What is Medicare Part D Prescription Drug Coverage?

Medicare Part D Prescription Drug Coverage

 Summary: You can get help paying for medications with a Medicare prescription drug plan under Medicare Part D. The coverage is optional and offered by private insurance companies approved by Medicare. Although benefits vary from plan to plan, all Medicare prescription drug plans must provide the minimum coverage required by the Centers for Medicare and Medicaid Services (CMS).

What is Medicare Part D?

There are four parts to the Medicare program:

• Part A, which is your hospital insurance
• Part B, which covers outpatient services and durable medical equipment (Part A and Part B are called Original Medicare)
• Part C, or Medicare Advantage, which offers an alternate way to get your benefits under Original Medicare
• Part D, which is your prescription drug coverage

Because there is no prescription drug coverage in Original Medicare, Congress created Part D as part of the Medicare Modernization Act in 2003. Medicare Part D is designed to help make medications more affordable for people enrolled in Medicare.

Do I need Medicare Part D?

Medicare Part D is technically voluntary coverage; you aren’t required to enroll in a plan. However, if you go without prescription drug coverage before you enroll in a plan, you may pay a late penalty with your monthly premium. If you have prescription drug coverage through an employer group or retiree plan, you don’t have to enroll in a Medicare Part D plan until your coverage ends.

What does Medicare Part D cover?

Under Medicare Part D, prescription drug plans are available from private, Medicare-approved insurance companies, so benefits and cost-sharing structures differ from plan to plan. However, the Center for Medicare and Medicaid Services (CMS) sets minimum coverage guidelines for all Part D plans. These rules require all plans to cover medications to treat most illnesses and diseases.

Each Medicare prescription drug plan uses a formulary, which is a list of medications covered by the plan and your costs for each. Most plans use a tiered copayment system. Prescription drugs in the lowest tiers, usually generic medications, have lower copayments. Brand-name and specialty medications in the higher tiers cost more out-of-pocket.

Medicare Part D only covers prescription drugs that are FDA-approved. Experimental medications are generally not covered.

How much does a Medicare prescription drug plan cost?

These plans are private plans, which means each insurance company determines costs for its plans. Generally, you will pay a combination of the following out-of-pocket costs for your Medicare Part D coverage:

• • Monthly premiums
  • Annual deductible (maximum of $480 in 2022)
  • Copayments (the flat fee you pay for each prescription)
  • Coinsurance (percentage of the actual cost of the medication)

Many Medicare Advantage plans include prescription drug coverage. If you enroll in a plan with Part D included, you typically won’t pay a separate premium for the coverage. You generally pay one monthly premium for Medicare Advantage. You may, however, have a separate Part D deductible.

Plans set their own copayment amounts. Coinsurance amounts for expensive brand-name and specialty medications range between 25% and 50% of the actual medication costs.

If you and your plan spend more than $4,430 on prescription medications in 2022, special coverage rules kick in. You’ll pay a percentage of your medication costs or a small copayment, whichever is higher, for covered medications for the rest of the year.

One thing to keep in mind: Medicare Supplement insurance plans sold today won’t pay any Part D prescription drug costs.

How do I choose a Medicare Part D plan?

It’s important to compare shop to find the one that’s right for you. In addition to monthly premiums and deductibles, you should compare plan formularies, especially if you take daily medications.

Some plans use a pharmacy network. If you have a pharmacy, you really like, make sure it’s part of the plan’s network. Look for other benefits, such as mail-order pharmacies, which can help save money out-of-pocket.

When can I enroll in a Medicare prescription drug plan?

You can enroll in a plan at any time during your Medicare Initial Enrollment Period, which starts three months before your 65th birthday month, includes your birthday month, and extends for three additional months. If you get Medicare because of a disability, you can generally enroll in Medicare Part D after you are on Social Security disability for 24 months.

You can make changes to your prescription drug coverage each year during the Fall Open Enrollment Period (October 15th through December 7th). If you get Medicare Part D as part of your Medicare Advantage plan, you can also make changes during the Medicare Advantage Open Enrollment Period which runs from January 1st through March 31st.

It’s important to enroll in a plan when you are first eligible if you want to avoid a late enrollment penalty with your monthly premium. If you go without creditable prescription drug coverage and you don’t enroll in Part D when you are first able, you’ll pay a penalty of 1% of the national base premium for each month you go without coverage. You pay this penalty for as long as you have Medicare Part D coverage.

There is a Late Enrollment Penalty for not having creditable prescription coverage. 

Ashford Insurance also offers Medicare Advantage (Part-C) and Medicare Supplements (Medigap) insurance Plans.

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