Medicare Part D Prescription Plan is an outpatient prescription drug program. Part D is provided in conjunction with private insurance companies and the federal government. It is important to know what type of prescriptions Part D will cover. Medicare Part D covers outpatient prescriptions. Usually, prescriptions picked up at a pharmacy. The costs outlined later in this article pertain to outpatient prescription drugs.
Part B Can Cover Drugs Too
Part B of Medicare can cover drugs as well. (To learn more about Part B click here) Drugs that Part D cover are usually part of treatment at a doctor’s office and are on an outpatient basis. Meaning you go to the doctor’s office and receive the drug intravenously. For example, Part B of Medicare usually covers chemotherapy. You go to the doctor’s office, receive your treatment and come home.
When Part B covers a drug it does not affect the levels of coverage for Part D of Medicare. This can sometimes save the Medicare Beneficiary thousands of dollars. I suggest a strategy to my clients that are receiving maintenance injections to try and have them covered under Part B of Medicare and usually saving a significant amount of money. I will use the example of rheumatoid arthritis. There are some injections for rheumatoid arthritis. If you ask your doctor to order the injection in the doctor’s office, sometimes Part B will pay instead of Part D and save the client a significant amount of money.
Why Part B Drugs Can Save Money
The reason it is less under Part B is because Part B will pay 80% of the cost and their Medicare Supplement will pay the balance. I also want to mention usually the doctor cannot get approval for Part B to cover some of these injections. We do see some of our clients getting approval to have injections administered in the doctor’s office and saving a lot of money. If you have a prescription for injections you may want to see if you can get them covered under Part B of Medicare. I want to be perfectly clear, you probably will not get approval, but we have seen some success and it might be worth to you to ask your doctor.
How to Receive Part D
There are two ways to have Part D delivered to the consumer. One is from a Medicare Advantage Prescription Drug Plan, which is a replacement for Original Medicare. The second way is to purchase a stand-alone prescription drug plan. Many consumers who keep Original Medicare purchase a Medicare Supplement Plan to help pay for deductibles, copays and coinsurance Medicare doesn’t pay for and also purchase a stand-alone prescription drug plan as well.
Who can enroll?
The beneficiary must have at least Medicare Part A. This is an important side note. When training agents some have the misconception that the beneficiary needs Part A and B. The way Medicare words is the beneficiary “must have part A and/or Part B. This means you can have only Part A and qualify to have a Part D plan. You can Part A and B and qualify for Part D. Last, you can have only Part B of Medicare and qualify for a Part D plan.
Costs for Medicare Prescription Drug Coverage
When looking at the costs most people will focus on the premium of the program as a main deciding factor. If you do not take any prescription drugs this may be the best way to go. However, most Medicare Beneficiaries are taking some type of prescription drugs and the best way to look at the cost of a Part D Prescription Drug Plan is to look at the overall costs. This includes the cost of the premium, deductible (if any), copays for prescription in the initial coverage level, cost of copays during the coverage gap (donut hole), and cost of copays during the catastrophic phase.
Medicare Part D Has 5 Different Levels
Medicare Part D Prescription Drug coverage has five different potential costs. The first is very simple and it is the premium. The monthly premium for the Part D prescription drug plan can range from under $20 per month to well over $100 per month. Why would a Medicare Beneficiary pick a $100 a month plan when a $20 per month plan is available. The main reason we see this is because of the formulary. A formulary is just a list of prescriptions on a specific Part D prescription drug plan and each company and plan will differ.
A person who only takes generic drugs may wish to purchase a lower-cost plan, because all of the generics they take are covered on the low-cost Part D prescription drug formulary. Another person may what to get the low-cost Part D prescription plan, but when they research the low-cost plan, they learn that their name brand drugs they take are not covered on the low cost formulary or have a very high copay. In addition, some high premium Part D prescription drug plans will also have lower copays than the low-cost Part D Prescription Drug plans.
