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Understanding Your Plan and Part D Eligibility

Medicare Part D covers prescription drugs. It’s a standalone plan you can add to Original Medicare (Part A and Part B), or you can enroll into a Medicare Advantage plan Part C, which would include Medicare Parts A, B and D.

Anyone enrolled in Original Medicare (Part A and Part B) is eligible for Part D prescription drug coverage.

Part D plans offer a wide range of coverage to fit your prescription needs.

What’s 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.

What’s Covered?

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 formularies 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.

What Costs Should I Consider?

Medicare Part D plans have an annual deductible, premiums and copays. 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. 

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.

Who’s Eligible for Part D Insurance?

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

How Do I Enroll in Part D?

The Open Enrollment Period 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).

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. 

Part D Late Enrollment Penalty

Beneficiaries may have to pay a premium penalty to join a Part D plan if:

  • They do not have creditable drug coverage and do not enroll when first eligible for Part D.
  • There have been at least 63 continuous days following a beneficiary’s initial enrollment period for Part D during which the beneficiary did not have either Part D or creditable drug coverage.
  • The penalty will be 1 % of the national average beneficiary premium for each month the beneficiary did not have Part D or creditable coverage.
  • In general, the penalty is in effect for as long as the beneficiary has Medicare prescription drug coverage.
  • Beneficiaries who qualify for the low-income subsidy are not subject to the late enrollment penalty.

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. 

Have questions?

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