Medicare Prescription Drug Plans (also called Part D, or PDP) are available through private insurance companies that are contracted by Medicare so costs and availability may differ between Medicare plans, insurance companies, and location.
But they are not really optional if you want to avoid a penalty later.
This happened to my husband. The insurance agent told him that he didn't need a plan because he didn't take any drugs. Wow, this agent was WRONG! Each month, we write a check for this penalty. Every month. My husband has to pay this penalty for the rest of his life!
How do you avoid this penalty?
Buy a plan when you are first eligible.
Medicare prescription drug coverage is available in two ways:
Stand-alone PDP Plan
Medicare does not automatically include drug coverage. You have to apply for it. You can get it by enrolling in a stand-alone Medicare Prescription Drug Plan. This plan works together with Original Medicare.
Or you can get Medicare prescription drug benefits by enrolling in a Medicare Advantage plan that includes this coverage. We call these plans Medicare Advantage Prescription Drug plans or MAPD. They include Medicare health and prescription drug benefits under a single plan.
Medicare Prescription Drug Plans eligibility and enrollment
You're eligible for Medicare prescription drug coverage if:
- You enrolled in Medicare Part A or Part B, and
- You also live in the service area of a Medicare plan that includes prescription drug coverage.
- If you're eligible for Medicare Part D, you can enroll in a PDP or MAPD plan during certain times.
You might not have to sign up right away if you are still working:
Some employer-sponsored health plans have creditable coverage. But be wary, because not all employer coverage is creditable. Your employer sends you a notification each year. This tells you whether your coverage is considered creditable.
Contact your human resources department to make sure your insurance is creditable if you don't receive this notice.
If you have creditable coverage, you don't have to sign up for any of the Medicare Prescription Drug Plans.
If you make too much money, you must pay more:
Keep in mind that if your income (as reported on your tax return from two years ago) falls above a certain threshold, you may pay an extra cost. Known as the Medicare Prescription Drug Plans Income-Related Monthly Adjustment Amount (IRMAA), this cost is separate from the monthly premium you may pay for your Part D coverage and may change from year to year. Unlike your Part D monthly premium, you'll pay the Part D-IRMAA directly to Medicare, not any of the Medicare Prescription Drug Plans you may have enrolled in.
*Sometimes you can get an exception for Medicare Prescription Drug Plans IRMAA. When my husband turned 65, he had just had a one-time bonus the year before. That kicked us above the IRMAA limits. Les contacted Medicare, and they gave him a form to fill out. Luckily, he got the IRMAA waived.
Contact Medicare for more information on how to request an exception at 1-800-MEDICARE. This translates to 1-800-633-4227 if you are like me and don't have a phone with letters on it. 1-800-Medicare is open 24 hours a day, seven days a week. (Where else can you get that kind of service?)
How Medicare Prescription Drug Plans Work:
Each Medicare plan that covers prescription drugs has its own formulary, which is just a list of covered drugs. All plans must cover certain categories of medications, but the specific prescription drugs covered in each category may vary by an insurance company. Check the formulary to make sure your specific medications are covered. It's best to do this BEFORE you enroll!
And remember these plans change every year! It's best to check each year.
Here's how to check your medications to see which plan is right for you. Watch my Drug Plan Video inside this free class. I recommend that you do this each year between October 1 and October 15th so you’re armed with the information when the Annual Enrollment Period starts.
Medicare Prescription Drug Plans Cost Information:
You must keep paying your Medicare Part B premium, in addition to any monthly premium required by your Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan. If you're enrolled in a Medicare Advantage plan that includes prescription drug coverage, your plan premium may include the cost for your Medicare Part D coverage.
If your Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan doesn't cover a prescription drug that you and your doctor think you need, you have a right to ask for an exception to get that medication covered.
You can submit an exception request to Medicare Prescription Drug Plans by phone or in writing, and the plan must respond with its decision within 72 hours of receiving your request.
Medicare Part D is an optional coverage, and you don't have to get it. But, if you don't sign up for it when you're first eligible, you might have to pay a penalty when you enroll later. This happened to my husband.
And…Medicare won't give you an exception to this because you didn't know about the penalty. I know…we tried!