For example, a name brand drug might be covered on a $20 per month premium plan and a $100 per month premium plan, but the copays may be drastically different. On the $20 per month plan the copay for a drug can easily be $100 for a 30 day supply and on the $100 per month plan the copay can be $10 for a 30 day supply for the same exact brand name drug. In this example, the monthly total cost of premium and copay of the drug for the $20 per month plan would be $120. And on the $100 per month plan would be $110 per month. This is why you need to look at all of the costs associated with each prescription drug Part D plan.
What are Tiers in the formulary of Part D?
All Part D plans have different tiers. Most plans have 5 tiers, some have more and some have less, but most have 5 tiers. Since most have 5 tiers we will use this model for this example. Each tier is has a copay level. Tier 1 usually has the lowest and tier 5 has the highest. Tier 1 is usually for preferred generics, tier 2 for generics, tier 3 for preferred brand name drugs, tier 4 brand name drugs and tier 5 for specialty or injectables. The copay for the drugs usually increases as the tier goes higher.
Each company has a formulary and defines the covered drugs and which tier they are on. All companies formularies are different. A formulary is a fancy description for a list of drugs. In addition, all companies don’t have to cover the same drugs. I am often asked, “are the drugs for the tiers the same with all the companies.” The answer is “no” and that is why it is important to do research where your drugs will fall with a specific company. For example, you may take a drug that with one company is a preferred brand name drug and will be on tier 3. With a different company, it may be on the brand name tier 4 of the formulary or maybe the other company doesn’t cover it at all.
Example of Beneficiaries That Do Not Do Research
I get many referrals and some of them are from my clients that have conversations with their friends about their drugs. The referral calls telling me they are taking a specific drug and their Part D doesn’t cover it. I ask them why they picked a plan that didn’t cover all of their drugs, to begin with. They usually say they chose that particular plan because it was the same company they were with when they were working. I then go look at all of the companies and this only takes a few minutes from the time we get the list of your drugs and find out the costs of all the Part D plans available to them and we are able to make a decision that fits their needs.
What is the Deductible?
The maximum deductible allowed by Medicare in 2020 is $435. $435 is the most a Medicare Part D Prescription Drug plan can have before the plan will start sharing in drug costs. If you get a plan with a deductible that means you have to pay 100% of the cost of your prescriptions up to that dollar amount before the Part D plan will start sharing in the cost of prescriptions. Some plans may only apply the deductible to brand name drugs and not apply the deductible to generic drugs. Some prescription plans have a $0 deductible on all levels.
Why should I buy a plan with a deductible when there are plans with no deductibles?
The premium tends to be a little higher on plans with $0 deductible. In addition, the overall costs for the entire year could very well be lower when you pay a deductible first. With the $0 deductible plans the copays for the prescription tend to be higher than those with a deductible. In many cases, it makes more economic sense to pay a deductible first then get the prescription at a lower copay compared to the Part D program with no deductible and higher copays for the prescriptions you take. This all depends on the combination of prescriptions you take.
What is the Initial Coverage Limit?
The Initial Coverage Limit is a dollar amount Medicare sets. It combines the amount the beneficiary pays and the drug plan pays. The Initial Coverage Limit in 2020 is $4,020. For example, if the Medicare Beneficiary’s copay for a drug is $10 and the insurance companies share is $90. Then the combined cost is $100. This $100 is subtracted from the $4,020. The beneficiary has $3,920 more dollars remaining in their Initial Coverage Limit. After the beneficiary and the plan have paid a total combined cost of $4,020. Then the beneficiary moves into the Coverage Gap (donut hole) Phase of Part D coverage.
What is the Coverage Gap (donut hole) Phase of Part D?
The Coverage Gap is usually where a beneficiary has the least amount of help from Part D to pay for prescription drugs. If a beneficiary reaches this phase it is critical to look at all of the available plans because they can all have different costs in the Coverage Gap Phase. For example, some plans will have what is called full coverage for generics in the Coverage Gap. They.. can also have full coverage for specific drugs like insulin or brand name drugs. This means that your copay for a generic prescription drug will be the same as if you were in the Initial Coverage Limit.
Part D enrollees will receive a 75% discount on their brand name drugs. This discount includes 70% paid by the drug manufacturer and 5% by Medicare. 25% of the plan’s cost is the maximum a beneficiary is responsible for brand name drugs. The 25% the Part D enrollee pays and 70% by the manufacturer count towards the True Out of Pocket Cost. The 5% Medicare pays does not count towards the True Out of Pocket Cost. Again, that is the maximum. Some plans may have lower costs.
