Medicare Part D is insurance that helps cover the cost of prescription drugs. It is federally mandated, however the plans are administered through private insurance companies. These plans cover prescription drugs based on your drug plan’s drug formulary. Coverage amounts will vary from plan to plan.
Part D plans are stand-alone plans. You can pair them with Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans.
Do I need Medicare Part D?
If you do not have prescription drug coverage from a creditable plan, you will need to enroll in Part D. You may face a Part D late enrollment penalty if you do not enroll in Part D during your initial enrollment period. ALWAYS check with your plan administrator to ensure your plan is considered creditable coverage.
What is considered creditable prescription drug coverage?
Creditable Prescription Drug coverage includes but is not limited to:
- Medicare Advantage (Part C) plans with prescription drug coverage. These plans follow the same rules as Medicare Part D plans. They are also known as MAPD plans.
- Some employer and union plans through you or your spouse’s employer
- Some Coverage through the Department of Veteran’s Affairs
How much does Medicare Part D cost?
Part D Premium costs
You will pay a monthly premium to the insurance company that handles your Part D plan. Your plan will usually include deductibles, copays and coinsurances for your prescription medications.
Although Part D plans are administered by private insurance companies, you may choose to have your monthly premium deducted from your social security benefits. Your first deduction may take up to 3 months to kick in. In this case Social Security will deduct your first 3 months premium at one time. After this, your premium will be on a monthly cycle.
Part D IRMAA
You may have to pay a Part D IRMAA or income-related monthly adjustment amount. This will depend on your income bracket. This amount is usually based on your income reported on your taxes from 2 years prior to your enrollment. If you are subject to paying a part D IRMAA, then social security will notify you. For more information on whether or not you are subject to a part D IRMAA, consult the chart provided by Medicare.gov.
Part D Coverage Phases
There are 4 coverage phases of Medicare Part D plans. These coverage phases include:
1. Deductible Phase
During the deductible coverage phase, you will pay the full retail cost of your prescription drugs until the plan deductible is met.
2. Initial Coverage Phase
Once your plan deductible is met, you will enter the initial coverage phase of your Part D plan. During this phase, you will pay your plan’s regular co-pays until your TROOP (true out of pocket cost) reaches $4,430 (in 2022). The TROOP is based on what both you and your drug plan spend in combined costs.
3. Coverage Gap
After your TROOP reaches $4,430, you will be in the Part D Coverage Gap phase. This also known as the donut hole. It is a temporary limit on what the drug plan will cover. If you and your plan do not spend a combined total of $4,430 in 2022, then you will not enter the coverage gap.
Note: If you receive Extra Help in 2020, you will be exempt from the coverage gap.
What happens when you enter into the coverage gap? You will pay no more than 25% of the cost of your plan’s covered brand-name prescription medications. However, some plans may charge less than this amount. This rule applies to both mail order and in-house pharmacy pickups.
The coverage gap combines The 25% or less that you pay with the manufacturer’s spend. This counts towards the total out-of-pocket spending needed to get you out of the coverage gap.
4. Catastrophic Coverage
Once your total out-of pocket spend totals $7,050 in 2022, you come out of the coverage gap. From this point, you qualify for catastrophic coverage. During this phase, you pay a small coinsurance or copay for covered drugs for the remainder of the year.
Part D drug formularies
You should always check to see if the plan or plans you are considering covers your prescribed medications. To do this, you should look at the plan’s drug formulary. Keep in mind that plan formularies can change every year. It is important to check your formulary each year during the Annual Enrollment Period (AEP).
How do I enroll in Medicare Part D?
As mentioned above, private insurance companies administer Part D plans. Therefore, you will enroll in Part D coverage through a private insurance company. You cannot enroll through Social Security directly.
When can I enroll in Medicare Part D?
Enrollment during IEP
Just like Original Medicare and Medicare Part C, eligibility to enroll in Medicare Part D happens during your initial enrollment period (IEP). This is a 7-month period . It is the three months before the month of your 65th birthday, the month of your 65th birthday, and three months after the month of your 65th birthday.
Enrollment during AEP
Each year, Medicare has an Annual Enrollment Period (AEP) from October 15 through December 7th. You may elect a different Part D plan during AEP or may switch to a Medicare Advantage plan. Your new plan will have an effective date of January 1st of the following year.
Example: Dan is 67 years old. He decides to cancel his Part D plan with ABC company and enrolls in a new Part D plan with XYZ company on October 21, 2020. His plan with ABC company will remain active until December 31, 2020. His new Part D plan with XYZ company will be effective January 1, 2021.
Enrollment during SEP
You may still be able to change plans outside of AEP if you qualify for a Special Enrollment Period (SEP) due to special circumstances such as moving outside of your plan’s service area or losing your coverage.
Thriving Seniors is here to help you with your enrollment process. Our services are 100% free of charge! Call us today at 1-808-650-5939 to speak with a licensed, independent insurance agent. You can also contact us via email by filling out our form on our contact us page.
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