Medicare Part D (Drug coverage)

In 2003, Medicare Part D was added to Original Medicare under the Medicare prescription Drug, Improvement, and Modernization Act (MMA) enacted by Congress. It increased the importance and costs of prescription drugs in treating both acute and chronic health care conditions.

Part D plans cover:

• Prescription drugs in a plan’s formulary
• Vaccines, including those for shingles. There are exceptions, though: Part D doesn’t cover vaccines covered under Part B, including flu, hepatitis B and pneumonia.

Part D plans don’t cover:

• Drugs not in a plan’s formulary
• Drugs covered in parts A or B of Medicare. These include medications you receive while you’re in the hospital or at a doctor’s office.
• Drugs used to combat erectile dysfunction or infertility, gain or lose weight, grow hair or help you cosmetically
• Prescription vitamins and minerals, with a few exceptions
• Over-the-counter medications

Plans each year are approved by Medicare and are available through Private Insurance Companies.

Your monthly plan premium and out-of-pocket expenses for prescription drugs will vary from plan to plan. You’ll make these payments throughout the year in a Medicare drug plan:

• Premium *
• Yearly deductible
• Copayments or coinsurance
• Costs in the coverage gap
• Costs if you get Extra Help
• Costs if you pay a late enrollment penalty

*

Your actual drug coverage costs will vary depending on:

• Your prescriptions and whether they’re on your plan’s list of covered drugs (formulary).
• What “tier” the drug is in.
• Which drug benefit phase you’re in (like whether you’ve met your deductible, or if you’re in the catastrophic coverage phase).
• Which pharmacy you use (whether it offers preferred or standard cost sharing, is out of network, or is mail order). Your out-of-pocket drug costs may be less at a preferred pharmacy because it has agreed with your plan to charge less.
• Whether you get Extra Help paying your Medicare drug coverage costs.

 

In order for you to enroll in a stand-alone drug plan, you must be enrolled in Medicare Part A and/or Part B. To enroll in a Medicare Advantage plan that may have a drug benefit, you will need to be enrolled in Medicare Part A and Part B.

Most Medicare drug plans (Medicare approved drug plans and Medicare Advantage Plans with prescription drug coverage) have their own list of what drugs are covered, called a formulary.

Formulary (list of covered drugs)

Plans include both brand-name prescription drugs and generic drug coverage.

• The formulary includes at least 2 drugs in the most commonly prescribed categories and classes.
• This helps make sure that people with different medical conditions can get the prescription drugs they need.
• All Medicare drug plans generally must cover at least 2 drugs per drug category, but plans can choose which drugs covered by Part D they will offer.

Tiers

To lower costs, many plans offering prescription drug coverage place drugs into different “tiers” on their formularies. Each plan can divide its tiers in different ways. Each tier costs a different amount. Generally, a drug in a lower tier will cost you less than a drug in a higher tier.

Here’s an example of a Medicare drug plan’s tiers (your plan’s tiers may be different):

• Tier 1—lowest copayment: most generic prescription drugs
• Tier 2—medium copayment: preferred, brand-name prescription drugs
• Tier 3—higher copayment: non-preferred, brand-name prescription drugs
• Specialty tier—highest copayment: very high-cost prescription drugs

 

Medicare drug plan companies can make some changes to its drug list during the year if it follows guidelines set by Medicare. Your plan may change its drug list during the year because drug therapies change, new drugs are released, or new medical information becomes available.

Your plan may raise the copayment or coinsurance you pay for a particular drug when the manufacturer raises their price, or when a plan starts to offer a generic form of a drug, but you keep taking the brand name drug.

Plans must give you written notice at least 30 days before the date the change becomes effective.

At the time you request a refill, provide written notice of the change and at least a month’s supply under the same plan rules as before the change.

Note: If you take insulin, you may be able to get Medicare drug coverage that offers savings on your insulin. You could pay no more than $35 for a month’s supply.

 

Plan Stages

The Standard Medicare Part D model includes 4 stages as described below and provides a framework for payment costs under approved plans.

Annual Deductible

Under this stage, you will pay the full cost of your prescriptions until your spending equals the amount of your plan’s deductible. If your plan has a $0 deductible, your costs will be based upon the standards set for the Initial Coverage stage.

Note: Many plans have deductibles that may only apply to drugs on specific tiers. Your costs under these types of plans may be lower, for certain medications. Monthly premiums are not counted toward reaching the deductible.

Initial Coverage

When you have completed paying your plans deductible (if it includes one) your plan pays for a portion of each prescription drug you purchase, as long as that medication is covered under the plan’s formulary You pay the other portion, which is either a copayment (a set dollar amount) or coinsurance (a percentage of the drug’s cost).

The amount you pay will depend in what tier your medication is allocated to under your plan. This stage ends when the amount you spent on your plan covered drugs totals the Initial Coverage limit set by Medicare which is $4,430 in 2022.

Coverage Gap

You start this stage when you and your plan have collectively spent $4,430 on your covered drugs.

If you enter the Coverage Gap (also referred to as the “Donut Hole”). In the coverage the plan is temporarily limited in how much it can pay towards the cost your drugs. If you do enter this stage, you’ll pay 25% of the plan’s cost for covered brand-name drugs and 25% of the plan’s cost for covered generic drugs.

Note: The percentage you pay for brand-name drugs is lower, the price of that drug may be much higher than the generic option.

The limit set by Medicare to exit the coverage gap is $7,050 for 2022. It is calculated as the total out-of-pocket cost on covered drugs (not including premiums). Out-of-pocket cost is calculated by adding together all of the following: yearly deductible, coinsurance, and copayments paid for the entire plan year, and what you paid for drugs in the coverage gap (including the discounted amounts you did not pay in that stage).

Catastrophic Coverage

During catastrophic coverage, you will pay 5% of the cost for each of your drugs, or $3.95 for generics and $9.85 for brand-name drugs (whichever is greater). Your plan and the government will pay the balance.

* Most people only pay their Part D premium. If you don’t sign up for Part D when you’re first eligible, you may have to pay a Part D late enrollment penalty.

If you have a higher income, you might pay more for your Medicare drug coverage. If your income is above a certain limit ($91,000 if you file individually (single or Married Filing separately) or $182,000 if you’re married and file jointly), you’ll pay an extra amount in addition to your plan premium (sometimes called “Part D-IRMAA”). You’ll also have to pay this extra amount if you’re in a Medicare Advantage Plan that includes drug coverage.

 

Vibrant Senior Benefits agents are equipped with the tools to help Calculate the amount you would owe under each plan to see which one offers the lowest cost plans for you to review.

 

For more information or assistance in determining which plan is the best for you, please contact us. Click here.