Prescription drug coverage is available to every senior covered by Medicare insurance. Enacted by law in 2006, coverage is provided by either an insurance company or another private entity that is approved by Medicare.
Every plan is different in both coverage and cost. Individuals with incomes below a particular threshold are eligible for assistance with premiums and drug costs. Additionally, the Affordable Care Act (ACA) has provisions that eliminate the “donut hole” currently in place. Enrollment in Part D is done at the same time that seniors enroll in Parts A and B. Failure to enroll in Part D in a timely manner can cause you to incur a penalty later.
Do I need to enroll?
There are three questions to ask when deciding if you need Medicare’s drug coverage:
- Do you currently have coverage through your Medicare Advantage plan?
- What is your monthly income?
- How much do you spend on prescriptions?
Medicare’s basic drug benefit uses the term “creditable” when looking at other plans. Creditable plans have benefits that are at least as good as or better than Medicare’s basic drug benefit. If you currently have coverage through your employer or insurance company, they will send a letter each year advising of the plan’s status as creditable. If the coverage is not creditable, you can enroll in Part D coverage without a penalty.
If you have coverage outside of Medicare, always be sure that taking Medicare coverage will not negate your benefits under your private plan. Some plans are not compatible with Part D. Joining a Part D plan can cause you to lose your benefits and not be able to get them back.
Taking a look at your current prescriptions and their costs, and comparing them to the benefits offered under other plans can also be helpful. Be sure to compare both the drug and the dosage, since these vary by plan, and include the premium when comparing.
Paying the premium
Most plans charge a monthly fee, which varies by coverage. This is in addition to your Part B premium. Those covered by a Medicare Advantage plan (also known as Part C or MA) may have coverage in that plan.
If you need help paying for Part D costs, Medicare offers an “Extra Help” program. This program provides assistance to people with limited income and offers significant savings to those who qualify. The income limit for Extra Help in 2016 is $1,356 a month for individuals and $1,822 a month for couples. This qualifies you for full assistance, which means zero-dollar premiums. Individuals who earn less than $1,505 and couples earning less than $2,022 a month qualify for partial assistance.
People on Medicaid who reside in a skilled nursing facility or are receiving Supplemental Security Income automatically qualify for Extra Help. Other people can apply for and receive some assistance in the form of fixed copays for both generic and brand name prescriptions. In the event you do not qualify for Extra Help, you may qualify for aid under your state health insurance assistance program (SHIP), or you can apply for regular Medicare Part D coverage.
The donut hole
The biggest downside to Part D coverage is the gap in coverage commonly called the “donut hole.” This hole is the gap between initial payments under Part D and when benefits resume. During this gap, participants are responsible for paying a larger percentage of their prescription drug costs.
Individuals receiving Extra Care or SHIP assistance or those who have another plan that covers the gap do not have to worry about these additional expenses. Additionally, if your drug costs do not exceed $3,310 in 2016 (or $3,700 in 2017), you will not have a gap in coverage. This limit is known as the coverage limit, and it triggers the donut hole because this is where coverage ends temporarily under Part D. The dollar amount is adjusted annually for inflation. The Affordable Care Act is seeking to close this gap by 2020, so important discounts are now being offered to offset the cost of prescriptions for people stuck in the gap.
If you fall into the donut hole, you get a 55 percent discount on brand-name drugs in 2016. The rest of the costs of brand name drugs are subsidized by the drug companies and generics are subsidized by the federal government. Generic drugs get a 42 percent discount in 2016. Next year, the discounts increase to 60 percent for brand names and 49 percent for generics.
By 2020, participants will pay no more than 25 percent of the cost of their prescription drugs while in the donut hole coverage gap. This gradual decrease in costs passed to the patient is due to the Affordable Care Act.
Once your prescription costs reach $4,850 in 2016, the amount falls under catastrophic coverage. As such, the Part D policy covers 95 percent of your prescriptions through the end of the year. Next year, that threshold will increase to $4,950.
Choosing a plan
This can be the most confusing part of the process. Therefore, it is important to make the right choice, since the plan you choose is the one you will be staying with for the entire calendar year. It is also wise to review plans each year, since your needs may change from year to year. You can add, make changes to or drop Part D coverage from October 15 through December 7 each year. To make an informed decision, there are a few things to consider.
- The first step to take is to write down every prescription you take, the dosage and its cost. The out-of-pocket cost of a drug depends on what kind of drug it is (generic or brand name and type), and these costs vary widely. There is a tool on the Medicare website that allows you to enter your ZIP code and the prescription data. The results will provide you with a list of plans with your probable out-of-pocket costs and which drugs will be covered. The list will also show the pharmacies in the network.
- Companies that provide Part D coverage change their plans every year. These changes can affect the premium, out-of-pocket costs, copays and the drugs covered. Some plans offer donut hole coverage for a plan year, then remove it during the next year. The insurer is required to provide an “Annual Notice of Change” outlining the changes to your plan by September 30 to provide you adequate time to look for a new plan.
- There is always the chance that you may not find a plan that covers all of your prescriptions, particularly those that are new or extremely expensive. Speak to your doctor to find out if there are any alternatives that can work for you. If not, your doctor can request an exception in writing to appeal the denial. Companies may make an exception for specific medical conditions.
Deciding to take on Part D coverage is voluntary. In order to make the best decision, you need to take into consideration your health, prescriptions, income and budgetary requirements. The cost of Part D is dependent on a person’s income. So even if a person is considered lower income, they can still get affordable Part D coverage. There are programs in place on both the state and federal level to assist seniors in paying for Part D coverage. It can be a time-consuming process, but Part D coverage is a significant benefit that helps seniors to maintain their healthcare.