Medicare Part D is prescription drug coverage, and it helps cover the cost of prescription drugs. Part D is available to any individual with Medicare Parts A and/or B, and each Part D plan covers its own list of covered drugs that is subject to change at any time. We recommend Part D beneficiaries to review their plan annually to ensure that they are on the best plan.
First off, do you NEED a Medicare Part D drug plan?
Technically, the Medicare Part D drug plan is an elective form of Medicare coverage. You don’t have to enroll in one. Healthy Medicare recipients often question the need to purchase drug coverage if they do not take medications yet.
However, while the plan is optional, there are penalties for not enrolling when you are first eligible. These penalties are only realized if you decide to take the Part D drug plan at some point in the future. In addition, you may end up paying a higher premium if you enroll later.
Even if you don’t tend to take medications now, it may be wise to at least pick up the lowest cost Medicare Part D drug plan in your area to have coverage just in case and to also avoid the Part D penalty. In many states, the most inexpensive Medicare Part D drug plans are less $20/month.
Cost of Medicare Part D in 2018
Medicare Part D drug plans have 4 phases of coverage.
- Phase 1 – Deductible Phase: The Annual Deductible is the amount you 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. Some Part D plans do not have a deductible. In 2018, Medicare Part D plans will not have a deductible more than $405.
- Phase 2 – Initial Coverage Phase: After you’ve met the deductible, you will enter the Initial Coverage Phase, in which you and Medicare start sharing the cost of your prescription drugs. As a Part D beneficiary, you will pay 25% of your drug costs in the form of copayments or coinsurance until you reach your initial coverage limit of $3,750 in 2018. (Your drug plan will pay 75% of your drug costs.) After you reach your Initial Coverage Limit of $3,750, 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 your drug plan stops paying, and you are responsible for the cost of your medications until you have reached $5,000 in your total true out-of-pocket (TrOOP) within the calendar year. While in the Donut Hole, you will pay 44% of the cost of generic medications and 35% on brand name medications. Once you have reached $5,000, you enter the next phase, which is called Catastrophic Coverage.
- Phase 4 – Catastrophic Coverage: In the Catastrophic Coverage Phase, you will pay a low-fixed price for your medications in copayments and coinsurance. You will not pay more than 5% of the retail cost for medications covered by the plan.
Refer to the chart below to look at Medicare Part D costs in 2018.
How to Enroll in a Medicare Part D Plan
If you are interested in or currently have a Part D plan, you can:
- Join a Medicare Part D plan for coverage on prescription drugs
- Switch from one Part D Plan to another Part D plan
We have a free, online tool that can help you find, compare, and choose Part D plans. To use this tool, enter your zip code, your local pharmacy, and the medications you are taking. It will automatically generate a list of the best plans for you. You can find this tool by visiting this link.
If you need additional help, you can check out our how-to guide on how to find the right Part D plan for you. It will walk you through the step-by-step instructions on how to use the tool, and help get you to the plan that you need.
When You Should Enroll in a Part D Plan
If you are enrolled in Original Medicare (Parts A and/or B), you can enroll for prescription drug coverage during your Initial Enrollment Period (IEP). This is the 7 month period encompassing the 3 months before, during, and 3 months after your 65th birthday.
You can also enroll in Part D during the Annual Election Period (AEP). This period runs yearly from October 15 to December 7.
For more information on key enrollment periods to be aware of, please check out our handy Medicare Enrollment Period Chart.
Review Your Medicare Part D Drug Plan Options Annually
Part D plans can change their formulary and benefits each year. It is a good idea to review your drug coverage annually. Even if your medications don’t change, it is possible to save more money on a different plan.