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Part D: Prescription Drugs

Medicare Prescription Drug coverage is the Medicare prescription benefit for enrollees. It reduces the prices of prescription drugs and for prescription drug insurance by a series of subsidies. It was enacted by Congress in 2003 and went into legal effect in 2006.

The prescription benefits apply to beneficiaries enrolled in Medicare Part A and Part B. Beneficiaries can purchase a stand-alone prescription drug benefit or a combination drug benefit and health plan — a private insurer Medicare Advantage-Prescription Drug combination.

Prescription drug plans seek to balance out-of-pocket costs for premium drugs. They offer standard benefits and equivalent benefits. The goal is to reduce costs by providing safe and effective drugs at the lowest price consistent with patient needs.

The Centers for Medicare and Medicaid Services approves prescription plans and there is a detailed up to date plan finder service that identifies costs, premiums, and availability of particular drugs.

The plans also work to remove the so-called donut hole exclusion for more uniform drug discount benefits. The Part D costs were reduced by the Affordable Care Act, which set in motion a program to reduce then eliminate the donut hole area of uncovered prescription drugs.

Plans offer drugs for CMS approval through a drug formulary which lists available drugs and sets them in a tier arrangement as determined by the drug costs. Higher tiers usually have higher co-payments. The choices occur when one wants a high tier drug at a low tier co-payment.

These choices affect the availability of drugs for beneficiaries as the price restricts access. There are exception processes to adjust the co-pay amount on a given drug when medically determined to be necessary.

How Does Part D Coverage Work?

AdobeStock_3303937-1600x1600For Part D coverage, beneficiaries must choose to join a prescription drug plan or a Medicare Advantage Plan. The prescription drug plans add drug benefits to Medicare A and B coverage.

The Medicare Advantage Plans provide comprehensive healthcare services in a form like an HMO, PPO, or fee for service plan; they add the drug benefit to the array of services. Often there are some advantages for the consumer such as lower co-pays than a PD standalone alternative.

Beneficiaries may only accept the drug benefit from a single source. If they enroll in a drug plan and a Medicare Advantage, the Advantage plan will terminate coverage and send the customer back to the original Medicare coverage.

The drugs in the plan’s drug formulary will have a lower price than available on the open market. The subsidy may come with a co-pay. The higher tier drugs in the formulary usually have the highest co-pay amounts.

The goal of reducing the overall costs to consumers involves preferences for lower-cost drugs, which include generics. One common procedure is to limit the quantity if a higher priced drug or limit availability.

Plans sometimes ask prescribers to try step therapy, in which they agree to trial use a certain lower cost version of a high tier drug.

When do you enroll in Medicare Part D?

Several events lead to the initial open enrollment for Part D.

  • At the start of Medicare coverage is the Initial Enrollment Periods for Part C & Part D. This is the ideal time to choose a Drug plan under Medicare or a private provider.
  • Best for applicants age 65 and newly eligible for Medicare
  • Best choice for applicants ages 65 and newly eligible for Medicare
  • Best for those already eligible for Medicare because of a disability, and that turned 65.
  • Those with no Medicare Part A coverage enrolled in Medicare Part B during the Part B General Enrollment Period must add Part A.

The best time to enroll in Medicare Part D is when one gets enrolled in Medicare A and B. These are required before buying the drug plan. If enrolled at this time of Medicare enrollment, there is no late fee.

Yearly enrollment periods provide opportunities to revise and change coverage options for Part D. The Open Enrollment for Medicare Drug Plan coverage is the annual time to add Plan D runs from October 15 through December 7 each calendar year.

Medicare Advantage Disenrollment period runs from January 1 through February 14 each calendar year. This enrollment period permits changes to Medicare Advantage including dropping MA and going back to Original Medicare.

Medicare Part D costs

AdobeStock_17688255-1600x1600The costs for Part D include a premium for the insurance coverage. Those who apply late must pay a late enrollment penalty. Upper-income earners as defined by Part D must pay and IRMAA premium adjustment fee that slides on a scale based on income above $85,000 per year. Social security determines the additional fees.

Subscribers can authorize an automatic deduction from social security for Part D premiums. Costs include deductibles, copays, and coinsurance.

– Part D Deductibles, Copays, and Coinsurance

Deductibles are the amounts consumers must pay before the plan begins to pay. It is an annual amount, and some plans have a zero deductible. No Medicare drug plan can exceed $405 in 2018. Co-pays are set amounts per transaction whereas coinsurance is usually a percentage of the costs of the drug.

– Part D IRMAA

Subscribers pay Part D premiums for Medicare and not to the Plan. High-income earners must pay an additional fee added to the premium. The high-income fees reflect an individual family or a family filing single tax statuses to determine the amount of additional taxes due.

– Part D Premium Scale

Individuals whether filing singly or on joint returns may have to pay additional premiums. $85,000 per year is the individual cutoff, and there are four groupings of additional tax. In 2018, Part D premiums vary by income.

