A Medicare Part D drug plan is an insurance plan for retail prescription medications. An easy way to think about it is as a pharmacy card that you enroll in with an insurance company to lower your medication costs. Instead of paying the full cost for your prescriptions, you will pay only the copays and coinsurance required by the plan.
We are very lucky to have this program today because for over 50 years prior to 2006, there was no retail prescription drug coverage for Medicare beneficiaries.
Part D plans are relatively easy for licensed insurance agents to research, but the general public often finds them confusing. Let’s examine some of the information you should know.
Two ways to enroll in Medicare Part D
- Stand-alone Medicare prescription drug plans can be purchased for a monthly premium, and you use this alongside your original Medicare coverage. People who buy Medicare supplements to help pay for their medical treatment expenses will often buy a stand-alone Part D drug plan to cover their pharmacy costs.
- Many Medicare Advantage plans also include built-in Part D drug coverage. It’s important to check exactly which medications a Medicare Advantage plan includes before enrolling so you can be sure your plan covers the medications you need.
Enrollment periods for Part D
Joining a Medicare Part D drug plan can only be done during certain windows of time. You are eligible to enroll in Part D when you first get Medicare. This window lasts seven months and includes the three months before you turn 65, your birth month, and the three months following. A similar window exists for people who first become eligible for Medicare due to disability.
Medicare Part D also has an annual election period which runs from October 15 – December 7. During this time, you can enroll or disenroll from any drug plan. This is because each Part D plan’s benefits, formulary, pharmacy network, provider network, premiums and/or co-payments/co-insurance may change on January 1 of the following year.
The insurance company will mail you an annual notice of change so that you can review what is changing for the following year. Many people change their drug plan during the annual election period if their prescription needs have changed and another plan better suits them.
In addition, you may be eligible for a special enrollment period under certain circumstances, such as moving out of the drug plan’s service area or losing your group medical coverage mid-year.
Extra Help for Part D
Our federal government offers help with paying for your Part D drug plan and paying for your medications if you qualify based on income. This is called the Low-Income Subsidy. Anyone can apply for this at Social Security at any time.
Some people have benefits which allow them to opt out of Part D in lieu of their other coverage. Persons with VA coverage or Tricare for Life are common examples.
Paying for Medicare Part D
You can pay for your Medicare drug plan easily by having your monthly premium deducted directly out of your social security check. Most plans offer several other options as well, such as bank draft, coupon books, or monthly statements. If you aren’t currently taking any medications, you might consider asking your agent to direct you to the least expensive plan in your state so that you can at least avoid the Part D penalty and be insured against any unexpected future needs for medications.
It’s important to also realize that while most people just pay the base premium for Part D that is offered by the insurance carrier, people with higher incomes will also pay an income adjustment on top of their base premium. Your insurance agent can help you determine if any income adjustment will apply to you, or you can visit the Medicare website for it.
The late enrollment penalty
While technically Medicare Part D is voluntary, there are some very important reasons why you should seriously consider enrolling.
- If you fail to enroll in Part D when you first become eligible, and you don’t have other creditable coverage for prescription drugs elsewhere, such as through an employer group health plan or through the VA, you may be subject to paying a penalty. This penalty amount depends on how long you waited to enroll in a plan.
- The penalty is equal to 1% of the national average base Part D premium for every month that you went uncovered. In 2015, the base premium is around $33, so you would have a penalty accruing at about 33 cents per month during this year. This penalty is cumulative, and when you do finally enroll in Part D, you will pay the penalty for the rest of your life.
- More importantly, if you miss your window, you cannot buy a drug plan mid-year without a special election circumstance. So if you develop a serious health condition in March and you need a very expensive medication for it, you would pay the full retail cost of that medication until the next Part D annual election period, which means you would have no coverage until January 1st. Remember that you are insuring your body here – and consider the true risks of being uninsured.
Late Enrollment scenarios
Sometimes it’s difficult for Medicare beneficiaries to really understand how late enrollment will affect them. Here are a few examples designed to show you why you should seriously consider joining a Part D drug plan when you are first eligible.
The late enrollment penalty
Mr. Brown became eligible for a Part D drug plan in September of 2013, but failed to enroll and had no other creditable drug coverage such as group benefits or VA coverage. Finally, during the annual election period, he enrolled in a Part D drug plan to be effective on January 1, 2015. Because he was uncovered for 15 months, his penalty would be calculated by Medicare, but would likely be something like this:
The penalty is 1% of the national average base drug plan premium. If the national average premium was $33, his penalty is then approximately 33 cents multiplied by 15 months, or a penalty of around $5/month, since Medicare will round to the nearest dime. Mr. Brown will pay this monthly penalty on top of his drug plan premium for the rest of his life.
The late enrollment risk
Mrs. Miller had been healthy all her life and, at the time of her Medicare eligibility, was taking no medications. Against the repeated advice of her insurance agent, she decided to gamble that her good health would continue so she decided not to enroll in Part D.
Four years later, she was diagnosed with cancer in September, and was prescribed Gleevec, a specific oral cancer medication that falls under Medicare Part D. Her specific dosage had a retail medication rate of $5,600 per month. Because she cannot enroll in a drug plan outside of the fall annual election period, Mrs. Miller had to pay the retail cost of her potentially life-saving medication for 4 months. Her total spending before her new drug plan began the following January was $22,400. (*This is a real-life example from an actual Boomer Benefits client, though the name has been changed to protect the client’s privacy.)
We provide FREE assistance to our clients by analyzing their Part D drug plan needs. Learn the facts from us! When you request quotes from Boomer Benefits, we also provide free help to you with your Part D drug plan.
If you are following our Medicare Learning Track, go next to: Medicare Part D – What It Covers