Since January 1, 2006, Medicare Prescription Drug Plans (Medicare Part D) have been available to everyone with Original Medicare.
You have to get Medicare Part D through a private insurance company that is contracted with Medicare to offer these plans.
Different insurers offer different types of plans, so your cost for the plan (premium), the drugs covered, and your out-of-pocket expenses for prescription drugs (copayments, coinsurance and deductible) will vary.
If you decide not to join a Medicare Prescription Drug Plan when you’re first eligible, and you don’t have other creditable prescription drug coverage, or you don’t get Extra Help (described below), you’ll likely pay a late enrollment penalty. Creditable prescription drug coverage means other drug coverage you may have now that is at least as good as a standard Medicare Prescription Drug Plan,
Before we cover Medicare Prescription Drug Plans in depth, you might find these resources helpful:
- The Medicare Part D Coverage Gap “Secret” That Smart Seniors Must Know
- Medicare Part D Formularies – Why It Pays To Shop Around
- Medicare Prescription Drug Plans: 6 Tips to Help You Choose and Keep the Right Plan
In general, there are two ways to get Medicare Prescription Drug coverage:
- Enroll in a stand-alone plan. These plans (sometimes called “PDPs”) add drug coverage to Original Medicare. Most people who purchase a Medicare supplement policy enroll in one of these stand-alone plans. You can choose any plan available in your service area.
- Enroll in a Medicare Advantage (Medicare Part C) plan. You get all of your Medicare Part A, Medicare Part B, and prescription drug coverage (Part D), through any of these plans offered in your service area.
Medicare Prescription Drug Plans 2014
Medicare Part D covers the cost of prescription drugs. The amount of coverage will depend on the drugs you take, and whether or not you are in the Coverage Gap or in Catastrophic Coverage.
Part D coverage typically works like this:
- You pay a monthly premium to be covered under the plan
- If the plan has a deductible, you pay the full amount of your prescription drug purchases until the deductible is met.
- After you satisfy the deductible, you will pay a share of the costs according to your specific plan. This is usually a flat amount (copayment). You typically pay this amount directly to the pharmacist at the time of purchase. This is called the Initial Coverage.
- After you and your Part D coverage has paid a certain amount for prescription drugs ($2850 in 2014), you will 47.5% of name brand drugs and 72% of generic drugs. This is called the Coverage Gap or Donut Hole.
- Once your out-of-pocket expenses (as defined by Medicare) reach $4,550 (in 2014), you are automatically in the Catastrophic Coverage phase. This means for the rest of that particular year, you would only pay a small copayment or coinsurance amount for prescription drugs.
The chart below illustrates the three “stages of a Prescription Drug Plan:
Total Drug Costs: The amount you pay and the plan pays for prescription drugs. This does not include premiums.
Out-of Pocket Costs: The amount you pay and the plan pays for name brand drugs, and what only you pay for generic drugs. This does not include premiums.
Note that Medicare Part D coverage may differ from plan to plan. Some drugs (for example brand-name drugs vs. generic drugs) are covered at different levels. Each insurance company determines what drug is covered at which levels.
Medicare Prescription Drug Plan Donut Hole
The coverage gap starts when your total drug costs—including what you and your plan have paid for drugs—reaches a certain amount since the start of the calendar year. In 2014, this amount is generally $2,850.
When you reach this amount, you hit the coverage gap. As a result of health reform, you get discounts to help you pay for your drugs during the coverage gap. In 2014, there is a 52.5 percent manufacturer’s discount on most brand-name drugs. This means you pay 47.5 percent for brand-name drugs listed on your Part D plan’s formulary, and the manufacturer plus the federal government together pay 52.5 percent. For generic drugs, the government provides a 28 percent discount in 2014. You pay the remaining 72 percent of the cost.
These discounts will gradually increase each year until 2020. Starting in 2020, you will typically pay no more than 25 percent of the cost of your drug at any point during the year after you’ve met your deductible.
Medicare Part D Drug List
Each plan has a list of drugs that are covered. It is call the formulary. The formulary will vary from plan to plan.
It is important that you and/ or your agent review the formulary of any prospective plans to insure that your prescription drugs are covered in that formulary.
Many Medicare Prescription Drug Plans place drugs into different “tiers” on their formularies. Drugs in each tier have a different cost.
A drug in a lower tier will generally cost you less than a drug in a higher tier. In some cases, if your drug is on a higher tier and your prescriber thinks you need that drug instead of a similar drug on a lower tier, you or your prescriber can ask your plan for an exception to get a lower copayment.
A Medicare drug plan can make some changes to its formulary during the year within guidelines set by Medicare. If the change involves a drug you’re currently taking, your plan must do one of these:
- Provide written notice to you at least 60 days prior to the date the change becomes effective.
- At the time you request a refill, provide written notice of the change and a 60-day supply of the drug under the same plan rules as before the change.
Medicare Prescription Drug Plans may have these coverage rules:
- Prior authorization: You and/or your doctor must contact the drug plan before you can fill certain prescriptions. Your prescriber may need to show that the drug is medically necessary for the plan to cover it.
- Quantity limits: Limits on how much medication you can get at a time.
- Step therapy: You must try one or more similar, lower cost drugs before the plan will cover the prescribed drug.