Before exiting the Coverage Gap and moving to the last phase of Part D Prescription Drug Plan coverage a beneficiary must have a total out of pocket $6,350. When the beneficiary has paid a total of $6,350 out of their pocket for prescriptions then they will move into the last phase of Part D coverage called the Coverage Gap. The total out of pocket costs does not include the premium paid.
Are all companies Coverage Gaps the same?
No, they are not. The 25% for generic drugs and the 25% for brand-name prescriptions are the most a plan can charge. Some companies Coverage Gaps are actually less. This is why you need to look at the total costs for your prescriptions in all phases of the Part D coverage. This is another reason why beneficiaries must look much deeper than just premium, copays, and tier levels.
What is Catastrophic Coverage?
It is the easiest of all the phases to understand, but still a little complicated. Once the Medicare Beneficiary has paid a total of $6,350 out of their own pocket they move to the Catastrophic Coverage phase. If a beneficiary reaches this phase they will pay a copy of $3.60 for generics which have a full cost of less than $72. If the generic is over $72 then the copay is 5%. For brand name drugs the copay is $8.95 for brand name drugs with a full cost of less than $179. If the brand name drug is over $179, then the copay is 5%.
What is the Late Enrollment Penalty and When It Doesn’t Apply (Part D Penalty):
The Part D late enrollment penalty applies when a Medicare Beneficiary does not enroll when they first become eligible and doesn’t have a special circumstance to waive the part D penalty.
If you did not enroll in Part D inside of your initial enrollment period when you first become eligible (usually when you turn 65) you are likely to incur a lifetime penalty. The initial enrollment period lasts for seven months. It is three months before your birthday month, the month of your birthday, and three months after your birthday month. This is the window you have to enroll in Part D and not incur the penalty.
How Much is the Penalty and How is it Calculated?
Medicare has a simple formula to calculate the penalty, but it is a little difficult to explain. The penalty is 1% of the national average premium for all Part D plans, for every month the beneficiary did not have a Medicare Part D plan when eligible. The beneficiary is responsible to pay the penalty every month. That sounds complicated, but once you plug the numbers into the formula it is pretty easy to understand.
The national average premium for 2019 is $33.19 per month. We will use an example of a Medicare Beneficiary that first became eligible in June of 2015 and was without coverage until December of 2019. That is a total of 55 months. In this case the penalty is going to be 55% of the monthly national average premium.
Here is the math: $33.19 x .55 (55%) = $18.25. This dollar amount is rounded to the nearest $.10 and the monthly penalty will be $18.30 per month. Whatever Part D prescription plan the beneficiary chooses they will be assessed an additional $18.30 per month. This amount is on top of the monthly premium. This penalty can last for life and can go up or down every year. This happens because the national average premium changes each year and the penalty is recalculated. Below is the link to Medicare’s website if you would like additional explanation.
When the Part D Penalty will be waived.
The Part D penalty does not apply to those that have creditable coverage. The definition of creditable coverage is prescription coverage that is at least as good as Medicare’s Part D coverage. We find this with people that continue to work after they became eligible for Medicar and have health insurance through their employer or spouse’s work. If you have creditable coverage you are highly likely to not incur the penalty. To find out if your coverage is creditable is to simply ask your group health administrator. They usually know this answer right off hand. If this is the case, you will not incur the penalty and you will receive a Special Enrolment Period to enroll in Part D outside of your Initial Enrollment Period.
Veterans Association drug coverage is also creditable coverage. If you have VA coverage and wish to enroll in Part D outside of your initial enrollment period. The Part D penalty will not apply. If you didn’t enroll in Part D during your Initial Enrollment Period. You will have to wait until the Annual Enrollment Period which is from October 15 to December 7 and plans become effective January 1.
This covers the basics of Medicare Part D Prescription Drug Plans and a little more. If we can be of assistance to you in any way. Please feel free to reach out to us through our website https://trustedbenefitsdirect.com or call us directly at 800-910-3382.