Original Medicare does not include any coverage or subsidies for prescription medications. Medicare Part D (also known as Prescription Drug Plans or PDP) is a Medicare program created to assist seniors with the expensive expense of prescription drugs and premiums.
Medicare Part D
Medicare Part D provides prescription drug coverage, which includes different drug plans that each offer their own set of drugs, known as a formulary. The cost of a drug plan can depend on what types of drugs you require, and if you use a pharmacy within the plan’s network. You can get prescription drug coverage with Original Medicare (as Part D) or as part of a Medicare Advantage plan. However, you cannot have both a PDP plan and Medicare Advantage at the same time. You don’t have to get prescription drug coverage, but if you don’t enroll and go for any continuous period of 63 or more days after your Initial Enrollment Period is over without prescription drug coverage, you may be charged a late enrollment penalty. It’s recommended that you sign up for Medicare Part D as soon as you’re eligible. Each year, insurance providers that offer Part D plans review their performance and make necessary changes, such as adjusting formularies, premiums and pharmacies, which is why you should compare plans annually to make sure your prescriptions are covered at the best price.
Medicare Part D plans have a monthly fee (premium) that varies depending on the plan. The average base premium for 2019 is $33.19, but many people choose to pay for additional coverage, bringing the overall average premium to $41.21. The cost of a Part D plan can range from less than $11 per month to over $150 per month, depending on the type of coverage and location. People with higher incomes may also have to pay an additional premium surcharge that ranges from $12.40 to $77.40 per month. Additionally, PDP plans have a complicated structure for out-of-pocket drug costs, detailed in the 2016 Medicare Part D cost breakdown.
Medicare Prescription Costs
Beneficiaries are responsible for 100 percent of their PDP plan’s initial fee, which is set by the plan. However, only 52 percent of PDP plans charge the full $415 deductible. Once the initial coverage limit is met, beneficiaries pay 25 percent of prescription costs, and 37 percent of generic drug out-of-pocket costs and 25 percent of brand-name drug out-of-pocket costs. In 2020, the gap for generic drugs will also be closed (at 25 percent). After a beneficiary has spent over $5,100 on prescriptions, their cost reduces to 5 percent, and out-of-pocket totals reset at the end of each year. It’s important to try and save as much money as possible on prescriptions up front, and Medicare offers Medication Therapy Management programs for those who wish to manage their prescriptions.
If you turn 65, you can enroll in a Medicare Part D plan during your Initial Enrollment Period, which begins three months before your birthday and ends three months after, as long as you have Medicare Parts A and B. If you don’t sign up during this period, you could be charged a Part D late enrollment penalty, which adds an extra cost to your Part D premium.
Once you’ve initially enrolled in a Part D plan, you don’t have to re-enroll every year. However, you have the option to change your plan annually during the Medicare Annual Enrollment Period (AEP). During this time, you can compare different Part D plans and find one that better suits your needs. This is important because plans change their benefits each year, and AEP allows you to manage those changes.