Complete Guide to Part D of Medicare

When you enroll in Medicare, you may choose Medicare Part A, Medicare Part B or both. Part A is hospital coverage and Part B covers medical care like doctor visits and clinic services. If you’re one of the many beneficiaries who takes prescription drugs, you’ll also want to consider a Medicare Part D plan. A Part D plan is voluntary prescription drug coverage offered by private insurers and approved by Medicare.

Medicare Part D plans help pay for your prescription drugs and protect you from high prescription drug costs. If you are eligible for Medicare Parts A or B, you are generally also eligible for Medicare Part D.

You also have the option of enrolling in a Medicare Advantage plan (Part C). Medicare Advantage plans combine the coverage of Medicare Parts A and B with the prescription drug benefits of a Medicare Part D plan. These comprehensive plans are offered by private insurers.

While all Part D plans are required to cover certain common types of drugs, the specific prescription drugs covered by a Medicare Part D plan vary by plan type and insurance carrier. Every plan has its own list of covered medications, called a formulary.

Before enrolling, you should review each Medicare Part D plan’s formulary to understand which of your drugs are covered. The drugs you take may not be covered in every Medicare Part D formulary.

There are a few things to understand when considering the total cost of a Medicare Part D plan: monthly premiums, the impact of your income on premiums, cost-sharing and the donut hole coverage gap.

First, every plan requires a monthly payment, or premium, for the prescription drug coverage itself. Because every insurer sets its own formulary, monthly premiums vary by insurer and plan.

Your income may also impact the premium you pay. People whose income exceeds certain thresholds pay more for Part D plans. This extra premium amount is called the Income Monthly Adjusted Amount (IRMAA) and is determined by federal tax returns. Those who are low-income or have limited resources may qualify for Medicare Part D extra help. This Low Income Subsidy may cover part or all of the Part D monthly premium.

In addition to the monthly premium, you will also be responsible for sharing some of the drug costs until you reach the limit on out-of-pocket costs for the year. This cost-sharing comes in the form of copays, co-insurance and your plan deductible, if you have one.

After you meet the annual out-of-pocket limit, you have reached the coverage gap known as the Medicare Part D donut hole. At this stage, you will be responsible for 25% of the costs for generic and brand name drugs until your out-of-pocket costs reach $4,130. Then you are in the Catastrophic Coverage stage, which requires a small copay or coinsurance amount for the remainder of the year.

However, if you qualify for Medicare Part D extra help, the Medicare Part D donut hole does not apply to you.

Like other parts of Medicare, there are specific times when you can enroll in a Medicare Part D prescription drug plan. You are eligible to enroll in Part D when you first get Medicare during the seven-month Initial Enrollment Period (IEP). If you need to make changes to your drug plan, sign up for a new plan or drop your Part D plan altogether, you can do so during the Annual Enrollment Period (AEP), which runs from October 15 to December 7. Changes may be possible at other times of the year if you qualify for a Special Enrollment Period (SEP).

Source medicare.gov