What You Need to Know About Medicare: Medicare Part D

Medicare Part D is the “prescription drug insurance” portion of Medicare.  Anyone who is eligible for Part A or Part B is eligible for Part D.  

The premiums are at their base (usually around $33.06 as of 2021, depending on coverage and region), but can be increased according to earnings by as much as $77.10 (as of 2021). (Income is based on 2019 amounts.)

If you don’t enroll when you are first eligible or go for more than 63 days without qualified prescription insurance coverage, you will have to pay a monthly penalty of about $0.33 per month you went without coverage for the rest of your life. (1) The open enrollment period is October 15th to December 7th every year, during which time you can change plans.

Benefit Coverage

While Medicare Part D is regulated by the Medicare program, it is actually designed and administered by private health insurance companies, so is not standardized.  Plans can choose which drugs they wish to cover, the level of coverage for each drug, and which pharmacies (including mail-order pharmacies) they will work with. Medicare fully excludes coverage for benzodiazepines, cough suppressants, barbiturates, and some other controlled substances. If the plan chooses to cover specifically excluded drugs, the cost cannot be passed to Medicare. 

The maximum yearly deductible is $445 (as of 2021) and must be met before your yearly coverage begins.(2) One very common gap in Part D plans is called a “donut hole” in which the patient will be responsible for 25% of plan-covered generic and name brand drug costs (as of 2021) once they reach $4,130 per year in drug costs (as of 2021),(3) but once yearly out-of-pocket costs exceed $6,550 (as of 2021),(4) Part D begins to pay again. After this point is reached, you will pay the greater of 5% of drug cost or $3.70 for plan-covered generic drugs and $9.20 for name-brand drugs for the rest of the year. (5)

Remember the following when comparing plans:

• Check Coverage: Make sure the drugs you need are covered by the plan by using the Part D plan finder at https://www.medicare.gov/find-a-plan/questions/home.aspx. Even if a drug is listed, sometimes a plan may not cover the dose and quantity that you need or may require you to get prior authorization from your doctor before the drug will be covered.
• Compare the Costs: While the premium is important, its overall effect on total cost can pale in importance to the effect of deductibles, copayments, pharmacy convenience, and drug coverage.
• Check the Pharmacies: Each plan has a list of pharmacies that support the plan participants. Make sure that your pharmacy, a nearby pharmacy, or mail-order pharmacy is supported by the plan you choose. It doesn’t make sense to save $50 a month in premiums if the plan ends up costing $50 in additional gas every month. 

Extra Help

Extra Help (also known as LIS) is a program to help people with limited resources pay for monthly premiums, annual deductibles, and prescription co-payments related to a Medicare prescription drug plan. Recipients are eligible to pay no more than $3.70 for generic drugs and $9.20 for name-brand drugs (as of 2021). (6) The Centers for Medicare and Medicaid estimate that there are more than 1.8 million people who are eligible and not receiving benefits. For those who qualify for the program, savings can add up to almost $5,000 per year,(7) so it is important to know if you meet the requirements.

In order to qualify for Extra Help, you need to fulfill the following criteria:

• Your resources must be limited to $14,610 for an individual or $29,160 for a married couple living together (as of 2021). (8) Resources include investment real estate, bank accounts, stocks, bonds, mutual funds, IRA accounts, and cash but do not include a primary residence, car, life insurance policies, personal possessions, property you need for self-support such as rental property or land you use to grow your food, resources not easily converted to cash such as jewelry or home furnishings, burial spaces, as well as a number of specific exclusions you can inquire about through Social Security.
• Your annual income must be limited to $19,140 for an individual or $25,860 for a married couple living together (as of 2021).(9) The amount is higher if you support other family members who live with you, have earnings from work, or live in Alaska or Hawaii. Annual income does not include food stamps, economic recovery payments, victims’ compensation, scholarships and education grants, and certain help you receive for food, shelter, heating, electricity, water, and property taxes.

Sources: 

1. “Part D Late Enrollment Penalty.” www.medicare.gov, www.medicare.gov/part-d/costs/penalty/part-d-late-enrollment-penalty.html.
2. “Yearly Deductible for Drug Plans.” www.medicare.gov, https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/yearly-deductible-for-drug-plans.
3. “Costs in the Coverage Gap.” www.medicare.gov, https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap.
4. “Catastrophic Coverage.” www.medicare.gov, https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/catastrophic-coverage.
5. “6 way to get help with prescription costs.” www.medicare.gov, https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap/6-ways-to-get-help-with-prescription-costs.
6. “Find Your Level of Extra Help (Part D).” www.medicare.gov, https://www.medicare.gov/your-medicare-costs/get-help-paying-costs/find-your-level-of-extra-help-part-d.
7. “What is Extra Help with Medicare Prescription Drug Plan Costs?” www.medicare.gov, www.ssa.gov/pubs/EN-05-10508.pdf.
8. “Lower Prescription Costs.” www.medicare.gov, https://www.medicare.gov/your-medicare-costs/get-help-paying-costs/lower-prescription-costs.
9. “Lower Prescription Costs.” www.medicare.gov, https://www.medicare.gov/your-medicare-costs/get-help-paying-costs/lower-prescription-costs.