Medicare Part D Plans are essentially pharmacy cards that give you lower cost medications. You enroll in a Part D plan through an insurance company in your home state. Instead of paying the full cost for your prescriptions, you will pay only the copays required by the plan.
For decades, there was no retail prescription drug coverage for Medicare beneficiaries. What Part D covers now provides us with a much better solution. Although enrollment into Medicare Part D is voluntary, Part D plans are very popular.
Today there are nearly 50 million Medicare beneficiaries enrolled in Part D coverage. To learn more on how and when you can enroll and what Medicare Part D plans cost, click here.
This post has been updated for 2020.
Companies Offering Medicare Part D Plans
Each year, there are many companies that offer Medicare Part D plan options. It is not uncommon for residents in each state to have 30 or more choices. However, they do have to comply with federal requirements to ensure minimum essential levels of coverage. They must also submit their plan designs annually to Medicare for approval.
Some of the biggest brand name companies in the health insurance industry offer Medicare Part D Plans. This includes name brands like Humana, Aetna, Blue Cross and Blue Shield, United Healthcare Medicare Solutions and more. There are also a number of companies you may not have heard of before you were eligible for Medicare, such as Silverscript.
Choosing a Medicare Part D plan is easier said than done. Many people tell us that they are confused by too many choices. The best way to find the right plan is to have a broker like Boomer Benefits assist you. We use Medicare’s Drug Plan Finder tool to analyze the plans offered in your state. The tool tells us which plans will give you the lowest annual out of pocket spending.
Most of the time, your Medicare Part D plan will be with a different insurance company than your Medigap plan. This is normal, and we have found that it actually makes things easier so that you don’t confuse your ID cards at the doctor and at the pharmacy.
How and When to Enroll in Part D
Check out this short video on how and when to enroll in Part D so that you can avoid penalties and get the coverage for the drugs you need:
Do I Have to Enroll in a Part D Plan?
No. Part D is voluntary, which means each individual can decide whether or not to enroll. However, you should think about not just the medications you are taking now but also those that you may need in the future. Keep in mind that some oral cancer medications these days cost thousands of dollars, and we never know when we may fall ill.
What Happens If I Don’t Enroll in Part D When I am First Eligible?
If you fail to enroll in Part D during your Medicare Initial Enrollment Period, you will have to wait for a future Annual Election Period to enroll, which means you could be without coverage for months after a diagnosis of an illness before you can get into a plan. You will also be assessed a late penalty later on when you do enroll. The only exception to this is if you didn’t enroll because you had other creditable drug coverage, like employer coverage or VA benefits. The penalty grows with time – let’s look at how that works.
The Medicare Part D 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 during your initial enrollment period (when you first become eligible), may result in a late penalty. The penalty is waived if you have had other other creditable coverage for prescription drugs, such as through an employer group health plan. If not, then your penalty amount depends on how long you waited to enroll in a plan.
The penalty is calculated by Medicare as follows: 1% of the national average base Part D premium for every month that you went uncovered and did not have other creditable coverage. The penalty is rounded to the nearest $.10, and then added to the premium you pay for your new Part D premium.
The base premium this year is around $35, so if you had waited 50 months to enroll in Part D, you would have a penalty of 50% of $35 added to your chosen Part D plans’ premium. 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 circumstance. Imagine 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. This means you would have no coverage until January 1st. Remember that you are insuring your body here, which is more important than your car or your home. Consider the true risks of being uninsured.
Late Enrollment Scenarios
Sometimes it’s difficult for Medicare beneficiaries to understand how late enrollment will affect them. Here are a few examples to show you why you should consider joining a drug plan when you are first eligible.
How the late enrollment penalty is calculated
Mr. Brown became eligible for a Part D drug plan in September of 2018. She 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, 2020. Because he was uncovered for 16 months, Medicare will calculate a penalty for him. It would likely be something like this:
The penalty is then 16% for being uncovered 16 months. If the national average premium is about $35, his penalty is then approximately $35 x .16, or $5.60 cents added to the cost of whichever Part D plan he chooses. Mr. Brown will pay this monthly penalty on top of his drug plan premium for the rest of his life.
The risks of late enrollment
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. She decided not to enroll in a Medicare Part D plan.
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. The name has been changed to protect the client’s privacy.)
Before enrolling, learn more about what Part D covers and how the 4 stages of Part D function. Lastly, be aware that insurance agents cannot solicit you for Medicare Part D plans. You must contact your agent and request to enroll before your enrollment period ends. Every year we see a few people who postpone Part D and miss their window, so be sure to set a reminder for yourself.
Get Someone on Your Side with Part D
We provide FREE assistance to our new Medicare clients by analyzing their Medicare Part D drug plan needs and helping them with their initial sign-up for Part D. We then provide ongoing information and instructions with how to use Medicare’s Plan Finder to shop your Part D plan each fall. This exclusive help is limited to our Medigap policyholders ONLY.
Already have a Medigap policy? No problem – we’ll quote it and see if we can reduce your premiums there too. Our team looks forward to helping you make the best Medicare decisions.
If you are following our Medicare Learning Track, go next to: Medicare Part D – What It Covers