Medicare includes several different parts, one of the most important being Medicare Part D. This supplemental plan covers prescription drugs. Those eligible for Medicare, usually people age 65+ and the disabled, may have several different medications necessary for health maintenance. Understanding how Medicare Part D plans affect you is important, and digging through the details of your coverage plan is going to help save you time and money.
Sometimes referred to as "Medicare Part D prescription drug plans" or Medicare PDP, these plans are supplements to Medicare Part A and Medicare Part B that help you manage the costs of brand name and generic prescription drugs. While this coverage is optional, if you don’t have any additional assistance to cover your prescription drugs, you can otherwise end up paying for expensive medications out of pocket. Luckily, Medicare works with many insurance companies to provide a variety of plans to suit your needs.
Medicare organizes medications into “tiers,” and each tier has a different price. The more expensive prescriptions you have, the higher your premium may be. If you’re enrolled in a Medicare Advantage Plan (Part C) you already have prescription drug coverage, and you do not need Medicare PDP. If you are unsure what coverage you have, ask your insurance agent or insurance company representative.
Note: It is very important to know that if you already have prescription drug coverage through a Medicare Advantage Plan when you enroll in Part D, your insurance company will be required to remove your previous prescription drug coverage and adjust your premiums accordingly.
Some aspects of Medicare do not require you to pay, but drug plans for Medicare do come with a premium. Compared to retail pricing for prescription drugs (without insurance), the premiums are affordable. An average premium in 2012 was $38, but prices will vary according to plans and insurers. If you make more than $85,000 per individual or $170,000 per couple per year, you will likely pay a higher premium, but it will not exceed $66.
Premiums aren’t the only out-of-pocket costs associated with Medicare Part D programs. You might have a deductible that must be met before your plan pays for your prescriptions. In 2012, the average deductible was $325. After your deductible is met, you may have a co-pay amount set in advance, or a coinsurance amount to pay with each prescription.
If you can’t afford to pay for any of your Medicare prescriptions, you can apply for “Extra Help.” This portion of Medicare Part D supplement coverage provides assistance to individuals with low and limited incomes. If you qualify, you won’t pay premiums and, depending on the drug, co-pay amounts can be less than $7.
If you don’t qualify for assistance but still have many prescriptions, you may find yourself caught in what is called a “coverage gap.” Part D coverage comes with a benefit limit. When the total drug costs that you and your insurer pay surpass a certain amount, Medicare will no longer pay, and you will have officially entered the coverage gap. In 2012, the limit was $2,930 before Medicare no longer paid, and in 2013, the limit was $2,970.
After you reach the limit, you’re expected to pay 47.5 percent of brand name drugs and 79 percent of generic drugs. At some point, you could reach your out-of-pocket maximum limits ($4,750 in 2013), and your catastrophic drug coverage will begin to pay 95 percent of prescription drug cost.
This Medicare coverage gap has been criticized due to high prescription drug prices, but the Affordable Care Act will attempt to close this gap. According to the ACA model, you may pay no more than 25 percent of prescription drug cost when you hit the Part D coverage limit.
You’ll want to take an inventory of your current medications and be familiar with their costs when looking for a prescription plan. Medicare Part D insurance companies offer a variety of plans and levels. It can still be challenging to find the right plan for you, especially if you’re combining different aspects of Medicare or other private insurance plans. When you work with an independent agent, you’ll get the best service possible from someone who specializes in health insurance.