What exactly is a Medicare Part D Prescription Drug Plan?


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As we talked about in “What To Do During Medicare Open Enrollment”, Medicare Annual Open Enrollment lasts from October 15th to December 7th. Medicare Prescription Drug Plans (Part D of Medicare) are allowed to be switched during this time. These drug plans are needed if you have a Medicare Supplement plus original Medicare, not a Medicare Advantage plan, as most advantage plans have drug coverage included.

Part D Prescription Drug Plans are not standardized, so they can vary in cost and benefits from plan to plan, which is why it is important to shop around each year, especially if your prescriptions have changed.

How do I know if I need a Drug Plan?

If you are taking a lot of medications that are provided by a pharmacy and you have a Medicare Supplement, you may want to consider a drug plan. When you are doing your research, it is very important to make sure that all your drugs are covered by the plan you choose.

If you need a drug that is not covered by the plan you choose, it can be very expensive. To check this, look at the list of drugs covered by the plan, which is called a formulary. You also need to see if your pharmacy is in the plan’s preferred network of pharmacies.

If you use a pharmacy that is not “in network”, you could potentially pay the full cost of your drugs.

How much does it cost?

Again, drug plans are not standardized, so premiums and benefits vary from plan to plan. Some plans have lower premiums but require higher copays and vice versa. It is important to evaluate the plan by how much you will pay out of pocket annually, not just the premium or copays.

Most drug plans place drugs into price tiers. This is done to incentivize consumers to use more cost effective options. Lower tiers are normally comprised of generic drugs while the higher tiers are brand-name drugs. The price you pay is going to be more in the higher tiers, possibly much more.

The highest tier is usually specialty drugs, which are drugs that are rare or for serious medical conditions. These are going to cost the most. You can file for an exception with your drug plan provider if your doctor thinks you need a specific medication from a more expensive tier. When considering costs, it is important to see what tiers your drugs fall into.

High earners (as defined by Social Security) pay a monthly surcharge in addition to the monthly premium for Part D plans. The increase ranges in amount depending on your income level. Currently, it starts with individuals earning $85,000 or more and couples earning $170,000 or more. On the other end of the income scale, if your income is under certain limits, you may qualify for Extra Help from Medicare to help pay for your Part D plan.

To see if you qualify for this, contact the Medicaid office or your local SHIP office, which you can find by going here.

What is the donut hole?

There are basically 4 stages of Part D plans:

  1. The first is the deductible, where you pay the full amount for your prescriptions until you meet the yearly deductible amount. Some plans do not have deductibles, and start immediately at stage 2.
  2. Stage 2 is the initial coverage stage, where you either pay a copay or a percentage of the drug’s costs, or coinsurance. This lasts until you and your plan have reached a certain amount spent on covered drugs, which can change yearly. In 2017, this amount is $3,700. Once you reach this amount, you fall into the “donut hole”.
  3. The donut hole is basically a gap in coverage. Once someone hits the donut hole, they pay a higher share of the drug costs until reaching the catastrophic coverage phase.
  4. In the catastrophic coverage stage, you start paying copays or coinsurance for your drugs again, an amount which is normally lower than the initial coverage stage.

Do I really need a Prescription Drug Plan (Part D)?

Drug plans are optional. However, if you do not sign up when you initially qualify, you will pay a penalty on top of every premium paid for the rest of your life if you do decide to sign up.

As mentioned earlier, if you have an advantage plan, drug coverage is usually included, so you would not need a Part D Drug Plan.
Drug plans are also sometimes included in work coverage or retiree coverage. It is important to check if your work or retiree coverage is credible. It is considered credible if the coverage is expected to pay at least as much as Medicare’s standard prescription drug coverage. If it is credible, you will not receive a penalty if you later decide you want to enroll in a Medicare Part D plan.

Contact Cardinal Advisors at 919-535-8261 if you need help with your drug plan. Make sure to get it started before December 7th!

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