Medicare Part D manages a retiree’s medications through Part D prescription plans, often called PDPs. There are tons of options for any given zip code or county, and not all of them cover every medication or come at the same price – so it’s important to shop and compare your options, as one little mistake could cost you hundreds or thousands of dollars a year overpaying for your medications.
Plans are insured or covered by a Medicare Advantage (HMO, PPO and PFFS) organization with a Medicare contract and/or a Medicare-approved Part D sponsor. Enrollment in the plan depends on the plan’s contract renewal with Medicare.
Who is eligible for Part D?
Most retirees automatically become eligible to enroll in Medicare Part D when they turn 65 and enroll in either Medicare Part A or Part B. Failure to maintain creditable drug coverage for at least 63 days after turning 65 will incur a 1% monthly average premium penalty fee for every month you don’t maintain creditable drug coverage either through a group health insurance plan, a retirement health plan that has creditable coverage, or a Part D Plan (PDP).
What is covered under Part D?
The price you pay for your meds is determined by your Part D plan’s tiered formulary system. All medications are assigned to a certain tier in a drug plan, ranging from generic to more expensive brand-name sometimes including other specialty drugs on a separate even more expensive tier. Not every drug plan will cover every drug, but by law, every plan must cover two options from each class of medication (so, two blood pressure medications and two thyroid medications, for example).
However, this tiered pricing only applies until you and your plan pay a certain combined amount ($8,000 in 2019). Once you hit that amount, you traditionally enter what was once called the donut hole – which is not as sweet as it sounds – but is now known as the Coverage Gap. While you’re in the Coverage Gap, you have to pay out-of-pocket for all your drugs until you hit what’s called the “catastrophic limit” – which is just as bad as it sounds ($8,00 for 2024). Once you hit this catastrophic phase, you pay a reduced copay for generics and a 25% percentage for your brand drugs – after that your drugs are are zero cost for the rest of the year.
Aside from that, your Part D Plan may also have other restrictions in place. Some plans may require Prior Authorization from your doctor to request coverage for a certain prescription when you’re new to a plan – even if you may have been taking it for a while. Other plans may have Step Therapy, requiring you to try less expensive or generic drugs before covering a more expensive medication. Some plans even place limits on the amounts of certain drugs that can be prescribed at once. These Quantity Restriction Limits can be meddlesome for retirees who like to get three months’ worth of medications through mail-order or online pharmacies.
How much does Part D cost?
There are three main costs you may have to pay for a Part D Prescription Drug Plan: your monthly plan premium, your drug deductible, and copays or coinsurance for your medications.
Because not all plans cover all drugs, or at the same price, it’s important to shop and compare plans to make sure your plan accepts all your medications – without also making you overpay for them. Formulary tiers often have several levels, so more common and less expensive generic drugs are covered in the bottom or first tier, and more expensive brand-name drugs for more serious conditions will be toward the top of the formulary – which reflects the pricing differences.
You may also have to pay a drug deductible in addition to a tiered copay system. Usually the cheaper the monthly premium drug plans, the higher chances of having a deductible for the drug plan. If the monthly premium is on the higher side, you’ll likely have little or no drug deductible.
When thinking about deductibles and copays, consider whether you may get cheaper prices by picking up your prescriptions at preferred pharmacy networks or getting them through mail order. These are all things to be aware of when shopping and comparing drug plans.
One last thing, if you’re in higher income tax brackets, you may have to pay an additional premium, called income-related monthly adjustment amount, or IRMAA, on top of your regular monthly premium. This additional amount is assessed and billed separately by the Social Security Administration (not Medicare), and it can range from an extra $12.90 to $81 per month.
When can I enroll in Part D?
Retirees can enroll in Medicare Part D during one of three periods. The most common is the Initial Enrollment Period (IEP) when you turn 65. This period starts three months before your birthday and ends three months after your birth month (for a total of 7 months).
The next most common is Annual Enrollment Period (AEP), which runs from October 15 to December 7 every year. During this period, anyone on Medicare can enroll in or change to any drug plan. Remember: you only need to be enrolled in Medicare Part A OR Part B to be enroll in a Part D Plan – whereas Medicare Supplements and Medicare Advantage plans require retirees to be enrolled in BOTH Part A AND Part B. So, for example, if you’re still covered by a group health insurance plan at age 67, you already have Part A but not Part B – so you could still pick up a drug plan if you wanted, even though you wouldn’t be able to get a Medicare Advantage or Medicare Supplement until you’re enrolled in Part B.
Then there are a couple of Special Enrollment Periods (SEP) that allow retirees to enroll in a drug plan; which is when retirees are coming off group health insurance or Medicaid.
How do I enroll in Part D?
The top two ways to enroll in a Part D Plan is either using the Plan Finder on the Medicare.gov website or going through your insurance agent or broker. If you use the Plan Finder, be sure to save the zip code, date and security code so you can easily recall your drug list from the previous year instead of starting all over again.
Once you locate your plan, you can either apply over the phone or via an electronic application – either way will take less than a half an hour. Once you’re enrolled, you’ll receive your ID cards and any plan paperwork, like your formulary tiers for medication coverage in the mail within 2 weeks.
