What Is Medicare Part D
Medicare has expanded since its creation in an attempt to provide seniors and the disabled with more comprehensive health insurance coverage. There are so many different supplemental Medicare plans now that you may wonder "What is Medicare Part D, and how does it benefit me?" Let us help you understand why this supplemental Medicare part is so important.
What Is Medicare Part D?
Medicare Part D, also known as the Medicare Prescription Drug Plan (PDP), is one of the two ways Medicare beneficiaries can get drug coverage. While Medicare Advantage (Medicare Part C) may offer drug coverage, Medicare Part D is a stand-alone drug plan that works in conjunction with your Medicare Part A and Part B.
Enrolling in Medicare Part D is a way you can save money on out-of-pocket expenses through Medicare prescription drug plans. If you meet the Medicare Part D eligibility requirements, it will help cover the cost of any prescription medications you need to treat ongoing or occasional conditions and illnesses. Many recipients feel quite comfortable in their level of protection with Part D Medicare added to their Original Medicare Part A and B plans.
How Does Part D Medicare Work?
When you enroll in your original Medicare insurance plan or Medicare Part C, you already meet Medicare Part D eligibility requirements. If you intend to sign up for any Medicare prescription drug plans, the enrollment is during the seven month period that spans the three months before you turn 65, your birth month, and the three months following your birthday.
There's also an Annual Election Period (AEP), or Open Enrollment Period, for Medicare Advantage and Medicare Part D from October 15 to December 7 of each year. Trying to add the coverage outside of the Open Enrollment Period could result in paying a penalty.
Even if you don't take any prescriptions now, it's to your advantage to sign up for Medicare Part D as early as possible to get the best rates. The exception to voluntary sign up for Medicare drug plans is Medicaid recipients, who must obtain prescription coverage through Part D Medicare once they turn 65.
Medicare Part D prescription drug coverage can be used with other health insurance plans and government assistance programs, but they must be credible. If you, your spouse, or children have prescription drug coverage under a union or employer-provided plan, you may lose that coverage if you enroll in Part D.
Each plan has a different premium, and your income level or late enrollment penalty may affect the amount. Premiums can be deducted from your Social Security disbursements or by auto-pay from your bank account. Those with high incomes may also have a surcharge applied. There are copays and deductibles to meet, but those may be waived if you fall within the income guidelines or receive government benefits like HUD assistance, food stamps, or SSI.
The standard benefit has a government-established minimum, but these are the expected out-of-pocket expenses:
- Monthly premium
- Share cost in the form of a flat copay or percentage of the cost per prescription.
- Cost percentage in the coverage gap, if you go over the initial coverage limit. This is called the Medicare Donut Hole.
- Fee of no higher than 5% of your drug costs during the time period from when you reach the end of your coverage limit until the end of the calendar year. This is known as the 'catastrophic period'.
Qualifying for the Extra Help program will provide you with coverage through the end of the year with no gap and lower out-of-pocket expenses. Coverage can differ by a large amount depending on the provider, the number of premiums and deductibles, and the types of drugs covered by your plan. This is another reason why it pays to compare before you commit to a particular plan.
Prescriptions under Medicare drug coverage are billed in tiers. Tier 1 is the copay amount for generic drugs, Tier 2 is for mid-range, preferred brand drugs, Tier 3 is higher cost, non-preferred brands, and Tier 4 is the copay level for extremely expensive or rare medications. There are plans that have the same copay for all tiers, and all plans charge a percentage that averages between 25% to 33% for Tier 4 medications.
Eligibility For Medicare Part D
As soon as you turn 65 or are diagnosed with a Medicare-covered disability, you'll automatically be enrolled in Medicare Part A and Part B. You'll also meet Medicare Part D eligibility requirements at that time. Enrollment in Medicare Part D isn't required when your Medicare eligibility begins, but it's a smart addition if you have conditions that require regular prescription medication. If you enroll in Medicare Advantage, you're automatically enrolled in Part D as part of your Medicare Advantage Plan.
Are Medicare Prescription Drug Plans Mandatory?
Medicare drug plans aren't mandatory unless you're on Medicaid, but you'll be happy you have Part D Medicare if you ever develop a condition that requires regular medication. Because it's subsidized by the government, Medicare drug coverage is often more cost-effective than other prescription insurance plans, especially if you have a lot of medications to pay for.
The Medicare Part D Penalty
Medicare drug plans have a penalty attached for late enrollment. This is an amount that's added to your Medicare drug coverage premiums each month. The most favorable time to enroll is as soon as you reach Medicare Part D eligibility at age 65. The penalty is applied if any of the following conditions is true during any continuous 63-day period in any calendar year:
- You don't have a Medicare Part D plan
- You don't have a Medicare Part C Advantage plan
- You don't have another health plan with Medicare drug coverage
- You have no creditable prescription drug coverage Note that those who qualify for the Extra Help program will not be assessed a penalty.
How To Calculator Your Part D Penalty
It may take a little bit of calculation to figure out exactly what is Medicare Part D penalty. The amount is based on how long you were without Part D Medicare coverage or a credible health insurance plan.
Medicare charges a penalty of 1% of the national base beneficiary premium, which is $35.02 as of the 2018 calendar year. That amount is multiplied by the number of full months you were without Medicare Part D coverage during that year. The product of that calculation is rounded to the nearest $10 figure and added to your monthly premium. You'll be notified by Medicare at the time of enrollment if you owe a penalty.
If you disagree with the assessment or amount, you can file for a reassessment within 60 days. There's a form available on the Medicare website to file for reconsideration. You'll receive an answer within 14 business days about their decision.
Is Medicare Part D Worth It?
You may feel that the extra cost of Medicare prescription drug plans is an expense you can save if you don't need medications or you don't use the ones you have. However, Medicare Part D isn't just a convenience. We often invest in insurance that we think we don't need, but we're always grateful it's there when we do. Just make sure to heed your Medicare Part D eligibility so you can get the lowest rates and avoid the penalty.
Medicare Part D Pros
Without prescription drug coverage, your medications can put a drain on your budget. Even if you only need medication when you're sick, it's good to know you have insurance to help pay for it. Among your choices for drug coverage, Medicare Plan D offers other advantages.
- Part D Medicare copays are usually less than those of other prescription drug insurance plans.
- Medicare drug plans fill prescriptions for 90 days at a time in most cases, so you'll have fewer trips to the pharmacy.
- Some vaccinations, like flu shots, are available at pharmacies, so you won't have to go to your Doctor's office to get them.
- Signing up as soon as you reach Medicare Part D eligibility age means lower premiums.
- Some plans offer member benefits that allow you to get prepaid cards to buy health items like vitamins, toothpaste, and topical creams.
- Wider availability of plans and providers allows you to shop for the best rates and coverage.
Medicare Part D Cons
Not every plan is perfect. As comprehensive as Part D is, there are also a few drawbacks.
- You may need medications that aren't covered by Medicare Part D.
- Some Medicare drug plans only allow you to use pharmacies in their network; this may be a problem if you live in a remote area.
- You'll pay more out-of-pocket for your Medicare drug coverage after you reach the coverage limit.
- Penalties assessed for late enrollment or lapsed coverage can make your premiums higher.
- Less standardized than other supplemental Medicare plans, so costs and benefits can vary widely among providers