Chapter 3 - Medicare Part D Prescription Drug Plans

Understanding Medicare Part D

In previous chapters, we discussed the details of Medicare Parts A and B. Now we’ll explore Part D for prescriptions. This is another area of medical expense you might incur during your retirement years. Medicare’s prescription drug coverage, Part D, is optional, but is offered to everyone who has Medicare. It may save you money on your current or future prescriptions.

What to Do Before Age 65 for Part D

Just like Parts A and B, you can enroll in Medicare Part D during your Initial Enrollment Period (IEP). Your IEP includes the 3 months before you turn 65, your 65th birthday month, and the 3 months after you turn 65. If you miss your IEP, there are still ways to apply. But, if you wait and try to get Part D later, you could possibly pay a penalty for as long as you have the prescription coverage.

For more information, visit the Social Security Administration website. 

What if I’m Still Working?

If you are still working, be sure to check with the benefits administrator at work. Signing up for Medicare Part D could interfere with the benefits you and your dependents receive from your employer or labor union. If your employer’s plan does not meet the Medicare standard, you will be required to enroll in a Medicare plan. It is best to carefully analyze the costs and benefits associated with your choice before the age of 65. 

Eligibility for Medicare Part D

If you have Part A and/or Part B, you are eligible to receive Part D. You must join a plan with a Medicare approved insurance provider and live within its geographical service area. These are private companies that offer the government subsidized prescription plans, also known as a Medicare Prescription Drug Plan (PDP).

Medicare Part D Premium Costs

The monthly premium for Medicare Part D varies depending on which insurance company and Prescription Drug Plan you choose. Each plan has its own list of drugs that it covers, called a formulary. Some prescriptions may cost more than others depending on whether they are generic or name brand drugs. What you pay at the pharmacy will also depend on if your pharmacy is an in-network provider. If you use an out-of-network pharmacy, you may pay more. Now let’s discuss how Medicare covers drug costs.

Medicare Part D Drug Costs

Medicare Part D has three unique costs for drugs. The first out-of-pocket cost is your deductible. After your deductible is met, you will be required to pay for a portion of the cost, called coinsurance. Once you have reached an annual out-of-pocket limit you will then pay a reduced cost, called catastrophic coverage. Let’s go into a little more detail.

First You Start with Your Deductible

You may have a deductible to meet, depending on the plan you choose. The deductible is the amount you will pay for your prescriptions before your insurance begins to cover some of the costs. You may receive a Medicare discount at the pharmacy for your drug purchases, depending on the drug and the pharmacy. This is a discount offered by the drug company and is different from one plan to another.  

Then You Begin Co-Pay or Coinsurance

Once you have met the deductible, you will pay a percentage of the drug cost, known as coinsurance or co-pay. You will pay this until you reach an annual out-of-pocket amount. This amount changes over time. Once you hit the annual out-of-pocket amount, your catastrophic coverage will then begin to cover the majority of your drug costs. 

When Catastrophic Coverage Takes Effect

After you have reached your annual out-of-pocket amount, you will pay a predetermined amount for either generic or name brand drugs; or you will pay a coinsurance percentage, whichever is greater.

It’s Best to Do Your Research

Choosing a Part D plan that is right for you is an important decision. Once you have chosen a plan and are enrolled, you can only change it during the annual enrollment period.  

If You are Covered by Another Program

If you believe you will not need Medicare Part D because you are using another medical health benefit program, check with both Medicare and the other program provider just to be safe. For more information on Medicare Part D, visit the U.S. Government’s official website on Medicare.

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