  • File individual tax return: Earning $85,000 or less — must pay the plan premium
  • File individual tax return: Earning above $85,000 to $107,000 — must pay $13 + your plan premium
  • File individual tax return: Earning above $107,000 to $160,000 — must pay $33.60 + your plan premium
  • File individual tax return: Earning above $160,000 to $214,000 — must pay $54.20 + your plan premium
  • File individual tax return: Earning above $214,000 — must pay $74.80 + your plan premium
  • File joint tax return: $170,000 or less — must pay the plan premium
  • File joint tax return: above $170,000 up to $214,000 — must pay $13 + your plan premium
  • File joint tax return: above $214,000 up to $267,000 — must pay $33.60 + your plan premium
  • File joint tax return: above $267,000 up to $320,000 — must pay $54.20 + your plan premium
  • File joint tax return: above $320,000 — must pay $74.80 + your plan premium
  • File married & separate tax return: $85,000 or less — your plan premium
  • File married & separate tax return: above $85,000 — $74.80 + your plan premium

What’s the Late Enrollment Penalty for Part D?

The late enrollment penalty fee is an amount of money added to the Medicare Part D monthly premium. It must be paid as part of the premium to Medicare to maintain coverage.

The penalty applies to applicants who go without prescription medical coverage for more than 63 consecutive days after the final date of the Initial Enrollment period.

Calculating the penalty is a simple equation based on the national base beneficiary premium. Medicare calculates one percent for every uncovered month. In 2016, the formula was one percent of the $34.10 base.

– Coverage Gap

The coverage gap is an area of spending in which beneficiaries do not get the full benefit of drug discounts (this gap may change annually). There is a temporary limit on the discount that affects participants who have spent $3,750 on covered drugs (in 2018). It does not affect people who get assistance from the Extra Help program.

The donut hole is a price factor in Medicare D plans that in effect caused higher prices for Medicare participants.

The donut hole was technically the spending areas between the initial program limit and the threshold for catastrophic care.

In this gap, the coverage fails to reduce price effectively. Short-term adjustments included allowing copays and coinsurance as out-of-pocket spending to get some participants to the catastrophic threshold faster.

The donut hole proved important. Studies showed that many participants reduced spending when entering the gap, which is not a favorable result when the activity involves using drugs considered medically necessary for treatment of illness or chronic conditions.

The long-term remedy was made in the Affordable Care Act. The donut hole was immediately and substantially reduced, rebate checks were sent, and set for final resolution by the year 2020. Generic drugs in the coverage gap cost more too. Medicare copays 42 percent of the drug’s costs. Consumers pay the remaining 58 percent.

The program reform will reduce the participants share to 25 percent by the year 2020. Only the amount paid by participants’ count as an out-of-pocket expense.

The 2018 coverage out-of-pocket limit is $5,000. Many participants will spend significant amounts on prescriptions before their burden goes completely over to the coverage. The discounts on prescription drugs in the Part D Prescription Plans are crucial for personal budgets and effective medical care.

By the year 2020, the costs of coverage for brand-name drugs will average approximately 25 percent in the coverage gap. This amount is the same paid for drugs between reaching the deductible and the out-of-pocket limit. The coverage gap will have been reduced significantly.

– Catastrophic Coverage

This benefit promises relief for Medicare participants who must pay a significant amount each year for prescription medications. Catastrophic coverage begins after participants have reached the annual out-of-pocket limit for prescription drug coverage.

The out-of-pocket limit for 2018 is $5,000. Catastrophic coverage begins automatically and immediately. It provides that participants will only pay a small co-pay or co-insurance with each prescription through the end of the calendar year.

How Do You Know Which Drugs are Covered by Part D?

AdobeStock_56560032-1600x1600The identity of the drugs covered by each plan is available for inspection. The CMS approves the drug formulary for each plan and the plan must update the list approximately twice per month.

Changes in the formulary are important as it may affect drug choices and coverage for the plan or members. Plans routinely provide notice to customers in advance of changes such as dropping a drug or adding a low cost generic in place of a high tier drug.

How do Medication Therapy Management Programs Work?

Medicare participants who have complex medical needs can take advantage of medication therapy management.

This option is a modern adaptation of the idea that another set of eyes to review a situation and will help detect problems. Having an accurate tabulation of medicines, dosages, and instructions is an extremely worthwhile document.

The document can travel with patients when they go into hospitals or other new treatment circumstances. It also permits remote reviews by experts and consultants. This method has some goals as listed below:

  • It tracks medicine effectiveness
  • Observes for possible adverse drug interactions
  • Observes for new or improved
  1., “Centers for Medicare & Medicaid Services,” Mar 15, 2018.
  2., “What drug plans cover,” Jul 1, 2016.
  3., “Joining a health or drug plan,” Jul 1, 2016.
  4., “Costs for Medicare drug coverage,” Jul 1, 2016.
  5., “Monthly premium for drug plans,” Mar 15, 2018.
  6., “Monthly premium for drug plans,” Jul 1, 2016.
  7., “Part D late enrollment penalty,” Jul 1, 2016.
  8., “What drug plans cover,” Jul 1, 2016.

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This website and its contents are for informational purposes only and should not be a substitute for experienced medical advice. We recommend consulting with your medical provider regarding diagnosis or treatment, including choices about changes to medication, treatments, diets, daily routines, or exercise.

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MULTIPLAN_GHHK5LLEN_Accepted Last Updated 3/18/2018

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