Medicare Part D: Drug Insurance

June 4, 2018     About this blog:  click here

Medicare Part D:  Drug Insurance

Medicare has its own alphabet soup:  Parts A, B, C, and D.    We’ve discussed Parts A, B, and C in previous posts.

Now let’s tackle Part D.   This one is easy to remember: D is for Drug coverage.

Medicare Part D was enacted in 2003, and was first available in 2006.  Before that, there was no Medicare coverage for prescriptions that you buy at a pharmacy.

That’s a big deal, since most people on Medicare take some prescriptions, and many take several them.   Before Part D, many folks on Medicare had great trouble affording their medications.

What is Part D, exactly?

When Congress created this drug benefit, they decided that the government would not pay pharmacies directly, but instead give all of a person’s Medicare prescription drug money to an insurance company.

This is similar to how Medicare Advantage (aka Part C), works:  All of your Medicare doctor and hospital money (about $800 a month) is given to the insurance company you choose.

Medicare Part D, the government gives all your Medicare drug money (about $120 a month) to the insurance company you pick.  That money, combined with the monthly premium you pay for the insurance policy, is what the company works with.

Out of that, the insurance company pays your pharmacy for your meds – at a price the insurance company dictates or negotiates.   If there’s money left over, the insurance company keeps it for itself.

You can only sign up for a Part D insurance policy on a January 1 to December 31 basis, except when you first get on it.

What does Part D drug coverage look like?

There are many different Part D policies, with different amounts of monthly premiums.  In general, the smaller the premium, the bigger the Annual Deductible and the Co-Pays; and vice versa.

Many Medicare Advantage policies for doctor and hospital coverage have Part D drug coverage included in the same policy.

Different Kinds of Co-Pays:

The Part D policies typically have several different types of Co-Pays, such as:  Preferred Generic, Non-Preferred Generic, Preferred Brand Name, and Non-Preferred Brand Name.  The Co-Pays go in price from smaller to higher, respectively.

Are my prescription drugs covered?

Extremely important question!!   Each Part D drug policy has its own Formulary, which is list of the drugs it will cover, and which of the different categories of CoPays each of those drugs is in.

Your need to find out:  (1)  Are the drugs I use on the list, at all?   (2) If they’re one the list, which ones are Preferred (smaller Co-Pay) and which are Non-Preferred (larger Co-Pay)?

That will give you an idea of how much a year in total Co-Pays you’ll pay with that particular policy.

Unfortunately, Congress gave the insurance companies the right to change their Formulary anytime they want.

So, even if your drugs are on the Formulary when you start in January, there’s no guarantee they’ll stay on it all year long.

Is the pharmacy I go to covered?

This usually isn’t an issue if you go to one of the big national or regional pharmacy chains — including those in big department stores.

But, if you go to a smaller local pharmacy, you’d better check to see if it participates with the Part D policy you are thinking of buying.

And now for the kicker:  Falling into the Donut Hole

Congress they invented a new feature for Part D, unseen before in other insurance policies.  It’s sort of like a second deductible, partway through the year, besides your normal Annual Deductible.

Annual Deductibles are the costs you have to pay starting Jan. 1 of each year, before the insurance kicks in and start paying.  Annual Deductibles are common in most all health insurance, including Part D drug policies.

The extra, second deductible that Part D has is called the Donut Hole.”   Here’s how it works:

After you’ve reached a total of $3,750 in drug costs in the year (amounts paid by you – Annual Deductible and Co-Pays – and paid by the insurance), then the insurance stops paying.

But, if your drug expense keeps rising to over $5,000 in that same year, then the coverage kicks in again, through Dec. 31.

A consolation is that when you are in the Donut Hole, the government requires that you get big  discounts at the pharmacy:  65% for brand name drugs, and 56% off for generics.

Do I have to buy a Part D drug policy?

You don’t have to, but know this:

If you don’t buy one when you first go on Medicare, and decide to later on, there is a penalty in the form of a surcharge on your premiums:  1% each month (12% each year) you wait.   For example, wait eight years, and you’ll pay about double for your premiums.

What if I am low income?

People on Medicare with a little too much money to get on Medicaid can have the government pay for all or part of their Part D premium, up to these income limits:  $1,517 for a single person and $2,057 for a couple.

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