Everything You Should Know About Medicare Part D

Medicare Part D is a federal medication insurance program administered through private insurance companies. More simply put, it’s insurance for your Rx needs. You can enroll in a standalone Part D plan to supplement your Part A and Part B benefits, or you can choose a Medicare Advantage (Part C) plan with Parts A, B and D included. You can purchase a Part D plan from a private insurance company. You get access to the company’s pharmacy network and pay a copay for prescriptions.

1. Once you have your Medicare (Part A and Part B) plan, you can select your Part D coverage from a private carrier.
2. After enrolling in Part D, you have access to your carrier’s network of pharmacies.
3. You can switch from Original Medicare to Medicare Advantage and keep Part D coverage.

Medicare Part D covers your prescription drugs. Each private plan offered through Part D must provide a standard level of coverage set by Medicare. The requirements mean most plans have sizable formulariesA formulary is a list of prescription drugs covered by a specific prescription drug plan. with the capability to prescribe medications for many illnesses. Private insurance carriers have control over the drugs they cover and the “tiers,” which affect the cost. Take a look at our Medicare Part D coverage guide for more information.

Medicare Part D plans have an annual deductibleA deductible is an amount you pay out of pocket before your insurance company covers its portion of your medical bills. For example: If your deductible is $1,000, your insurance company will not cover any costs until you pay the first $1,000 yourself., premiumsA premium is a fee you pay to your insurance company for health plan coverage. This is usually a monthly cost. and copaysA copayment is the fixed amount you pay directly to your provider for medical services or prescription drugs covered in your plan. For example: If your plan includes a copayment of $20 for office visits, you'll pay $20 to your doctor whenever you have an appointment.. Your plan may require you to pay all, some, or none of the deductible. After you reach the deductible, you will begin to pay a copay for your medication. Each plan offered through Part D has numbered drug “tiers.”

Tier one is the least expensive, each tier progressively costs more along with the complexity of the drug and the illness it treats. Once you spend a specific dollar amount from copays (determined annually by Medicare), you move into the coverage gap.The Medicare Part D coverage gap, also known as the donut hole, is the payment stage between the initial coverage limit and catastrophic coverage. The portion you pay for prescriptions is usually higher in this phase until you enter the catastrophic level. Learn more about Medicare Part D costs.

What is the Donut Hole?

The coverage gap is the “donut hole.” The donut hole is not an official term. Before 2006, Medicare beneficiaries were responsible for 100% of their drug costs after reaching their initial coverage limit. Beneficiaries paid out-of-pocket until they reached catastrophic coverage. The gap in financial assistance was like a “donut hole”.

Currently, you pay 25% of the retail cost of your medications. The coverage gap applies until your out-of-pocket costs reach a specific dollar amount (determined by Medicare). 

If you reach the max out-of-pocket costs for the coverage gap, your coverage is considered catastrophic. When you reach catastrophic coverage, your Part D plan will cover 95% of your drug costs for the remainder of the year.

• Tier 1 has the lowest copay for generic drugs. To receive approval from the Food and Drug Administration, generic drug makers must prove that their product performs the same way as the corresponding brand name drug. Generic drugs use the same active ingredients as brand name drugs to achieve desired results.
• Tier 2 has a medium copay for preferred brand name drugs. Preferred brand name drugs are medications manufactured by one manufacturer that are typically lower-cost among all brand name drugs. This is partly because these medications have been in the market for some time and are widely accepted).
• Tier 3 has a higher copay for preferred brand and non-preferred brand name drugs. Non-preferred brand name drugs, on the other hand, tend to cost more because they are new to the market. You may have heard the term “designer drugs.” These high-cost drugs fall into the same category.
• Tier 4 has a higher copay for non-preferred brand drugs and non-preferred generic drugs.
• Tier 5, or the Specialty Tier, has the highest copay. It contains very high cost brand and generic drugs, which may require special handling and/or close monitoring.

Do you have more questions about the “donut hole?” Here’s everything you should know about Medicare Part D Donut Hole coverage.

You are eligible for a Medicare Part D plan if:

• You are 65 years of age or older.
• You have a qualifying disability for which you have been receiving Social Security Disability Insurance (SSDI) for more than 24 months.
• You have been diagnosed with End-Stage Renal Disease (permanent kidney failure requiring a kidney transplant or dialysis).
• You are entitled to Medicare Part A or Part B.

You should consider Part D if you enroll in Original Medicare and you:

• Have a regular prescription drug need.
• Will have a prescription drug need in the future.
• Have trouble paying for your current prescription drug needs.
• Do not have prescription drug coverage.
• Want to avoid a penalty. ^[i]

The Open Enrollment PeriodThe Medicare Open Enrollment Period (OEP), also known as the Annual Enrollment Period, runs from October 15 to December 7 each year and allows you to make multiple Medicare-related changes. In addition, Affordable Care Act Open Enrollment allows changes to non-Medicare coverage from November 1 to December 15. for Medicare and Part D is October 15 to December 7. If you don’t purchase a plan then, you may qualify for a Special Enrollment Period (SEP).A Special Enrollment Period is an opportunity outside of a standard enrollment period in which your specific circumstances allow you an opportunity to make changes to your Medicare-related coverage.

New to Medicare and Part D?

If you’re preparing to enroll for the first time, the initial Medicare enrollment period is open for seven months. We think it’s easiest to explain initial enrollment when you slice it three ways: 

• You can enroll in the three months before your 65th birthday month. Coverage begins the first day of your birthday month.
• You can enroll the month of your birthday. Coverage begins the first day of the month after your birthday.
• You can enroll in the three months after your birthday month. Coverage begins the first day of the month after enrollment.

For example: Let’s say you turn 65 on July 10. Your Initial Enrollment Period begins April 1 and ends October 31. 

What if the drug I need isn’t covered?

Each Part D plan has a formulary. Simply, it’s a list of the drugs covered. If the drug you need is not on a formulary, you can request an exception. You can contact the carrier to ask if your drug has a different name you don’t recognize. Part D offers at least two types of drugs in most categories, and is required by Medicare to cover all drugs in the six most essential categories. 

Learn more about how to navigate Medicare Part D enrollment.