Medicare Part D plans – The basics
Medicare is a type of healthcare administered by the U.S. government. It is available to everyone aged 65 or older, as well as certain younger individuals who receive Social Security Disability benefits. Medicare is divided into four parts, identified by the letters A through D. Part D is the prescription drug plan.
If an individual does not enroll in Part D upon first becoming eligible, and they do not have prescription drug coverage under another creditable plan, a late enrollment penalty may be assessed. To enroll, individuals select a plan from those offered by Medicare-approved private insurance companies or other providers. The specific drugs covered by the plan, the copayments and the monthly premiums vary, depending on the provider and coverage chosen.
Although it is not necessary to submit a new application for Medicare each year, beneficiaries are asked to review their Part D coverage annually. If they desire to change insurance companies or plans, they can do so during this annual open enrollment period. The open enrollment also applies to people who are securing Part D coverage for the first time.
Other than the open enrollment period, the ability to secure new coverage is limited. Individuals turning 65 can enroll three months before and three months after the month in which they celebrate their 65th birthday. For those receiving disability payments, the enrollment period starts three months prior to the 25th month of benefit payments. It extends three months after the 25th month.
Medicare Part D enrollment
Special circumstances can permit enrollment or changes to Medicare plans. People who move to a new area that is not served by the current provider have the option to make changes, such as:
- If the provider is notified of the move in advance, changes are permitted, from the month prior to the move through the two months following the month in which the move was made.
- If the provider is not notified prior to the move, the window begins with the month in which the move is made and continues for two additional months.
- The same time frames apply for moves that are served by the provider, but which have different plan options available.
- Medicare-eligible recipients who have been living in a foreign country can enroll in Medicare Part D for two months following the month in which they make the return move to the U.S.
- Those entering, leaving or residing in an institution, such as a nursing home, can join, change or drop coverage for the duration of their stay in the institution, plus two months following the month in which they leave the institution.
- Individuals who have been incarcerated can join Medicare for two months following the month in which they were released.
Each plan can offer different coverage or require participants to complete certain actions. For example, not all plans offer full coverage for high-cost drugs. And, some may require participants to get prior approval for them or to try a more economical drug first. The plan may limit how much of each medication is dispensed at one time, such as a 30-day or 90-day supply. Vaccines deemed medically necessary, such as the shingles vaccine or others intended to prevent illness, are normally covered under a Medicare Part D plan. Drugs received in an outpatient setting or at a physician’s office may be covered, but recipients may have to meet certain circumstances.
In addition to paying a monthly premium, individuals covered by a Medicare Part D plan must normally pay part of the cost of each drug. This is called a copayment or coinsurance. The difference between these terms is that a copayment is a fixed amount, such as $10 per prescription, while coinsurance is a percentage of the prescription’s cost. Some plans have an annual deductible that must be met before the insurance company will pay any of the costs. As of 2015, deductibles could not exceed $320 per year; in 2016, this increases to $360.
Medicare Part D coverage gap
Most plans include a temporary limit, called a coverage gap that becomes effective once a certain dollar amount has been spent on drugs. As of 2015, once the total for the copayment or coinsurance, annual deductible and payments from the insurance company total $2,960, benefits are temporarily reduced; this increases to $3,310 in 2016. Participants must pay 45 percent of the total cost for brand-name prescription drugs and 65 percent of the cost of generic drugs. In 2015; in 2016, these percentages will change to 45 and 58, respectively. These amounts count as out-of-pocket expenses.
As of 2016, once participants accumulated $4,850 in out-of-pocket costs related to expenses eligible for Part D coverage, the coverage gap ends and catastrophic coverage begins. This means that for the balance of the year, participants will pay only a small co-payment or coinsurance amount for their covered drugs.
The selection of a Medicare Part D plan is a highly personal decision. Individuals must evaluate a number of factors to determine the plan that best suits their needs and finances. Some of these factors include the number of drugs taken on a regular basis and how much each prescription costs. You should also consider whether income or savings are sufficient to absorb the higher costs associated with most plans offering the most economical premiums.