the first of the month. When that happens, they can start applying a month earlier. For example, someone born on May 1st can start enrolling on January 1st. The enrollment period would end on July 31st.
Younger individuals can sometimes qualify for Medicare before they are 65 if they have certain disabilities. Typically, they have a seven-month-long enrollment period. This includes three months before the 25th month they receive Social Security or Railroad Retirement Board benefits. They have three more months after the 25th month to sign up for Medicare Part D.
Enrolling late can be costly. There is a 1 percent Part D late enrollment penalty for late enrollment. However, if individuals can prove they had creditable drug coverage and lost it, they may not have to pay a penalty.
For example, if an individual failed to enroll in Medicare Part D for eight months, their monthly premium would be 8 percent higher. In 2019, Medicare Part D plans cost an average of $33.19 a month. With the penalty, this individual would pay about $2.65 more per month or an extra $31.80 a year.
Note that Medicare Part D penalties are always calculated from the base premium. This means that even if individuals enroll in a new Medicare Part D plan that is cheaper, the penalty will not change.
According to CNBC.com, those who qualify for Medicare Part D can choose from 27 plans on average. Private insurance companies provide a traditional Medicare Part D plan. Enrollment is available by phone or online.
To enroll by phone, individuals can call 1-800-MEDICARE. This is a Medicare-run phone service where one can discuss different plans available and select the plan that works best after talking to a Medicare representative.
Medicare Interactive, an independent organization that helps people understand Medicare benefits, recommends enrolling via phone because they find that people have fewer errors in enrolling that way.
Calling insurance companies directly is also an option to find out which Medicare Part D plans they offer. This option is optimal for those who have a trusted insurance company or preferred they want to buy from.
To enroll online, individuals can visit Medicare.gov. New or existing accounts can be accessed, and a “Plan Finder” function is the perfect tool to find available Medicare Part D options. The “Plan Finder” can be accessed here: https://www.medicare.gov/plan-compare/.
Medicare Advantage plans can be enrolled in much like a traditional Medicare Part D plan. These options include:
While Medicare benefits can vary from place to place, the average person who qualifies for Medicare has at least 24 Medicare Advantage plans they can choose from. However, in some very rural areas, it is possible that insurance companies do not offer a Medicare Advantage plan at all.
It is important to note that Medicare Advantage plan representatives cannot call eligible individuals unless directly requested. All calls that are received but not requested should be reported by calling 1-800-MEDICARE.
Insurance agents or brokers can help clients select a Medicare plan. They should advise a person on all available Medicare plans but do not always.
There are a lot of laws dictating what insurance brokers can and cannot do when trying to sell Medicare Part D insurance. Importantly, they cannot charge application processing fees or offer cash or other incentives to sign up for their plans.
According to the Kaiser Family Foundation, the average monthly premium for all Medicare Part D plans in 2019 was $29.20. This decreased from the previous year’s average monthly premium of $31.78. Premiums can vary based on coverage and insurance company. For example, one plan called the Aetna Medicare Rx Select has an average monthly premium of $17, while another plan called the AARP MedicareRx Preferred has an average monthly premium of $75.
Medicare Advantage plan costs can vary widely – from adding nothing to $300 or more per month to insurance bills. Typically, the premium is less than that for Medicare Part B specifically. According to the Centers for Medicare & Medicaid Services, the average Medicare Part C premium is around $28 a month in 2019.
A premium is the monthly fee for the Medicare Part D plan. Premiums usually vary based on income level. Premiums can be paid via a monthly bill from insurance companies, or it can be directly deducted from Social Security, debit, or credit accounts.
A deductible is the out-of-pocket costs for prescription drugs before Medicare Part D kicks in and starts to cover medication costs. In 2020, insurers will not be able to offer a deductible that is higher than $435. Currently, however, some people do not even have a deductible on their plan.
A copay is the amount paid out-of-pocket per service, appointment, or prescription after the deductible has been met. The insurance company pays its portion of the medication and individuals pay the remaining share. For example, a person may pay 20 percent of the drug’s cost. Like deductibles, some people may not have copays with their particular Medicare plan.
The coverage gap, also known as the “donut hole,” is a term insurance companies use to describe the time after insurance plans have paid up to a set dollar amount for prescription medications during that year. After this cap, medication prices may be raised. At this time, individuals may qualify for “catastrophic” coverage to help lower out-of-pocket costs while lacking coverage. Catastrophic coverage offers a significantly lower copay that provides coverage for the remainder of the year while in the coverage gap.
Not every person who has Medicare Part D will reach the coverage gap. If it does happen, some options will help bring down costs. In 2020, people who are in the coverage gap:
It is easy to get confused about needing Medicare Part D when Medicare Part B already covers some drugs, but Part B does not cover a majority of prescriptions. For example, Medicare Part B covers medications like injections at the doctor’s office, drugs used with special medical equipment (like a nebulizer for breathing medications), and some cancer medications. However, Part B coverage does not usually cover drugs that you take by yourself at home.
A Medicare Supplement Insurance policy is designed to cover some of the out-of-pocket costs of Medicare, such as co-pays and deductibles. A lot of insurance companies call these policies “Medigap.” However, those who have a Medicare Advantage plan cannot have a Medigap plan. Several standard Medigap plans are classified by letter (Plan A, Plan C, etc.). Before Medicare Part D, some Medigap plans covered prescription drugs.
Individuals with employer or union insurance that pays for some medications may still need Medicare Part D. This is because the government requires “creditable” drug coverage. Creditable drug coverage is coverage that pays at least the amount the standard Medicare drug plan pays. Penalties might be imposed on individuals without this coverage. Not all employee- or union-based health insurance is creditable. To find out if plans are creditable, contact a representative for the employee-based insurance to find out. Those who drop employer coverage or employer coverage stops offering prescription drug benefits, and a Medicare drug plan can usually be joined without penalties.
Medicaid is a federal insurance plan that insures low-income people of all ages. Those who receive Medicaid may follow different requirements for coverage gaps, etc. In fact, there are little-known parts of Medicaid. For example, if an individual on Medicaid meets their Medicaid deductible for one month in a year, all co-pays, deductibles, and gap costs are reimbursed for past months and go away for future months of the calendar year. This can dramatically help with covering costs related to healthcare needs.
To those currently receiving supplemental security income benefits, Medicare will provide something it calls “Extra Help” to reduce the costs of a Medicare Part D plan. Most of the time, Medicare will send a letter called a “purple letter” informing eligible individuals that they qualify for the Extra Help program.
Those with multiple insurance plans (such as an employer- or union-based insurance plan), insurance companies usually decide on a primary payer (the company who pays first) and a secondary payer (the company that pays the costs that are not covered). Many different rules govern who pays first, Medicare or private insurance. Most of the time, doctor’s offices or pharmacies will file with both and determine which company will pay first. Individuals can call the Benefits Coordination & Recovery Center at 1-855-798-2627 for more information.