Medicare Regarding Your Prescription Drugs
Medicare Part D plans are designed to help pay some of the cost of your prescription drugs. These plans are optional. However, if you do not sign up when you become eligible there may be a penalty attached to the premium of any prescription drug plan that you do enroll in at a later date. Part D plans are offered by private insurance companies and vary by premium, deductible and copayments.
How do Medicare Part D plans work?
Part D plans are one of the more complex elements of Medicare. Plans may be a stand-alone prescription plan combined with a Medicare supplement, or coverage built into a Medicare Advantage plan, but all have the same general structure.
Each plan has a list of prescriptions covered by the plan. This list is called the formulary. Within the formulary, each prescription is placed in a tier. Preferred generic drugs, which are usually the least expensive, are typically tier 1. The more expensive the prescription the higher the tier and the higher the copayment or coinsurance.
There are three phases of Medicare Part D: the initial coverage period, the coverage gap (donut hole), and the catastrophic coverage phase. The timing of your transition from one phase to another is based on the retail cost of the prescription drugs that you need.
What is the Initial Coverage Phase?
Some plans have an annual drug deductible that must be met before the plan begins to pay. During the initial coverage phase the Medicare model says that you will pay approximately 25% of the retail cost of your prescriptions and the plan will pay approximately 75%. When the total retail cost of your prescription drugs reaches that year’s threshold, you will transition into the coverage gap/donut hole.
What is the Coverage Gap/Donut Hole?
Most Medicare drug plans have a coverage gap/donut hole, though not everyone will necessarily enter into the coverage gap. The coverage gap begins after you and your drug plan combined have spent a certain amount for your prescriptions. Once you enter the coverage gap, you pay a percentage of the plan’s cost of covered brand-name drugs and covered generic drugs until you reach the end of the coverage gap.
The following count toward getting through the coverage gap:
• Your annual deductible
• Your coinsurance or copayments during the Initial Coverage Phase
• The discount you get on covered brand-name drugs in the coverage gap
• The cost of your prescriptions while in the coverage gap
What is Catastrophic Coverage?
If you reach the Catastrophic Coverage phase of Medicare Part D, you will pay the greater of either $3.60 for generic drugs and $8.95 for brand-name drugs or 5% of the cost. You will remain in this phase for the rest of the year. Everything resets on January 1st, when Medicare Part D phases begin anew.
What pharmacies can I use with Medicare Part D?
Private insurance companies use a network of pharmacies, but most will have a preferred pharmacy with which they are partnered where copayments are usually lower.
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