Medicare Part D prescription drug plans help lower the cost of prescription drugs for Medicare beneficiaries. These plans allow policyholders to pay copayments and deductibles rather than the total retail price of their drugs.
Prescription drug coverage is one of the most challenging parts of Medicare to understand. Each plan offers different levels of coverage and involves varying deductibles, premiums, and copayments.
Yet, the base of all plans is the same. Below, we review all there is to know about Medicare Part D.
What is Medicare Part D?
Not to be confused with Medicare Supplement Plan D, Medicare Part D is the only prescription drug coverage offered alongside Original Medicare.
Medicare Part D plans are available to anyone enrolled in Medicare Part A. However, it is not mandatory to have in Medicare Part B – the other half of Original Medicare – to enroll in a Medicare Part D plan.
Medicare does not administer Medicare Part D plans directly. Instead, private insurance companies that Medicare approves offer and manage these plans. Companies like SilverScript, Humana, Mutual of Omaha, and others offer Medicare Part D plans.
Medicare Part D Plan Availability in 2022
In 2022, there are 766 Medicare Part D plans available nationwide. This is a substantial drop in available plans from the previous year. In 2021, there were just under 1,000 Medicare Part D plans available for Medicare beneficiaries.
Even with a drop in the number of available plans, each state will have anywhere from 19 to 27 Medicare Part D plans in which beneficiaries can enroll. Keep in mind, although the same plan may be offered within the same state or even across the country, plan details can vary from one ZIP Code to another.
Annual Premiums for Medicare Part D Coverage
Each year, Medicare Part D costs change. The average monthly premium for Medicare Part D coverage in 2022 is $33.37. However, premiums vary depending on the plan you select.
Most beneficiaries pay the same premium price for the same plan coverage, but those with higher incomes are subject to a monthly surcharge. This income-related surcharge, called IRMAA, also applies to Medicare Part B medical insurance, so if you need to pay an IRMAA for Medicare Part B, it will also apply to Medicare Part D.
On the other hand, the government assists people who need help paying for Medicare Part D. Depending on where you live, additional assistance may be available from state or federal agencies. You must meet income and asset requirements to qualify.
Medicare Part D Extra Help
Extra Help is a low-income subsidy for Medicare Part D plans. If your monthly income is below limits set for the year and your assets do not exceed other specified limits, you are eligible for Extra Help with Medicare Part D.
If you are enrolled in state insurance coverage assistance programs such as Medicaid, you are automatically eligible for Extra Help benefits. These benefits include Medicare Part D premium reduction, lower copayments on prescriptions, elimination of the Medicare Part D late enrollment penalty, and allowing the beneficiary to enroll in a new drug plan up to nine months after becoming eligible for Extra Help. Levels of Extra Help vary by need.
Medicare Part D Coverage Phases
Your Medicare Part D costs for prescription drugs may change during the year. This is because Part D coverage has four different phases.
Every Medicare Part D plan follows the same coverage phases, meaning each beneficiary should be aware of how they work, particularly if you require high-cost drugs.
The four coverage phases are:
- Deductible (if applicable; varies by plan)
- Initial Coverage
- Coverage Gap (Donut Hole)
- Catastrophic Coverage
Medicare Part D Coverage Phases Chart
|Phase 1: Deductible||During the deductible phase, you are responsible for the full cost of your prescription drugs until you meet the Medicare Part D deductible.
After you reach your plan’s deductible, Medicare Part D will then cover the cost of your medications. Although deductible expenses will vary between plans, no plan’s deductible may exceed $480 in 2022. However, some plans have deductibles as low as $0.
|Phase 2: Initial Coverage||Once you meet your annual deductible, your plan will pay its predetermined share of the drug cost, and you will be responsible for the remaining co-payments or co-insurance.
The length of your initial coverage phase depends on drug costs and the benefits your plan offers. In 2022, the initial coverage phase ends once your total drug cost is $4,430.
It is important to note that total drug cost is the amount both you and your plan pay for medications, not just your out-of-pocket costs.
|Phase 3: Coverage Gap (Donut Hole)||During the coverage gap or donut hole phase, most generic and brand-name drugs receive a 75% discount by the drug manufacturer and the federal government.
That leaves the beneficiary responsible for only 25% of the cost, keeping prescriptions affordable.
This coverage phase lasts until you reach the Medicare Part D True Out-of-Pocket (TrOOP) limit of $7,050.
|Phase 4: Catastrophic Coverage||Once you exceed the Medicare Part D TrOOP limit, your plan will cover most of your prescription drug costs.
During this phase, your out-of-pocket cost is capped at the greater amount between 5% of the retail cost of the drug OR $3.95 for generic medications and $9.85 for brand-name medications.
- Your plan’s deductible
- Amount you pay during your initial coverage phase
- The cost of brand-name drugs purchased during your coverage gap phase
- Expenses paid by any person on your behalf
- Fees paid for by State Pharmaceutical Assistance Programs, AIDS Drug Assistance Programs, and the Indian Health Service
What is TrOOP in Medicare Part D?
Medicare tracks True Out-of-Pocket Costs (TrOOP) annually. Since Medicare tracks spending, you get protection from paying more than necessary. The Medicare Part D TrOOP does not include monthly premiums, out-of-network pharmacies, non-covered drug costs, and the 75% discount on generic drugs.
So, if you reach the deductible before you move out of state, then expect that you don’t need to meet the deductible in your new area. The same is true for the coverage gap and the catastrophic phase. No matter where you move, Medicare will be aware of your current coverage phase.
During the Annual Election Period, you can make changes to your Medicare Part D plan without penalty. However, if you qualify for a Special Enrollment Period at any time, you can also change plans without penalty.
Medicare Part D Penalty
Although no part of Medicare is mandatory, there are consequences for delaying prescription drug coverage. If you defer enrollment without creditable drug coverage, you will incur a penalty in addition to your Medicare Part D premium each month. Additionally, the penalty never goes away as long as you have Medicare Part D coverage.
Plan Changes on Medicare Part D
Each year, your Medicare Part D plan is subject to change. You find out about the changes for the upcoming year each fall when you receive an Annual Notice of Change letter from your carrier. These changes can include new out-of-pocket costs, adjustments to pharmacy networks, and removal of drugs from the formulary.
Formularies are lists of prescription drugs for which plans include coverage. Every Medicare Part D plan has a formulary, and it is important to make sure yours includes what you need each year.
Once you enroll in a Medicare Part D plan, be aware that the coverage will automatically renew the following year. Therefore, it is especially important to make sure your coverage is still what you want for the following year.
The only time you need to act is when you wish to change your drug plan. The Medicare Annual Enrollment Period is your chance to do this each year. It is always recommended to review your drug plan with a licensed agent during this time as many plans change each year. You may find another plan that provides more comprehensive coverage for your medications.
How to Enroll in Medicare Part D
Trying to find the best plan for you can be overwhelming. That is why we are here to help – free of charge. Our licensed agents work hard to help you through this process.
Enrolling in a Medicare Part D prescription drug plan is the best way for beneficiaries to save money on costly medications. We can help you compare plans in your area to ensure you receive the best coverage. Simply complete our online rate form here, or you can give us a call at the number above.
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