What is Medicare Part D Coverage?
Medicare Part D is prescription drug coverage.
It can be through two avenues:
Original Medicare– Stand Alone Part D is a separate plan that you have to enroll in through a private insurance company.
Medicare Advantage Plan (Part C)- Most Advantage plans include a Medicare Advantage Prescription Drug plan
Part D Formulary
A Formulary is the list of drugs that a particular Part D plan will cover.
Stages of Medicare Part D Coverage
Stage 1: Annual Deductible - Until you reach your deductible amount, you will pay for your prescription (premiums do not contribute to reaching your deductible)
This ends when your prescription drug payments reach your deductible amount.
Stage 2: Initial Coverage - Note: if your plan DOES NOT have a deductible, this begins immediately. If your plan DOES have a deductible, this begins after you reach you deductible in prescription payments.
Part of your prescription drug will be paid for if it is on your plan's formulary; you pay for the other part of the prescription payment.
Stage 2 ends when you and the insurance company’s payments towards prescriptions (premiums do not contribute to it) equal your initial coverage limit. This limit is set annually by Medicare. 2020's limit is $4,020. In other words, after the retail cost of your medications in any calendar year exceed the annual threshold you will enter the donut hole.
Stage 3: Coverage Gap (also known of the donut hole) - This doesn't happen for everyone.
If the retail cost of your medications exceed the annual threshold as explained above, you enter the coverage gap (aka donut hole). When in the coverage gap, you will pay 25% of the cost of your prescriptions.
This coverage gap ends when your out-of-pocket costs (not premium payments) equal $6,350.
Although you'll pay no more than 25% of the price for the brand-name drug, almost the full price of the drug will count as out-of-pocket costs to help you get out of the coverage gap. What you pay and what the manufacturer pays (95% of the cost of the drug) will count toward your out-out-pocket spending. Here's a breakdown:
Of the total cost of the drug, the manufacturer pays 70% to discount the price for you. Then your plan pays 5% of the cost. Together, the manufacturer and plan cover 75% of the cost. You pay 25% of the cost of the drug.
There’s also a dispensing fee. Your plan pays 75% of the fee, and you pay 25% of the fee.
What the drug plan pays toward the drug cost (5% of the cost) and dispensing fee (75% of the fee) aren't counted toward your out-of-pocket spending.
Stage 4: Catastrophic Coverage - begins after your out-of-pocket prescription payments reach $6,350
Under Catastrophic Coverage, your plan and the government will cover 95% of your prescription costs.
This lasts through the end of the year.
What does Medicare Part D cost?
Costs will vary from plan to plan, but they depend on where you live, insurance company, and the plan itself.
Your Part D premium is separate from your Part A and Part B premiums.
However, if you have a Medicare Advantage plan it may have prescription drug coverage included.
Medicare Part D Enrollment
Initial Enrollment Period (IEP): When you first become eligible for Medicare Part D.
- Typically, this will be at the same time that you are first eligible for Medicare (3 months before you turn 65, your birthday month, and the three months following)
Medicare Advantage Open Enrollment Period: January 1st-March 31st
- The purpose of this period is if you are enrolled in an Advantage plan and would like to switch to Original Medicare or to enroll in a Medicare Prescription Drug Plan.
Annual Election Period: October 15th-December 7th
- In this time frame, you can enroll, switch, or disenroll from your plan.
Special Election Period:
- If you qualify for a Special Election Period, you are allowed to make adjustments to your Prescription Drug Coverage outside of the other periods.
Medicare Part D Penalty
The Medicare Part D penalty is a late enrollment fee that is added to the monthly premium of your Part D plan. The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($32.74 in 2020) times the number of full, uncovered months you didn't have Part D or creditable coverage. The penalty lasts for as long as someone has a Part D. example: If some does not have creditable drug coverage for 25 months, then wants to purchase a Part D plan, they would have a 25% penalty added to their Part D premium every year going forward.
Click here for a quote on Medicare Prescription Drug Coverage.
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