Medicare Part D is a Prescription Drug benefit program that is offered as part of the wider Medicare federal health insurance program. It is for persons 65 years and older, certain younger people with disabilities, and people with end-stage renal disease (ESRD).
Part D is an optional benefit that is administered by private insurance companies and available to anyone who is enrolled in Medicare program.
Beneficiaries can enroll in a standalone Part D drug plan that goes alongside their Original Medicare benefits. The other option they can choose is a Part D drug plan that is built-in into some Part C Medicare Advantage plans.
HOW MEDICARE PART D WORKS
Medicare Part D is insurance for your medication needs. You pay a monthly premium to an insurance carrier for your Part D plan. In exchange, you use the insurance carrier’s network of pharmacies to purchase your prescription medications.
Instead of paying full price, you will pay a copayment or percentage of the drug’s cost and the insurance company will pay the rest.
Medicare sets a standard level of coverage for prescription drug plans, which vary in the prescription drugs they cover and in costs. Part D plans have their own list of which drugs are covered, which is called a formulary.
The plans include brand-name and generic prescription drugs and cover at least two drugs for each of the most commonly prescribed categories and classes.
If your specific prescription drug is not on your plan’s formulary, a similar drug should be available. You and your prescriber can request an exception if none of the drugs on the formulary will work for your condition.
Plans place their covered drugs into tiers on their formularies. Tiers are divided by cost and differ for each plan. Commonly, the lowest tier is for generic prescription drugs and requires the lowest copayment.
Preferred brand-name drugs follow in the next tier with a higher copayment. Non-preferred brand-name drugs are in a higher tier with a higher copayment. Really special high-cost prescription drugs are in the highest tier and require the highest copayment.
PART D COVERAGE
Medicare Part D always covers:
- HIV/AIDS treatment
- Antipsychotic medications
- Anticonvulsive treatments for seizure disorders
- Anticancer drugs (unless they are being covered under Part B)
Besides mentioned, Part D covers most vaccines unless they are already covered under Medicare Part B.
4 STAGES OF PART D COVERAGE
If you decide not to sign up for prescription drug coverage when you are first eligible, you will most likely be exposed to a late enrollment penalty fee.
This gets added to your monthly premiums and generally lasts for as long as you have Medicare prescription drug coverage. There are 4 stages of the Part D plan: Annual Deductible, Initial Coverage, The Coverage Gap and Catastrophic Coverage.
Annual Deductible means that there is an initial deductible set that beneficiaries must pay before their plan kicks in with coverage. For 2022, the Part D deductible is $505. Initial Coverage begins when the annual deductible is reached.
During this stage, Part D will provide cost-sharing coverage based on your drug formulary. Cost-sharing is where the plan shares with you the retail cost of the prescription drug covered with the coinsurance or copayment.
The initial coverage usually extends to the part where your medication’s total retail cost reaches $4,660 in 2023. After reaching that limit, beneficiaries enter The Coverage Gap (Donut Hole).
During this stage of the coverage, you will only pay 25% of all your formulary drugs. The gap in spending will remain until you have reached $7,400.
Finally, you enter Catastrophic Coverage when you spend more than $7400 for medication. In this stage, Medicare Part D will step in to pay 95% of the costs of the medications. When you reach this stage, you will remain in the coverage area for the remainder of the calendar year.
MEDICARE PART D ELIGIBILITY
To enroll in the Part D plan, you must have Original Medicare and live in the plan service area you want to join. If you have a bundled Medicare Advantage plan that already has prescription drug coverage, you can’t sign up for a standalone Medicare Part D plan.
No matter how you obtain coverage or qualify for Medicare Part D, you will get the same level of coverage.
MEDICARE PART D ENROLLMENT
It is best to enroll in Part D during the Initial Enrollment Period, which begins three months before your 65th birthday and ends three months after. This period is when you will also enroll in Original Medicare.
If you delay your enrollment in Part D and do not have drug coverage, you will have a permanent late enrollment penalty to pay when you do enroll.
You can enroll in the service area or through an insurance carrier. You also have the option to enroll on Medicare’s website.
SPECIAL RULES OF PART D COVERAGE
Medicare allows drug plan carriers to apply certain rules for safety reasons and also for cost containment. The most common utilization rules that you may run into are:
- Quantity Limits – a restriction on how much medication you can purchase at one time or upon each refill. If your doctor prescribes more than the quantity limit, the insurance company will need him to file an exception form to explain why more is needed.
- Prior Authorization – a requirement that you or your doctor must obtain plan approval before allowing a pharmacy to dispense your medication. The insurance company may ask for proof that the prescription is medically necessary before they allow it.
- Step Therapy – the plan requires you to try less expensive alternative medications that treat the same condition before they will consider covering the prescribed medication. If the alternative medication works, both you and the insurance company save money. If it doesn’t, your doctor will need to help you file a drug exception with your carrier to request coverage for the original medication prescribed.