Medicare Part D – prescription drug coverage

Understanding prescription drug plans (PDPs) and Medicare advantage prescription drug plans (MAPDs)

  • May 4, 2016

In 2015, nearly 40 million Medicare beneficiaries had prescription drug coverage through Medicare Part D. About 60 percnet of them had a stand-alone prescription drug plan (PDP) in conjunction with Original Medicare, while the other 40 percent had a Medicare Advantage prescription drug plan (MAPD). For those enrolled in Original Medicare, the only source of PDPs is through private insurance companies, as Medicare A and B don’t cover outpatient prescriptions. Most Medicare Advantage plans do include prescription drug coverage, although in some cases you can purchase a stand-alone PDP if your Medicare Advantage plan doesn’t include prescriptions.

When and how do I enroll in Medicare Part D?

The first opportunity for 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.

Here’s more information on how to pick a prescription drug plan.

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. 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 Plan D, it generally takes five weeks for your membership card to arrival. 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.

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 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 a general open enrollment period in a later year, there’s a late enrollment penalty that will be added to your premium.

This penalty would also apply if you drop your prescription coverage for more than 63 days and then re-enroll during a general 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 2015, the average stand-alone prescription drug plan premium was just under $37/month, although there is wide variation in price from one plan to another. For 2016, the average cost was projected to increase about 13 percent, to more than $41/month (based on weighted average enrollments as of September 2015, and assuming all enrollees kept their existing 2015 plans into 2016 – which was not likely the case, as people can and do shop around for better deals during open enrollment).

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 will be fully closed by 2020, but in 2016, enrollees pay 45 percent of the plan’s cost for brand-name drugs while in the donut hole, and 58 percent of the plan’s cost for generic drugs.

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 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.

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.)