What is Medicare Part D?
Medicare Part D helps cover your prescription drugs. Part D coverage is not offered by Original Medicare, but through private insurance plans monitored by the Centers for Medicare and Medicaid Services (CMS). CMS is the department in the federal government that manages Medicare.
Who is Eligible for Medicare Part D?
Anyone who is enrolled in Medicare Part A and/or Medicare Part B (Original Medicare) is eligible for a Medicare Part D plan. You are also eligible if you’re enrolled in a different Medicare plan, such as a Medicare Supplement or Medicare Part C (Medicare Advantage) plan without prescription drug coverage.
What Does Medicare Part D Cover?
Medicare Part D plans help cover the costs of prescription drugs. Each plan has a different formulary, which is the list of prescriptions they cover and at what costs. CMS does set rules about the required level of coverage and some price standards.
Both generic and name brand prescriptions are covered by Part D plans.
Medicare Part D Costs
In a Medicare Part D Plan, your costs will usually include:
- A monthly premium
- A yearly deductible
- Coinsurance or copayments on each prescription
If you don’t enroll in a Medicare Part D plan when you’re first eligible, and don’t have creditable coverage, you may pay a late enrollment penalty if you sign up later. You will have to pay this penalty for as long as you have Medicare. While prescription drug plans are technically optional and not part of the federal Medicare program, this late fee means that lack of coverage is penalized.
There is also a prescription coverage gap sometimes called the “Medicare donut hole” if you max out the amount your Part D plan is allowed to cover. In the gap, you are responsible for 25% of medication costs until you hit your maximum out-of-pocket amount for prescriptions and roll over into catastrophic coverage.
Prescriptions and the Inflation Reduction Act
As of August 2022, the Inflation Reduction Act works to lower and negotiate prescription drug costs, as well as improve Medicare Part D coverage. Starting in January 2023, one month’s supply of Part D-covered insulin was capped at a maximum of $35. In 2023, Medicare began negotiating the costs of 10 Part D-covered drugs.
Beginning in 2024, if you spend up to your Part D catastrophic coverage limit, you won’t have to pay copay/coinsurance. Also in 2024, beneficiaries who earn less than 150% of the federal poverty level will qualify for Extra Help. In 2025, yearly Part D out-of-pocket costs will be capped at $2,000.
Types of Medicare Part D Plans
There are two types of prescription drug plans you can choose from depending on how you get your Medicare benefits.
If you receive your benefits through Parts A and B (with or without a Medicare Supplement Plan), then you’ll need to enroll in a standalone Prescription Drug Plan (PDP). These plans only cover prescription drugs and you can choose the best one for you based on the plan’s formulary and which pharmacies they work with.
Medicare Advantage Plan
Medicare Advantage Plans (Part C) can come with or without bundled prescription drug coverage. If you want a fully bundled plan, you should look for an MAPD plan – Medicare Advantage Prescription Drug Plan. Just like the PDPs, MAPD plans will have their own formularies and network of pharmacies. You can compare those costs and benefits just like you would any other benefit with a Medicare Advantage Plan. If you are enrolled in a Medicare Advantage Plan that doesn’t include prescription drug coverage, you can also enroll in a standalone Prescription Drug Plan (PDP).
How to Enroll in Medicare Part D
Since Medicare Part D plans are offered by private insurance companies, you’ll enroll in a plan through the company of your choice, often with a licensed insurance agent. This is in contrast to your Parts A and B enrollment, which is handled by Social Security.
You have three main enrollment opportunities:
Initial Enrollment Period
This 7-month period when you’re first eligible for Medicare is usually the best time to enroll in a Part D plan to avoid gaps in coverage and the late enrollment penalty. Exceptions may apply if you have employer coverage still.
Annual Enrollment Period
This yearly enrollment opportunity occurs from October 15 – December 7 every year and you can select a new Part D plan.
Special Enrollment Periods
These enrollment periods are triggered by special circumstances that affect your Medicare coverage, such as moving, leaving employer coverage, and more.
Help With Part D Costs
You have several options for lowering your prescription costs or getting assistance with paying those costs. Comparing your Part D options from multiple carriers every year can help ensure that you have the plan with the right costs and coverage for you. Your doctor may be able to prescribe generic drugs or lower-cost options instead of brand-name prescriptions, reducing your overall payments.
Many states have Pharmaceutical Assistance Programs that may be able to help with your premiums, drug costs, and more. Look online or contact your local Department of Health to learn more about state-based aid.
Extra Help is a prescription cost assistance program run by the Social Security Administration and Medicare. If you qualify—based on limited income—the costs of your prescriptions will be set at a lower price point by Extra Help. If you are in Medicaid or eligible for Medicaid, you may also qualify for Extra Help.
Annual Enrollment Period (AEP)
Medicare Annual Enrollment Period runs each year from October 15 to December 7. What is the Annual Enrollment Period vs. Open Enrollment Period?
Initial Enrollment Period (IEP)
Your Initial Enrollment Period generally surrounds your 65th birthday but may occur if you otherwise become eligible for Medicare for the first time.
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