Medicare Part D: Key takeaways
- The only source of prescription drug plans is through private insurance companies.
- Most Medicare Advantage plans include prescription drug coverage.
- You can also purchase a stand-alone prescription drug plan if you’re enrolled in a PFFS or MSA plan that doesn’t include prescription coverage.
- Your first opportunity to enroll in Part D is when you’re initially eligible for Medicare.
- You have the option of selecting an Advantage plan and using that in place of Medicare A, B, and D.
- In most cases, enrollment outside of your initial enrollment period is limited to an annual enrollment period.
- If you don’t enroll in prescription drug coverage during your initial open enrollment and then enroll later during general open enrollment, a late enrollment penalty will be added to your premium.
As of late 2019, more than 46 million Medicare beneficiaries had prescription drug coverage through Medicare Part D. More than 20 million of them had Part D coverage in conjunction with a Medicare Advantage plan (ie, a Medicare Advantage prescription drug plan — MAPD), while the rest had stand-alone Part D prescription drug plans (PDPs), most of which were purchased to supplement Original Medicare.
All prescription drug coverage for Medicare beneficiaries is provided by private insurance companies, as Medicare A and B don’t cover outpatient prescriptions. Most Medicare Advantage plans do include prescription drug coverage (90 percent do so in 2020). If you’re enrolled in a Medicare Savings Account (MSA) plan or Private Fee-for-Service (PFFS) plan that doesn’t include Part D coverage, you have the option to enroll in a stand-alone Part D plan to supplement your coverage.
However, a stand-alone Medicare Part D plan cannot be used to supplement a Medicare Advantage plan that doesn’t include prescription drug benefits. Medicare Advantage enrollees who want prescription drug benefits need to enroll in a Medicare Advantage plan that offers them.
When and how do I enroll in Medicare Part D?
The first opportunity for Medicare Part D enrollment is when you’re initially eligible for Medicare – during the seven-month period beginning three months before the month you turn 65.
If you enroll prior to the month you turn 65, your prescription drug coverage will begin the first of the month you turn 65. If you enroll during the month you turn 65 or one of the three following months, your prescription coverage effective date will be delayed — it will not be retroactive to the month you turned 65.
If you enrolled in Medicare due to a disability, you may enroll during a seven-month window beginning three months prior to your 25th month of disability. If you enroll in the three months prior to your 25th month of disability, your coverage will begin the first day of the 25th month. If you enroll during the 25th, 26th, 27th, or 28th month of disability, your coverage will begin the first of the month after you enroll (note that the effective date rules are different if a person is enrolling in Medicare due to a diagnosis of ALS or end-stage renal disease).
In both of these cases – whether you’re turning 65 or are eligible for Medicare because of a disability — you have the option of selecting a Medicare Advantage plan that includes prescription drug coverage, and using that in place of Medicare A, B, and D (note that this is generally not the case if you have end-stage renal disease, although that rule will change in 2021 under the terms of the 21st Century Cures Act; ESRD patients will be able to enroll in Medicare Advantage plans as of 2021). The enrollment periods and rules are the same as those described above for stand-alone Medicare Part D plans.
After you’ve chosen from the various PDP offerings, you can enroll by:
- calling 1-800-MEDICARE to locate PDPs in your area
- logging in to Medicare’s Prescription Drug Plan Enrollment Center
- filling out the paperwork sent by mail from Medicare, or
- calling the private insurer with the specific PDP you want to join.
Once you apply for Medicare Part D, it generally takes five weeks for your membership card to arrive. During that time, if you need prescription medications, most pharmacies will accept the initial letter you received from Medicare acknowledging your upcoming membership, or an enrollment confirmation number.
Call 1-844-309-3504 now to discuss your Part D coverage options with a licensed advisor.
In most cases, enrollment outside of your initial enrollment period is limited to an annual enrollment period between October 15 and December 7, with coverage starting January 1 of the following year. During this time, you can switch to a new PDP or Medicare Advantage plan, and coverage is guaranteed issue. The new plan will automatically replace the old one, so you don’t need to do anything other than enroll in the new plan.
If you are enrolled in a Medicare Advantage plan and want to switch to Original Medicare, you can do so either during the fall open enrollment period (October 15 – December 7) or during the Medicare Advantage open enrollment period (January 1 – March 31). If you do so, you’ll also have the option to purchase a Part D plan at the same time, so that you’ll have prescription coverage to go along with your Original Medicare coverage.
If you didn’t enroll in prescription drug coverage – either through a PDP or a Medicare Advantage plan – during your initial open enrollment window and then you enroll during an open enrollment period in a future year, there’s a late enrollment penalty that will be added to your premium (the late enrollment penalty does not apply if you delayed your Part D enrollment because you maintained creditable drug coverage from another source — like an employer-sponsored health insurance plan).
The Part D late enrollment penalty would also apply if you drop your prescription coverage for more than 63 days and then re-enroll during the open enrollment period. It’s important to maintain continuous drug coverage from the time you’re first eligible, both to protect against significant prescription costs, and also to avoid higher premium when you ultimately re-enroll.
What will I pay for part D coverage?
In 2020, the average stand-alone prescription drug plan premium is $42.05/month, including both basic and enhanced Medicare Part D plans. But the plans are issued by private insurers, and there’s significant variation in terms of the benefits, the formularies (covered drug lists) and the pricing. Among the twenty Part D plans that are available nationwide, average premiums range from $13/month to $83/month.
High-income enrollees (those with income above $87,000 for a single individual or $174,000 for a married couple) pay extra for their Part D coverage. In 2020, the additional premiums (which are added to the regular amount that the Part D insurer charges) range from $12.20/month to $76.40/month (these are slightly lower than the income-related premium adjustments that applied in 2019).
The premium adjustment for high-income enrollees is based on income tax returns from two years prior, since those are the most recent returns on file at the start of the plan year (so for example, 2018 tax returns were used to determine whether you pay an increased Part D premium in 2020). There’s an appeals process you can use to contest the income-related premium adjustment if you’ve had a life-change event that has subsequently reduced your income.
In addition to the premiums, you’ll pay a copay (fixed cost) or coinsurance (a percentage of the cost of your medications) for drugs. The “donut hole” (coverage gap) in Part D plans has been steadily closing over the last few years, thanks to the Affordable Care Act. It is fully closed as of 2020: Enrollees with standard Part D coverage in 2020 pay 25 percent of the cost of generic and brand name drugs while in the donut hole, which is the same percentage they pay before entering the donut hole. But the donut hole is still relevant in terms of how drug costs are calculated towards reaching the catastrophic coverage threshold.
Your out-of-pocket costs will depend on the plan you choose, based on your individual medical needs. Be sure to look beyond the plan’s premium and consider all costs. You can use Medicare’s plan finder tool to help you select the best drug plan to meet your needs. This is a process that you’ll need to repeat each year during open enrollment, as drug formularies (covered drug lists) change along with premiums from one year to the next.
[Note that the plan finder tool was updated in advance of the autumn 2019 open enrollment period, and there were concerns that some enrollees received incorrect or misleading information via the updated tool. CMS will provide a special enrollment period for those who believe they selected the wrong plan for 2020 due to information presented by the plan finder tool in the fall of 2020.]
Once you select a PDP, there are four ways to pay the premium:
- deducted from your personal account;
- charged to credit or debit card;
- billed monthly; or
- deducted from your Social Security check (You’ll contact your PDP issuer to set this up.)
Is there help if I can’t afford my prescription drug costs?
Some Medicare beneficiaries struggle to afford the high cost of prescription drugs. Although the Affordable Care Act (ACA) reduced the amount enrollees pay — to 25 percent — during the Medicare Part D donut hole, that amount still is more than some beneficiaries can afford.
Enrollees with limited incomes and resources can apply for Extra Help. This federal program dramatically lowers prescription drug expenses under Part D. The income limit is $1,615 a month for singles and $2,175 a month for couples, and the asset limit is $14,610 for individuals and $29,160 for spouses.
State Pharmaceutical Assistance Programs (SPAPs) also provide prescription drug assistance to beneficiaries in some states. These programs can pay for Part D premiums, deductibles and co-pays. Income limits for SPAPs are usually much higher than Extra Help.