Medicare Part D is a federal program that began in 2006. It provides Medicare beneficiaries with access to retail prescription drugs at affordable copays. Prior to 2006, people on Medicare paid mostly out-of-pocket for their medications for over 40 years.
Medicare Part D is coverage for retail prescription drugs that you obtain from a retail pharmacy. This voluntary program allows you to access medications at a more affordable rate. It also provides insurance against catastrophic drug costs.
You do not enroll in Medicare Part D via Social Security. Instead, you will choose a Medicare Part D plan offered by a private insurance company in your state.
Medicare Part D Cost
How much is Medicare Part D?
Medicare Part D costs include several things. First there is a monthly premium that you will pay for the insurance itself. Then there is cost-sharing that you will pay at the pharmacy for your medications. That cost-sharing may include some deductible spending if your Part D plan has a deductible.
Let’s break those down for you.
Medicare Part D Monthly Premiums
The monthly premiums for Part D drug plans vary depending on the specific plan that you choose. Each insurance company sets its own rates.
In 2020, there are many Medicare Part D plans to choose from in each state – sometimes 20 or more. Plans range from as low as $10 in some states to over $170+. Every insurance company sets its own formulary (list) of medications that are covered by the plan. Therefore they can determine what monthly premium they will charge for the plan each year.
The cheapest Part D drug plan in your state is not always best one for you. It’s important to choose the plan with a formulary that offers the medications you need. If you just enroll in the cheapest plan without checking the plan’s formulary, you may later learn – after you are locked in – that the plan does not cover one of your medications.
Some people with higher incomes may have to pay more for their Medicare Part D plan. If you earned more than $85,000 filing individually or $170,000 filing jointly, then Medicare will also require you to pay extra for your Part D coverage. This is called the Income Monthly Adjusted Amount or IRMAA. You can read more about IRMAA costs on our Medicare cost page.
Medicare Part D Cost-Sharing
When you go to the pharmacy to pick up your prescriptions, you will pay your share of the costs. Some plans have a deductible and then there are the copays that you pay for the medication itself.
Medicare Part D Deductible
The Center for Medicare and Medicaid Services sets the minimum guidelines for Part D plans each year. Each insurance company offering Part D plans must follow these guidelines. All drug plans have 4 stages, and Medicare sets the threshold for each stage each year.
The first stage is the Medicare Part D deductible. In 2020, this deductible is $435. This means that each insurance company can require up to a $435 deductible from you up front before your benefits kick-in. The insurance company can also charge a lower deductible if it chooses to do so. However, no plan can charge a higher deductible than what Medicare allows for that year.
In general, the drug plans that charge the deductible up front will have lower monthly premiums and lower drug copays. Some companies waive the deductible, but then you will see that the premiums and copays are usually higher than plans that charge the deductible.
Medicare Part D Copays
Medicare Part D plans usually have 5 tiers for their medications in their formularies. A Tier 1 is usually a preferred generic medication. Tier 2 would be non-preferred generic. Tier 3 would be preferred brand and so on. The insurance company will set the copay for each tier. For example, one company might charge a $3 copay for Tier 1 medications, while another charges $5. This is why it’s important to review the plan’s formulary to make sure your medications are covered and to know what you can expect to pay for those medications.
Medicare offers a Drug Finder Tool which can be found at www.medicare.gov. You can use this tool to enter your zip code and medications. The Drug Finder Tool will show you which plans in your state will be most cost effective for you.
At Boomer Benefits, we assist our Medicare supplement clients with this analysis on an annual basis. This is important because remember: with all Part D plans, the benefits, formulary, pharmacy network, provider network, premium and/or co-payments/co-insurance may change on January 1 of each year.
You must do your annual homework with Part D to ensure the lowest out of pocket drug spending for the next year.
Extra Help for Part D Costs
Our federal government offers help with paying for your Part D drug plan expenses if you qualify. This is called the Low-Income Subsidy. Anyone can apply for this at Social Security, but help is awarded based on proving low-income and limited resources. You must have an annual income that falls below 150% of the Federal Poverty Level based on your household size.
Beneficiaries who qualify will receive assistance with paying their monthly Part D premiums, their annual Part D deductible, and also their copays for retail medications. There are different levels of qualification. The subsidy level generally determines how much assistance you will get with your monthly premiums. Someone qualifying a full subsidy would have 100% of their Part D premium paid for, up to the benchmark allowed by Medicare for that year.
For example, if you get an award notice for a full subsidy, and the benchmark for the year is $34, then the LIS program will pay up to $34/month toward your premiums. Choosing a drug plan with a premium of $34 or less in that scenario would mean you pay nothing for your drug plan. Furthermore, you will pay no deductible if your plan has one. Your copays for medications are greatly reduced. If you think you may qualify, it is worth contacting Social Security for an application.
Medicare Part D Enrollment
Medicare Part D is a voluntary program but without it you may pay alot for medications that you need down the road. If Medicare will be your primary coverage, you should enroll in Part D when you first become eligible at age 65.
Many people who are still working at age 65 delay their enrollment into Part D until they retire. As long as your employer insurance has drug coverage that is as good as or better than Medicare Part D, you can delay enrollment without penalty.
How Do I Enroll in Part D?
You must enroll in a Medicare Part D plan in the service area where you live. You can enroll in Part D directly with a Medicare Part D insurance provider or through an agent that specializes in Medicare products. Enrolling through an agent means you will have back-end support if you run into any hiccups, such as prior authorization requirements or drug exceptions.
You can also enroll in Medicare Part D via Medicare’s website or by calling Medicare at 1-800-MEDICARE.
Some 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. Be sure that your plan covers the medications you need. You can only be enrolled in one Part D plan at a time. You cannot be enrolled in both Medicare Advantage and Part D at the same time.
When Do I Enroll in 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 Initial Enrollment Period (IEP) lasts seven months.
It 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. Since all those things can change, Medicare gives you an annual election period to also change.
The insurance company will mail you an Annual Notice of Change each September. It will list everything that is changing with your plan for the following year.
If you are fine with the changes, your Part D drug plan will automatically renew in January. However, some people change their drug plan during the annual election period if their prescription needs have changed and another plan better suits them.
Special Election Periods for Medicare Part D
Once enrolled in Medicare Part D, you are locked into the plan for the rest of the calendar year. You must wait for the next Annual Election Period to change or disenroll. However, Medicare recognizes that there might be certain circumstances in which you need to change mid-year. They have created Special Election Periods (SEP) for this.
An example would be if you move out of state or lose your group medical coverage mid-year. These kinds of situations create a short Special Election Period during which you can make the necessary change. Your application for the new Part D plan must be coded properly to take advantage of that SEP. An incorrect code on the application can cause a rejection, so be sure to work with an agent who specializes in these plans.
Be aware that your insurance agent cannot solicit you for Part, so if you wish to enroll, you must initiate that with your agent.
Is Medicare Part D Right for Me?
There are dozens of drug plans offered in most states. Fortunately, there is also a comparison tool which allows us to evaluate each plan based on your individual medications. It helps us to determine who offers the specific medications you need at the lowest copays.
Many insurance agents do not help their clients with Part D due to the extremely low commissions. At Boomer Benefits, we will happily Our free help with Part D for any client who has a Medigap plan with us. We’ll even review it for you annually at your request to ensure you are always getting the most bang for your buck. Give us a call at (855) 732-9055 or to request for help, click below: