If you are about to enter Medicare, you may be wondering what coverage you need. Medicare Prescription Drug Coverage (Part D) covers your prescription medications, and plans are available through private insurance companies approved by Medicare. If you are not currently taking medications, or are comfortable paying out of pocket, you may wonder whether or not you should sign up for a Part D drug plan. We’ll explain why having a drug plan is essential and why you should enroll when you first enter Medicare.
Why Should I Enroll When I’m First Eligible?
Technically, a Medicare Part D drug plan is an elective form of Medicare coverage. This means that the law doesn’t require you enroll in one, but there might be significant penalties if you choose to pick up a plan later than your Initial Enrollment Period.
Medicare only allows you to pick up a Part D plan at certain times. This means that if you miss an enrollment period, you may have to wait until the next one. It’s important to understand your enrollment periods, because if you don’t enroll on time, you may face a year or more of paying for your medications out-of-pocket.
In addition to waiting a year to enroll, when you do pick up coverage, you’ll likely have to pay a late enrollment penalty. You will pay an additional 1% of the national base premium ($33.19 in 2019) for every month that you did not have drug coverage (rounded up to the nearest $.10) for the rest of your life. For example, if you enroll one year late, you will pay an extra $4 on your monthly premium. In short, it tends to be less risky and more cost-effective to enroll in a drug plan when you’re first eligible.
When Can I Enroll in a Part D Drug Plan?
You can enroll in prescription drug coverage during your Initial Enrollment Period (IEP). This is the 7-month period including the 3 months before, the month of, and the 3 months following your 65th birthday.
You can also enroll in or change your Part D plan during the Annual Election Period (AEP). This period runs yearly from October 15th to December 7th, and your coverage will be effective January 1st. You may also be able to add or drop Part D coverage during the Medicare Advantage Open Enrollment Period (January 1 – March 31). Part D plans can change their formulary and benefits each year. The formulary determines which drugs the plan will cover, and how much of the cost of each medication that they will cover, so it is a good idea to review your drug coverage every AEP. Even if your medications don’t change, it is possible to save money on a different plan.
Do I Need a Part D Plan If I have Other Drug Coverage?
If you have creditable drug coverage, you do not need to pick up a Part D plan. Most prescription coverage you get through an employer will be regarded as creditable, but a discount plan, for instance, is not. You should verify with Medicare that your coverage is considered creditable, otherwise, you’ll face the same penalties that you would with no coverage.
How Do Medicare Part D Drug Plans Work?
Medicare Part D drug plans have 4 phases of coverage.
- Phase 1 – Deductible Phase: The Annual Deductible is the amount you may have to pay before your Medicare Part D plan begins to pay its share in drug costs. During this phase, you must pay the full cost of your drugs. Deductible amounts vary from plan to plan, and some plans have no deductible at all. In 2019, Medicare Part D plans do not have a deductible of more than $415.
- Phase 2 – Initial Coverage Phase: In this phase, you and your plan start sharing the cost of your prescription drugs. You will pay a certain percentage (which varies by plan) of your drug costs in the form of copayments or coinsurance until you reach your initial coverage limit. In 2019, the limit is $3,820. After you reach your Initial Coverage Limit of $3,820, you will enter the next phase, known as the infamous “Donut Hole.”
- Phase 3 – Secondary Coverage Phase or Coverage Gap (AKA “the Donut Hole”): The Donut Hole is the phase in which you pay no more than 25% of the plan’s cost for covered brand-name drugs, until you have reached $5,100 in your total true out-of-pocket (TrOOP) within the calendar year. While in the Donut Hole, you will pay 37% of the cost of generic medications and no more than 25% of the plan’s cost for covered brand name medications. Once you have reached $5,100, you enter the final phase, which is called Catastrophic Coverage. In 2020, the Donut Hole will close.
- Phase 4 – Catastrophic Coverage: In the Catastrophic Coverage Phase, you will pay a low price for your medications in copayments and coinsurance.
How Do I Enroll in a Medicare Part D Plan?
You can enroll for a Medicare Part D drug plan online. Enrolling online is quick and easy. You can view plans in your area, and enter your medications to see what your monthly costs will be.
Nothing on this website should ever be used as a substitute for professional medical advice. You should always consult with your medical provider regarding diagnosis or treatment for a health condition, including decisions about the correct medication for your condition, as well as prior to undertaking any specific exercise or dietary routine.