Initial Enrollment Period for Medicare Prescription Drug Plans
This is the period you're first eligible for Medicare prescription drug coverage. It usually overlaps with the period you're first eligible for Medicare, starting three months before you turn 65, including your birthday month, and ending three months later (for seven months). If you are eligible for Medicare through disability, this period starts three months before your 25th month of disability benefits from Social Security or the Railroad Retirement Board and lasts for seven months.
Medicare Annual Election Period / Medicare Annual Enrollment Period (October 15 to December 7):
The Annual Election Period or AEP is your yearly opportunity to change your Medicare Part D coverage or to sign up for it if you don't already have it.
Medicare Advantage Dis-enrollment Period (January 1 to Valentine's Day):
If you change your mind about your MAPD plan, you can dis-enroll return to Original Medicare during this time period.
If you qualify medically, you can use this time period to change from a Medicare Advantage Plan to a Medicare Supplement Plan.
But be careful, this can be filled with many pitfalls so make sure that you work with someone who has experience in this change.
Special Election Periods
If it isn't an election period we already discussed, you must qualify for a SEP to make changes. SEP stands for “Special Election Period”.
Some examples of situations that may qualify you for a SEP include, but aren't limited to:
- Moving outside of your Medicare plan's service area
- Losing your Medi-Cal (Medicaid) eligibility
- Moving into a nursing home
Medicare Part D late-enrollment penalty:
Even if you're not taking prescription medications, it's a good idea to sign up for Medicare Part D as soon as you're first eligible. If you don't, you'll be accumulating a penalty of 1% per month for every month until you sign up! And it's not a one-time penalty. The penalty lasts for the rest of your life.
As I mentioned earlier, you're eligible for Medicare Part D once you:
- Are enrolled in Medicare Part A and/or Part B
- Live in the service area that includes prescription drug coverage
In case you are wondering what will happen if you are prescribed medication in the middle of the year, you needn't stress.
All plans must cover at least two prescription drugs per drug category. Plans must also cover most medications in the anti-psychotics, anti-depressants, immunosuppressants, anti-convulsant, antineoplastic (cancer), and anti-retroviral (HIV/AIDS) categories must.
If you don't enroll in Medicare Part D, please make sure you have other creditable prescription drug coverage. Creditable coverage is insurance that is as good as the standard Medicare prescription drug benefit.
If you don't enroll in Medicare Part D when you're first eligible and go without creditable prescription drug coverage for 63 days in a row or more, you could face a late-enrollment penalty if you sign up for Part D later on. The penalty adds an extra amount to your Part D premium. You don't want to wind up like us: paying the extra amount for the rest of your life!
In addition to your monthly plan premium, other Medicare Part D costs may include:
This is the amount that you must pay out of pocket before your Medicare plan covers costs. The government sets a maximum deductible for Medicare plans that cover prescription drugs, which may change each year. The good news is that some plans don't have a deductible.
Co-payments and coinsurance:
You are responsible for paying these amounts for your medications after you have paid your plan deductible (if required).
Co-payments are fixed costs (for example, a $5 copay), vs coinsurance is usually a percentage.
For example, you may owe a 10% coinsurance for covered medications after your plan has paid its share.
Coverage gap, or “donut hole”:
Once you and your plan spend a specified amount, you go into the donut hole. While you're in the donut hole, your costs normally go up.
Then, after you've paid a different specified amount, you'll start the catastrophic coverage phase. During this phase, you pay only a small co-payment or coinsurance for covered prescription drugs. Your plan covers the rest of the costs.
And it all starts again the following year, with different specified amounts.
You can ask for an exception if your plan doesn't cover a medication your doctor thinks you need. If you get the exception, you can buy your medication under your plan. Normally, your doctor will apply for this for you.
The easiest way to find a plan that will save you the most money is to use Medicare's, Plan Finder. It can be tricky to find at first, but it's super easy to use. I've created a short 8-minute video that shows you how. Just go to The Free Medicare Class and watch the “How to Find the Cheapest Drug Plan” video.
And if you have any questions or would like help in enrolling, give me a call at 866-445-6683!