Whether you are enrolled in traditional Medicare or a Medicare Advantage plan, you can get prescription drug coverage through a Medicare Part D drug plan. It doesn’t cover your full costs, but it provides important partial coverage. About 75 percent of people with Medicare–46 million–are enrolled in Part D.
Part D drug companies are commercial insurance companies that contract with the federal government to provide drug coverage to people with Medicare. In Medicare Advantage plans, Part D coverage tends to be administered by the insurer offering the Medicare Advantage plan.
Here’s how Medicare Part D coverage works in 2020 and what to consider before choosing a Part D drug plan, along with how to enroll and premiums. If you are choosing among Medicare Advantage plans, you should factor in your prescription drug costs with different Medicare Advantage plans, as well as your costs for medical and hospital coverage.
- Many Part D drug plans usually have a deductible, which can require you to pay up to several hundred dollars out of pocket before your coverage kicks in. In 2020, the defined standard benefit deductible is $435. Enhanced drug plans generally have low or no deductibles, cover a wider array of drugs, and provide more coverage in the coverage gap, but they charge higher monthly premiums.
- After you pay your deductible, your drug plan covers 75 percent of your drug costs. During this “initial coverage period,” you pay 25 percent coinsurance until your total drug costs reach $4,020.
- If your drug costs are higher than $4,020, you will spend 25 percent of the drug plan’s cost for covered brand-name drugs and 37 percent of the drug plan’s cost for covered generic drugs until your total out-of-pocket costs reach $6,350.
- If your income is low, you may be eligible for the “Extra Help” program, which helps cover your coinsurance costs.
- No matter which Part D plan you choose, after you have paid $6,350 of your own money for covered drugs, Medicare will pick up 95% of the cost of your drugs. You will pay the greater of 5 percent of the cost or $3.60 for generic drugs and $8.95 for brand-name drugs.
Keep your costs down: Unfortunately, if you take a lot of high-cost drugs, unless your income is low and you qualify for Extra Help or another low-income program, there is no limit on your out-of-pocket drug costs. And, no matter what your drug costs, you can save a lot of money if you do your homework when picking a Part D plan. Each drug plan has different premiums, deductibles and copays and covers different drugs under different conditions.
- Does the Part D plan cover the drugs you take? You want to make sure the drugs you take are on the Part D drug plan’s formulary and whether there are any restrictions on coverage. If you choose a plan that does not cover some of your drugs, you should ask your doctor if you could take the drug on the formulary instead.
- Where can you get your drugs? Find out whether you can continue to use the pharmacy you use to get your drugs as well as whether you can get drugs by mail order and when you travel.
- What will your costs be? Ask what your out-of-pocket costs will be for the monthly premium, the deductible, the copays for the drugs you take at in-network pharmacies and the copays at out-of-network pharmacies.
- Is the drug plan in your service area? If you are enrolled in traditional Medicare, you must choose a drug plan in your service area, so you should understand what that area is.
You should also check to see whether you are eligible for a state pharmaceutical plan or for Extra Help with your prescription drug costs.
Enrollment: If you have traditional Medicare, you can call Medicare at 1-800-633-4227 to sign up for Part D at the same time you sign up for traditional Medicare, so that you have full coverage. Most Medicare Advantage plans fold Medicare Part D coverage into their benefit package. If your income is low, you may be eligible for help paying the cost of this coverage.
Click here for Medicare’s plan finder tool that can help you choose a drug plan. It will tell you which drugs a particular plan covers at any given time.
Keep in mind that each Fall you will need to study your options if you want to keep your costs down, since most drug plans, as well as Medicare Advantage plans that offer drug coverage, change their premium, deductibles, copays and benefits from one year to the next. The average drug plan monthly premium is $30, but the premium can be a lot higher. Premiums, copays and coinsurance vary tremendously depending upon the plan you choose.
Medicare charges you a higher premium if your income is above $87,000 and that additional premium could be $70 a month if your annual income is above $163,000.
NB: Because out-of-pocket costs for drugs can be very high, Kaiser Health News reports that millions of people who use a lot of costly drugs bought them from abroad at far lower cost.
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