Original Medicare (Parts A and B) does not cover prescription drugs. A Part D prescription drug plan is required to have drug coverage that will help pay for medications if the beneficiary opts to remain on Original Medicare. There are literally dozens and dozens of Medicare Part D plans that will afford coverage for members nationwide, but not all plans are the same and can vary greatly in their premiums, deductibles, copays, and drugs covered.
Medicare Part D plans can only be obtained through a private insurance company. The federal government sets guidelines for the types of drugs Medicare Part D plans must cover, however, each plan decides on which specific medications it will cover and how much members will pay. Medicare Part D plans are available to those eligible for Medicare and have at least one of the Medicare parts, either A or B. Both Medicare parts are not required for Part D eligibility as its required for Medicare Supplements and Medicare Advantage plans.
As noted above, not all plans cover all medications. Each plan has its own list of covered medications, known as a Drug Formulary. It is especially important to choose the right plan for yourself. The agents at Health Plans of Texas will help you review all your medications to make sure they are listed in the drug formularies of the plans you may be considering. Some plans may also require the member to pay the annual Part D deductible ($445 for 2021) before the plan affords any coverage, which could greatly affect the ability for some to pay for name brand and other expensive medications during the annual deductible stage of Part D.
Contact us today to learn more about Part-D Plans.
Most plans will group covered drugs together by their cost. These groupings are called tiers and can range from Tier 1 up to Tier 5. Generally, the lower the tier, the lower the member cost-share for that medication.
- Tier 1 – Preferred Generic
- Tier 2 – Generic Drug
- Tier 3 – Preferred Brand
- Tier 4 – Non-preferred Drug
- Tier 5 – Specialty Tier
Note: Not all generic drugs fall under tiers 1 and 2. There are generic drugs in all five tiers, and it is important to check the drug formulary for the tier of the specific generic drug you are taking. Our agents will assist you in checking that.
Drug Coverage Stages
Under Medicare Part D prescription drug coverage, the amount the member pays for prescriptions may change over the year for the following reason. There are 4 drug payment stages in a plan year and the amount of the member cost-share changes depending on which stage the member is currently in.
One must take this into consideration to be able to calculate their annual costs and whether that plan is cost feasible.
- Under Medicare Part D prescription drug coverage, the amount the member pays for prescriptions may change over the year for the following reason. There are 4 drug payment stages in a plan year and the amount of the member cost-share changes depending on which stage the member is currently in. Annual Deductible Stage – This stage only applies to plans that have a Medicare Part D deductible as part of the cost-share. The plan may not cover any medications until the member meets the deductible. Other plans may have a deductible, but only apply it to tiers 3 and above.
- Initial Coverage Stage – Once a member meets their deductible, they move to the initial coverage stage which has set copays for each tier that a member must pay. Members who are on plans that do not have a deductible will automatically begin the year in the initial coverage stage.
- Coverage Gap Stage (also known as the donut hole) – Medicare sets a limit on total drug costs covered through the initial coverage stage each year. This limit ($4,130 for 2021) is calculated by adding the amount the member pays and the amount the insurance pays for each medication.
This calculation is known as true cost of medications and when the member reaches the limit, the member goes into the coverage gap stage. The member no longer pays the set copays that were in the initial coverage stage. Instead, the member will pay no more than 25% coinsurance for generic or for name brands drugs on any tier during this stage. This amount is usually considerably higher than the set copays one was paying before. If one takes a lot of medications, especially high-cost medications, you may move into this stage.
- Catastrophic Coverage Stage – This is the last stage of Part D plans and one will not reach this stage until the insured’s out-of-pocket costs reach $6,550. However, once the person reaches this stage, they will pay the greater of $3.70 copay for generic medications, $9.20 copay for all other drugs, or 5% coinsurance.
The coverage cycle resets and starts over again on January 1 of each plan year. Medicare Part D plans send their members an “Explanation of Benefits” each month detailing how much in cost that medications have been covered. There is also a section in that explanation that keeps track of how close the member is to reaching the coverage gap stage.
Late Enrollment Penalty
The initial enrollment period (IEP) is 7 months long, which includes your birthday month, plus the 2 months before and 3 months after your birthday month. If you have creditable drug coverage through either an employer group plan or other insurance, it may not be necessary to enroll in a Part D plan right away. Creditable drug coverage is defined as coverage at least as good as you could get through Medicare Part D. Prescription discount cards and plans, such as GoodRx, are not considered creditable drug coverage. One can also get creditable drug coverage through a Part C Medicare Advantage plan. If you lose creditable drug coverage, you have a two-month Special Election Period to enroll in a Part D or Part C Medicare Advantage.
Although you are not required to enroll in a Medicare Part D plan, there is a penalty of 1% of the average monthly premium for each month you delay enrollment if you do not have other creditable drug coverage. The maximum amount of time that a Medicare eligible recipient can go without creditable drug coverage and not be charged a penalty is 63 days.
Note: If a single person or married couple falls under certain income and resource limits, they may qualify for Extra Help with Medicare Part D through the Social Security Administration. Depending on the level of extra help one qualifies for, it can greatly reduce the copays the member pays as well as eliminate any Part D deductibles and Late Enrollment Penalties. Our agents can help you apply for Extra Help with Medicare Part D.