Medicare Part D

What is Medicare Part D?

Medicare Part D offers many choices when choosing prescription drug coverage. Medicare beneficiaries can choose a new Medicare Part D prescription drug plan each year. This takes place during an annual enrollment period from October 15 to December 7.

It’s a good idea to shop around for a new plan even if you’re happy with your current coverage because premiums, covered medications, and out-of-pocket costs for many plans can change each year. While you’re always automatically renewed in the same plan from one year to the next, simply comparing new plans can often save you money and Medicare out-of-pocket costs.

To get Medicare drug coverage, you must join a plan offered by an insurance company or other private company approved by Medicare. Each plan varies in cost and drugs covered.

Experimental drugs generally are not covered.

Late-enrollment Penalty for Medicare Part D

Many Medicare recipients are unaware they must enroll in a Medicare Part D plan once they become eligible for Medicare, even if they currently do not take medication or need prescriptions.

If you don’t enroll in a drug plan when you’re first eligible or if you go without prescription drug coverage for a period of 63 or more days in a row after you qualify, you may have to pay a late-enrollment penalty.

If you miss your Medicare Part D enrollment window, the penalty will depend on how long you went without having a Part D plan or “creditable” drug coverage in place.

The penalty is calculated by multiplying 1% of the “national base beneficiary premium” $32.74 (in 2023), times the number of full months you did not have Part D coverage. The monthly premium will be rounded to the nearest $.10 and then added to your monthly Part D premiums.

Note: This IS NOT a one-time penalty, the penalty is annual and may increase each year. Also, you may have to pay this penalty for as long as you have a drug plan. Remember to ask a agent which drug plan is right for you.

Your Costs and Medicare Part D Limits; the Donut Hole

There are coverage limits on what each plan will cover for drugs. This limit is known as the donut hole. The donut hole is reached when the combined cost of what you’ve paid for your prescriptions, plus the difference of what the insurance company pays, reaches $4,660 (in 2023).

Each drug plan sets the price for specific drugs with the pharmacy whether you buy through the mail or at a pharmacy. It is a good idea to research different Medicare Part D plans to determine what their discounted prices will be. This will help you know when you can expect to reach the coverage gap (donut hole).

Once you reach the coverage gap (donut hole) expect to pay 25% for the price of generic drugs and 25% for name-brand drugs. Who pays the rest? For generic drugs, Medicare pays 75% of the cost during the coverage gap. For brand name drugs, the drug manufacturer will pay 70% during the coverage gap and your drug plan pays 5%. Together they cover a combined total of the remaining 75% on your behalf.

Additionally, expect to pay 25% of pharmacy fees, also known as dispensing fees, when you fill your generic drug prescriptions. These dispensing fees are not included in your discount for name-brand drugs but are included when calculating the discount for generic drugs.

What Is Covered and What Is Not Covered?

What is counted towards the coverage gap?

  • Annual deductibles, copayments, coinsurance
  • Discounts on brand-name drugs in the coverage gap
  • Anything you’ve paid in the coverage gap

What is not counted towards the coverage gap?

  • Your drug plan premiums
  • Pharmacy dispensing fees
  • What you pay for non-covered drugs

Every month that you fill a prescription, your drug plan mails you an explanation of benefits (EOB) telling how much you’ve spent on Medicare Part D covered prescription drugs.

How Do I Get out of the Donut Hole?

Once you’ve paid $7,400 out-of-pocket (in 2023), you’re now out of the coverage gap or donut hole. Once this happens, you will automatically get what is known as catastrophic coverage. This means you will only pay a small copayment and coinsurance for your covered drugs for the rest of the year. However, there are costs that do not apply toward reaching catastrophic coverage.

Items not counted towards catastrophic coverage include:

  • Your monthly drug plan premiums
  • Covered drugs out of your network
  • The 75% generic drug discount
  • The cost of non-covered drugs

Once you’ve reached catastrophic coverage, you will only pay $4.15 for generic drugs with a retail price under $83 and 5% for those with a retail price above $83. For name-brand drugs you will pay $10.35 for drugs with a retail price under $207 and 5% for those with a retail price above $207.

Avoiding the Part D Drug Coverage Gap—the Donut Hole

Some people automatically qualify for Extra Help if they meet certain income and resource limits. Call your agent at (480) 382-1823 to be certain you are paying the correct amount. You may also request a call to speak with a licensed professional.

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Category: Medicare Part D (Prescription Drugs)
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