Medicare Part D Explained
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.
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.
In 2022, there are many Medicare Part D plans to choose from in each state – sometimes 20 or more. Plans range from as low as $7 in some states to over $200+. 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 monthly premiums for Part D drug plans vary depending on the specific plan that you choose. Each insurance company sets its own rates.
The cheapest Part D drug plan in your state is not always the best one for you. It’s important to choose a 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 $91,000 filing individually or $182,000 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.
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 2022, this deductible is $480. This means that each insurance company can require up to a $480 deductible from you upfront 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 upfront 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 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 the 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.
You must do your annual homework with Part D to ensure the lowest out-of-pocket drug spending for the next year. It is better to use a qualified agent in your state to help you come up with the best plan options for you and your situation.
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 for a full subsidy would have 100% of their Part D premium paid for, up to the benchmark allowed by Medicare for that year.
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 an extra resource for help when you have questions or problems with your drug plan.
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.
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 – to 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 plans during the annual election period if their prescription needs have changed and another plan better suits them.
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 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 D, so if you wish to enroll, you must initiate that with your agent.
There are dozens of drug plans offered in most states. Fortunately, we can assist you with evaluating each plan based on your individual medications. We’ll help you determine which drug plans offer the specific medications you need at the lowest copays.
At My Medicare My Way, we will happily offer assistance with Part D when you choose to enroll in a Medigap plan through us. Give us a call at (816) 436-9977 or to request help, fill out the form below: