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What is Medicare Part D?

If there’s one part of Medicare that is not too difficult to remember, it’s this one—D for Drugs. Yes, that’s exactly what Medicare Part D covers: the Medicare Prescription Drug Plan, or PDP.

Part D Prescription D plans are a supplement to the basic Medicare services comprised on Parts A and B. Part A deals with hospitalization and B caters to medical insurance needs.

While PDPs are under very strict governmental rules, they are administered by compliant private companies.

Thanks to the Medicare Prescription Drug Improvement Act of 2003, PDPs were rolled out as a means of offering prescription coverage for those enrolled in Medicare. In exchange, beneficiaries are expected to pay a monthly premium, an annual deductible and take on some drug cost-sharing.

For seniors, being able to make prescription medication expenses more budgetable can be a huge blessing. Rather than wait in fear of getting smacked with a bill for medication that you have no choice but to take, PDPs offer beneficiaries the opportunity to diminish large one-off expenses, as well as ease the financial burden of chronic medication. Simply put—a drug plan can be a forward-thinking way to make your medication costs more manageable.

And now for the next question that is undoubtedly on everyone’s lips—how much do you have to pay for Part D Plans?

What do Medicare Part D Plans Cost?

While PDPs are a vital facet of comprehensive health insurance, they can be rather difficult to comprehend. Even people who have been on Part D plans for a while have some trouble understanding the ins and outs of how they work.

As with other supplemental insurance plans, the costs vary according to which company you decide to go with. However, the government has provided very strict guidelines for Part Ds regarding the relationship between beneficiaries and insurance companies, meaning that you should never be saddled with above market rates for your PDP.

To understand the costs related to Part D plans, it’s necessary to understand their basic structure, which is composed of four phases.

Here is a closer look.

Phase 1 — Deductible Period

When you sign up for a PDP, you will encounter a period where you have not yet paid the deductible amount. In 2018, the maximum allowable deductible is $405.

While you are in this period, you will be required to pay the full retail value of your prescriptions. Once you meet this requirement, the next coverage period will kick in. Certain plans have no deductible, so if yours falls within that category, you can move straight on to the next phase.

Phase 2 — Initial Coverage Period

In the initial coverage period, your prescription coverage will increase. You will now enter a phase of copayment and coinsurance. At this phase, you will be required to pay 25% of the prescription drug costs. If your drug costs are not high, you may never leave this phase. If, however, your drug costs reach the stipulated ceiling, your copayment options will change. As things stand in 2018, that ceiling is $3,750 in total drug costs.

Phase 3 — The Coverage Gap

Ever heard of the Part D Donut Hole? We wish we could tell you that it had something to do with a sugary snack for all beneficiaries, but this is unfortunately not the case. Rather it’s an (unaffectionate?) term for the coverage gap that exists in PDP plans that you might encounter once you reach the cap for the initial period.

Luckily, the federal government is aware of this donut hole and hopes to bring an end to it by 2019. In the meantime, the government has made provisions for drug discounts accordingly, as a sort of Polyfilla for your health insurance coverage. In 2018, this discount amounts to 65% for brand name drugs and 56% for generic drugs.

Phase 4 — Catastrophic Coverage

No matter what PDP you have, when you reach a certain amount of out-of-pocket drug costs, you begin paying significantly lower copays and coinsurance for the remainder of the year. This amount can be reached through an accumulation of the payments of your deductible, the amounts that you paid for medication during both the initial and coverage gap periods, and the amounts paid on your behalf by either family members, organizations or State Assistance Programs.

In 2018, the amount that needs to be reached to be eligible for catastrophic coverage is $5,000.

Medicare Part D Enrollment — Fast Facts

Here are 5 fast facts you need to know about enrolling in Part D insurance:

You can only enroll at certain times of the year.
The Annual Enrollment Period (AEP) runs from October 15th to December 7th.
You can also enroll 3 months before the first day of the month in which you turn 65.
If you don’t enroll in Medicare Part D, another option is to sign up for Part D coverage through Medicare Advantage. Compare Part D plans to see which one will work best for you.
If you are already enrolled in a Medicare Advantage Plan that has a prescription drug plan and you sign up for Medicare Part D, you will automatically forego your Advantage Plan and be returned to Medicare Original. Make sure you know the details of your plan so that you do not get caught unawares.

important to note that you will be subject to penalties.

This is how it works.

Medicare Part D Penalty

A late enrollment penalty is charged at around 1% of the average premium for each full month that you go without coverage. (This average is calculated by finding the medium of the national base beneficiary premium.)

This amount will be rounded off to the nearest $0.10 and form part of your monthly premium when you do decide to enroll.

Here is a simple Medicare Part D Penalty Calculator so that you can work out any late enrollment penalties you may be owing.

1% of Average Premium

x Number of Months your enrollment was late

= The amount of your penalty

Another cost that you might need to account for when enrolling in a Part D plan is IRMAA. If you haven’t heard of this yet, don’t worry. We will take you through it.

IRMAA

IRMAA stands for Income-Related Monthly Adjustment Amount. It is applicable to both Part D and Part B plans.

IRMAA is aimed at people who earn higher incomes, and is based on the information you submit to the IRS with your annual tax return. It is calculated two years in arrears. For example, for 2018 coverage, they will use the data submitted in 2016.

You will not be subject to IRMAA for the 2018 year if you earned less than $85,000 or if your household income was less than $170,000.

If you are unsure about your late enrollment penalties or have questions about IRMAA, we would be more than happy to figure out the answers.

In fact, we offer a free Drug Plan quote that will take all of these permutations into account.

Why not get in touch sooner rather than later? The more informed you are, the better chance you have of making the right decision for your financial future.

Our Mission is to Become America’s Most Respected Medicare Insurance Brokerage …