We’ve been writing quite a bit lately about Medicare, going over each of the different aspects of this government healthcare program.
Today we’re going to focus on Medicare Part D, which deals with prescription drug coverage.
What is Medicare Part D?
Although Medicare Part D is a federal program, it’s run through private insurers who offer retail prescription coverage to people who receive Medicare.
Before 2006, when Medicare Part D was introduced, many Medicare recipients had to fend for themselves when it came to the cost of prescription drugs, often paying for medications out of pocket at the cost of thousands of dollars each year.
Medicare Part D offers better coverage, allowing beneficiaries to enroll in a stand-alone Part D plan or choose a drug plan that’s tied to a Part C Medicare Advantage plan.
Under Medicare Part D, recipients pay an insurance carrier a monthly premium in exchange for access to the insurer’s network of pharmacies to purchase prescription drugs. Rather than paying full price, users pay a copay or percentage of the cost of the drug, with the insurer picking up the rest.
How does Medicare Part D work?
Part D drug plans have four stages:
1. The annual deductible
As of 2019, the Medicare Part D deductible is $415. Plans can charge the full deductible, part of the deductible or simply waive the deductible.
Recipients pay the network discounted price for medications until their plan concludes they’ve met the deductible. Once they’ve reached that point, initial coverage begins.
2. Initial coverage
During this stage, recipients pay a copay for medication based on the drug formulary. Each plan divides medications into tiers with their own copays.
For example, you might pay $7 for a Tier 1 generic medication, or $40 for a brand name drug on Tier 3. Your insurance company will track how much you and they have spent a combined $3,820. (That’s for 2019. This figure is subject to change.)
3. The coverage gap
Once you’ve hit your initial coverage limit for the year, you enter what’s known as the coverage gap. In this stage, you’ll likely still get a substantial discount for generic medications – 37 percent – and a 25 percent discount on brand name drugs.
This might be higher than what you’d pay in initial coverage, but still better than before 2006, when many people in the coverage gap were forced to pay the full cost.
Gap spending will continue until you’ve spent – according to 2019 rules — $5,100 on out-of-pocket drug costs. To get into the gap, Medicare keeps track of how much you and the insurance company have spent. When you’re getting out of the gap, Medicare counts only what you’ve paid, not what the federal government has contributed.
4. Catastrophic coverage
Once you’ve come to the end of the coverage gap, your Medicare plan will pay 95 percent of the cost of your medications for the remainder of the year. This allows you to limit potential spending if you’ve been prescribed expensive medication.
Frequently asked questions about Medicare Part D
Some common questions about Medicare Part D include:
- Do I have to pay for Medicare Part D? Everyone pays a monthly premium except for people who qualify for low-income subsidies.
- How much will it cost? Like we said earlier, monthly premiums are set by insurers and vary greatly. But most states offer plans that start at around $15 per month.
- Am I eligible for Medicare Part D? Anyone who’s enrolled in Medicare Part A or Part B is also eligible for Part D. They must also live within the plan’s service area.
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