Medicare Part D: Explained

Of the 60 million people who are Medicare beneficiaries, 43 million are enrolled in Medicare Part D. This is the area of Medicare that covers prescription drug costs.

You can get Medicare prescription drug coverage in two ways. If you are a beneficiary of Original Medicare, you should know that Medicare Part D isn’t automatically included. You’re going to have to get this coverage by enrolling in a separate Medicare Prescription Drug Plan.

If you have Medicare Part C, then you can enroll in a Medicare Advantage Plan that includes prescription drug coverage. Check out this guide to Medicare Part D: Explained in order to learn everything that you’re going to want to know!

Who Can Get Medicare Drug Coverage?

Any person who is on Medicare (with either Medicare Part A or Part B) is then entitled to Medicare Part D (drug coverage). This is regardless of your income.

You also can’t be denied coverage because you already use a lot of prescription medications or have poor health. There also aren’t any physical exams required.

Do You Need to Sign Up?

When it comes to Original Medicare, most people are automatically enrolled when they become eligible. This is not the case with Medicare Part D, as most people have to enroll voluntarily. With that said, if you currently get your drugs via Medicaid, then you need to get them from a Medicare drug plan once you become eligible for the program.

If you have drug coverage that’s better than the one offered by Medicare, then you won’t have to sign up for Medicare Part D. An example of this situation would be if you received benefits from a union or a former or current employer.

If you don’t happen to have other prescription medication coverage that’s considered to be as good as Medicare, then you’ll have to pay a late fee if you delay signing up. This fee will be added to your premiums for as long as you’re in the program. You’ll also only be able to enroll during open enrollment, which takes place at the end of the year.

How Do You Get Medicare Prescription Drug Coverage?

In order to get prescription drug coverage with Medicare, you have to enroll in a private insurance plan that’s been approved by Medicare. There are two ways in which you can get this drug coverage.

First, you can get it through a stand-alone plan (PDP). This kind of plan only offers drug coverage. This is meant for people who decide to get their other health benefits from the traditional fee-for-service Medicare program.

There is also the Medicare Advantage plan (MA-PD). This type of plan is best for people who want to get all of their Medicare benefits in one package. This is usually through a preferred provider organization (PPO) or a health maintenance organization (HMO).

Does Income Affect How Much You Pay?

Your income might affect how much you pay. If you have an income that’s over a certain amount, then you’ll pay a surcharge for Part D drug coverage as well as your plan premiums. If your modified adjusted gross income is more than $85,000, you’ll pay the surcharge.

People who have to pay this surcharge will pay it straight to Medicare. They will pay the regular premium to the drug plan.

It’s important to note that you might have to pay this surcharge even if your drug coverage comes from a union or former employer as a retiree benefit. If your union or employer gets a subsidy from the federal government for providing drug coverage, you won’t have to pay this surcharge.

However, if your union or employer has contracted with Medicare to provide you with Part D coverage, you might have to pay the surcharge. Make sure to check with your plan administrators in order to know what type of coverage you have.

If your income suddenly drops because of a “life-changing” event, such as divorce or retirement, then you can apply to Social Security in order to have both your Part D and Part B surcharges removed or lowered.

If your income happens to go up and you pass the surcharge level because of a one-time event, you’ll have to pay the surcharge. An event like this could be cashing in on your IRA or selling your house. If your income goes back down below the threshold, then you can get the surcharge lowered or removed.

What Will You Pay for Your Drugs?

Depending on the phase of coverage that you’re in, you could end up paying a different amount for the same medication. If your coverage plan has a deductible, you’ll pay the full price for the medication until you reach the deductible amount. The coverage will then kick in.

If you see “full price,” this refers to the price that your plan has negotiated with each medication’s manufacturer. The price is often less than what you would pay retail at a drug store.

There is also the initial coverage period. Your share of each drug is either a percentage of the drug’s cost (for example, 10 percent) or a flat copayment (for example, $10).

The majority of plans have three levels of copays. The copays go up in price from the least expensive generic drugs to brand-name drugs to specialty drugs.

You’ll also have to account for the coverage gap, known colloquially as the “donut hole.” In 2020, after you and your plan have spent $4,020 on covered drugs, you’ll be in the donut hole. After you reach the donut hole, you won’t pay more than 25 percent of the cost for the prescription drug.

And with a catastrophic level of coverage, your share of each drug won’t be more than five percent of the total cost of the medication.

Why Do Plans Charge Different Amounts for the Same Drug?

The price of each drug is negotiated between each plan and the manufacturer of the drug. So if your plan gets a good discount on one brand-name drug but it doesn’t on a similar drug, then the plan will charge a lower copay for the “preferred” (former) medication and a higher copay for the non-preferred (latter) medication.

Also, different plans might put the same drug at different levels of charges. These can vary by as much as $50 or more between levels.

And some plans will charge you a percentage of the drug, while others might charge you a flat dollar copay. This can lead to significant differences in costs among varying plans. This is why it’s so important for people to compare copays (as well as deductibles and premiums) when they’re choosing a plan.

Can You Switch Your Medicare Part D Plan?

If you feel that your Medicare Part D plan isn’t meeting your prescription drug needs, then you can always switch plans. In fact, this is what you should do if you’re not happy with the services provided. With that said, you should be aware that just because a plan is a great deal one year doesn’t mean it’s going to be as good or useful the next year.

Before you make any decisions, you should know what your options are. Most of the time, you really can’t just move from one plan to another, other than during the Medicare Annual Election Period (AEP).

If your plan isn’t satisfying you, you need to take the time to learn about your current plan and what the other plans are like. This way, you can review your options by the time the AEP comes around.

There aren’t any penalties for switching plans. Still, you can end up with a penalty if you don’t enroll in a Part D plan when you’re first eligible to do so. However, you can only switch your plan once a year, during the AEP.

If you don’t switch during this period, you’re going to have to wait another full year to do so.

You can learn more about Medicare Part D plans here (MedicareWire.com/medicare-part-d/).