Medicare Part D (Medicare Prescription Drug Plan)
There are two types of Medicare Part D. If you are using Original Medicare, you’ll use a stand-alone Medicare Prescription Drug Plan (PDP). This presrition plan, Part D, is optional. It is run by private companies approved by Medicare. Alternatively, if you are enrolled into a Medicare Advantage Plan, you may use Medicare Advantage Prescription Drug Plan (MA-PD) with Prescription Drug Plan as a part of Medicare Advantage.
- You are eligible for Medicare Prescription Drug Plan if you are enrolled in Medicare Part A and/or Part B.
- Covers most types of prescription drugs (both generic and brand-names) with few exceptions.
- Part D adds drug coverage to Original Medicare, HMO and PPO Plans, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) Plans, and Medicare Medical Savings Account (MSA) Plans.
- Unlike the Original Medicare, the Part D coverage is not standardized. All plans must provide at least a standard level of coverage set by Medicare, but each plan can vary in cost and drugs covered. Plans decide which drugs they cover, at what level (tier), and whether not to cover some of them at all.
PREMIUM / DEDUCTIBLE / CO-PAYMENT/ COINSURANCE
The Part D monthly premium varies by plan (higher-income consumers may pay more).
- Each plan can vary in cost and drugs covered. The cost include: monthly premium, yearly deductible and copayment / coinsurance.
- Most Medicare Drug plans have a coverage gap (sometimes called a ‘donut hole’). It means that after you and your plan spent a certain amount of money, you need to pay out-of-pocket for all drug costs up to the specified limit. Above this limit there is a catastrophic coverage when you need to pay only a small coinsurance/copayment for the rest of the calendar year.
You may owe a late enrollment penalty if you go without a Medicare Prescription Drug Plan (Part D), or without a Medicare Advantage Plan (Part C) (like an HMO or PPO) or other Medicare health plan that offers Medicare prescription drug coverage, or without creditable prescription drug coverage for any continuous period of 63 days or more after your Initial Enrollment Period is over.
In general, you’ll have to pay this penalty for as long as you have a Medicare drug plan. The cost of the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage.Learn more about the Part D late enrollment penalty.
You can join, switch, or drop Medicare Prescription Drug Plan (PDP):
The chart below show your estimated prescription drug plan monthly premium based on your income as reported on your IRS tax return from 2 years ago and last year. If your income is above a certain limit, you’ll pay an income-related monthly adjustment amount in addition to your plan premium.
|For year 2017. If your filing status and yearly income in 2015 was
|File individual tax return
||File joint tax return
||File married & separate tax return
||You pay (in 2016)
|$85,000 or less
||$170,000 or less
||$85,000 or less
||your plan premium
|above $85,000 up to $107,000
||above $170,000 up to $214,000
||$13.30 + your plan prem.
|above $107,000 up to $160,000
||above $214,000 up to $320,000
||$34.20 + your plan prem.
|above $160,000 up to $214,000
||above $320,000 up to $428,000
||above $85,000 up to $129,000
||$55.20 + your plan prem.
||$76.200 + your plan premium
- At Initial Enrollment Period – a 7-month period that begins 3 months before you turn 65, or 3 months before your 25th month of disability. The period includes the 3 months before, the month of, and the 3 months after the triggering event, such as ‘turning 65′.
- At Annual Enrollment Period – between October 15 and December 7. Your coverage will begin on January 1 of the following year.
- In certain situations you may be eligible for a Special Election Period (SEP) that allows you to make changes in your coverage outside of enrollment periods described above. Examples of SEP are: you’ve moved out of service area, you are enrolled into PACE plan, you’ve lost creditable prescription coverage, you have both Medicare and Medicaid, etc. SEP length is dependent on event that triggered it. For example, people who qualify for Extra Help have continuous SEP – they can change plans once a month.
- On switching PDP, you don’t need to cancel the old plan. It will end automatically when the new plan begins.
- Normally enrollment is on calendar year basis, starting the date your coverage begins.
- If you didn’t enroll in Prescription Drug Plan when you were first eligible and you go without Creditable Prescription Drug Coverage for 63 continuous days or more, you may have to pay a penalty if you’ll decide to join later. (Creditable Prescription Drug Coverage is prescription drug coverage that is at least ‘as good’ as standard Medicare Prescription Drug Coverage). The penalty is 1% for each month you could have been enrolled but were not (assuming you didn’t have the creditable coverage).
- Each PDP plan is required to provide to its members the Annual Notice of Change every year. Changes may include changes in drug tier structure as well as cost sharing.
There are four stages in PDP. Coverage vary significantly from various carriers For example, there are several plans that do not have an up-front deductible. For an in-depth analysis from plan to plan, call (215) 658-1776.
1. Yearly Deductible
You pay the first $400 (year 2017) of drug costs before plan starts to pay.
2. Initial Coverage (ICL)
For each covered drug you pay a copayment/coinsurance (defined by the plan), and the plan pays its share. CMS’ standard coinsurance is 25%, i.e. you are paying 25% of the drug costs, the insurance company pays the rest. The initial coverage continues until the total drug costs (total of what you’ve paid and what insurance company paid) reaches $3,310 (year 2016).
3. Coverage Gap (donut hole)
Once the total costs of prescriptions (paid by you and your plan) has reached $3,700 (year 2017):
Brand Name Drugs
You’ll pay 40% of the plan’s cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. The discount will come off of the price that your plans has set with the pharmacy for that specific drug. Although you’ll only pay 40% of the price for the brand-name drug in 2017, 95% of the price—what you pay plus the 50% manufacturer discount payment—will count as out-of-pocket costswhich will help you get out of the coverage gap. What the drug plan pays toward the drug cost (5% of the price) and what the drug plan pays toward the dispensing fee (55% of the fee) aren’t counted toward your out-of-pocket spending.
In 2017, Medicare will pay 49% of the price for generic drugs during the coverage gap. You’ll pay the remaining 51% of the price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap
4. Catastrophic Coverage
Once you’ve spent $4,950 out-of-pocket in 2017, you’re out of the coverage gap. Once you get out of the coverage gap (Medicare prescription drug coverage), you automatically get “catastrophic coverage.” It assures you only pay a small coinsurance amount or copayment for covered drugs for the rest of the year.