If you or your doctor believe that one of these coverage rules should be waived, you can ask your plan for an exception.
Medicare Part D Premiums
Prescription Drug Plan monthly premiums range from a low of $15.00 to over $90.00, depending on the insurance company, the plan you choose, your prescriptions, deductibles and copays.
If your modified adjusted gross income as reported on your IRS tax return is above a certain amount ($85,000 filing individually or $170,000 filing jointly) you may pay more than the plan’s advertised monthly premium.
Also, you may pay a permanent, monthly late enrollment penalty in addition to the regular monthly premium if you didn’t join a Medicare Part D plan during your initial enrollment period.. It increases the longer you go without other prescription drug coverage.
A good place to compare Medicare Prescription Drug Plans is Medicare’s website. (Medicare.gov)
Medicare Part D Enrollment
Everyone who is eligible for Original Medicare can get a Medicare prescription drug plan. You must live in the service area for the particular plan that you are considering and continue to pay your Part B premium, if applicable.
There are several election periods:
Initial Enrollment Period (IEP) You can enroll when you first become eligible for Medicare. Your Initial Enrollment Period (IEP) is a seven-month period that starts 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65.
Open Enrollment Period (OEP) If you are already enrolled in Original Medicare, then you must wait until the next enrollment period to sign up for a prescription drug plan. The Open Enrollment Period (OEP) is October 15 through December 7. During this time you can join, switch or drop a Medicare drug plan. The plan coverage chosen during the OEP begins on January 1 of the next year.
Special Enrollment Period (SEP) Generally, once you enroll, you stay enrolled and you have the option to switch plans when the next Open Enrollment Period (OEP) opens. However, there are some situations that might qualify you to make a change during the rest of the year. This is called a Special Election Period (SEP). Some examples of these situations include (but are not limited to):
- You move outside your Medicare Advantage Plan’s service area
- You qualify for Extra Help (a program to help you afford prescription drugs)
- You qualify for Medicaid (Medi-Cal in California)
- If you move into an institution (such as a nursing home)
- You are leaving employer or union coverage.
- Lose other creditable prescription drug coverage
Medicare Prescription Drug Plan Star Ratings
A prescription drug plans comparison would not be complete without looking at the Star Rating of the plans in your area
Medicare wants is to make sure that the quality level of Medicare Advantage Plans stays high and consistent.
In this effort, Advantage Plans are each year are rated on a scale ranging from 1 to 5 stars. One star represents poor performance, while a five-star rating is considered excellent. Plan Ratings are published each year in fall, before the open enrollment period begins and beneficiaries may enroll in or switch plans.
The overall score makes it easy for Medicare beneficiaries (that’s you) to compare plans, based on quality and past performance.
Medicare uses several criteria to asses the quality of Prescription drug plans. The information is taken from member satisfaction surveys and health care providers in order to give overall performance star ratings.
The criteria for plans covers the following topics:
- Staying healthy, including how often members got various screening tests, vaccines, and other check-ups that help them stay healthy.
- Managing chronic (long-term) conditions, including how often members got certain tests and treatments that help them manage their condition
- Health plan responsiveness and care, including ratings of member satisfaction with the plan
- Customer service, including how well the plan handles calls and makes decisions about member appeals
- Member complaints and Medicare audit findings, including how often members filed a complaint about the drug plan and findings from Medicare’s audit of the plan
- Member experience with the drug plan, including member satisfaction
- Drug pricing and patient safety, including how well the drug plan prices prescriptions and provides updated information on the Medicare website, and how often members with certain medical conditions get prescription drugs that are considered safer and clinically recommended for their condition.
Get Help Paying Your Health and Prescription Drug Costs
If you have limited income and resources, you may qualify for help to pay for some health care and prescription drug costs. The program is called Extra Help. It is a subsidy from the Federal government. It helps pay for the Medicare Part D premium, yearly deductible, coinsurance and copayments. You will also have no coverage gap or late enrollment penalty.
Currently, to qualify for Extra Help, also called the low income subsidy (LIS), your yearly income and resources must be below these limits:
- Single person: Income less than $17,505 and countable resources less than $13,440.
- Married person living with a spouse and no other dependents: Income less than $23,595 and countable resources less than $26,860.
We are always asked what is included and not included in the countable resources. Here is the official list:
Countable resources include:
- Money in a checking or savings account
Countable resources don’t include:
- Your home
- One car
- Burial plot
- Up to $1,500 for burial expenses if you have put that money aside
- Other household and personal items
You automatically qualify for Extra Help if you have Medicare and meet any of these conditions:
- Have full Medicaid coverage
- Get help from your state Medicaid program paying your Part B premiums.
- Get Supplemental Security Income (SSI) benefits
You may qualify for Medicaid (called Medi-Cal in California). It helps with medical costs for some people with even more limited income and resources. Medicaid also offers benefits not normally covered by Medicare like nursing home care and personal care services. If you qualify for Medi-Cal, you automatically qualify for Extra Help paying for your Medicare prescription drug coverage (Part D).
To get help reviewing your choices for a Medicare Prescription Drug Plan, Medicare Advantage Plan, Medicare Supplement plan, or even if you just have questions about Medicare, call us at 415-999-5071 or email us a message