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- Why Buy a Medicare Part D Plan?
- Who Is Eligible?
- When Can I Enroll?
- How Do I Get Enrolled?
- Where Do I Get Enrolled?
- Are Prescription Drug Discounts Available?
- What is the Late Enrollment Penalty?
Medicare pays about 80% of your hospital and doctor expenses, but they don't pay for any part of your prescriptions, unless you are hospitalized. That's why Medicare added Part D. A Medicare Part D plan is cheap coverage for prescriptions. It's not required, but it's foolish not to have it.
You are eligible for prescription drug coverage under Medicare Part D as soon as you are entitled to Medicare Part A and/or enrolled in Medicare Part B. You can get drug benefits through two types of private plans: a Prescription Drug Plan (PDP) that provides drug coverage only or a Medicare Advantage plan with prescription drug coverage (MA-PD), also known as Medicare Part C. About 66% of all Part D beneficiaries use the PDP-only option.
The open enrollment period, also known as the Medicare Annual Election Period, starts on 15 October and ends 7 December. If you are becoming eligible for Medicare because you are turning 65, you have an Individual Election Period (IEP) that starts three months before your birth month and ends two months after your birth month, giving you plenty of time to get signed up. If you are Medicare eligible due to a disability, you have a similar IEP starting on your 24th month of SSI.
You must affirmatively enroll in a Part D plan to participate; It’s not automatic. If you are eligible for Medicare and don't enroll during the open enrollment period (or your individual enrollment period if you are just turning 65) you will have to pay a late-enrollment penalty (LEP) to use the benefit. The penalty is about 1% the average premium times the number of months that that you were eligible but not enrolled.
You enroll in Part D plan through an authorized Medicare insurance agent, through the plan itself, or through Medicare.gov. If you would like an independent agent recommendation, enter your zip code below to see a list of agents in your area.
Are Prescription Drug Discounts Available?
All Part D plans are different. Each insurance carrier covers drugs differently. This is why it is so important to verify the cost and coverage of your prescriptions before you choose a plan. If you do not have regular prescriptions, then the lowest cost plan is generally safe. You can always switch at the next open enrollment.
All prescription drugs are not covered at the same level. There are five standardized tiers in each drug formulary, giving participants incentives to choose generics over brand name drugs. The lower-cost medications are assigned to lower tiers making plans easier to compare.
Be aware that a Medicare Part D Plan does not cover everything, and it's only good for up to $2,960 of initial benefits (2015 initial coverage limit). After that, you pay out of pocket until you become eligible for catastrophic coverage. That's why we highly recommend GoodRx for People on Medicare. They have the most innovative prescription discount program we've seen for seniors.
What is the The Late Enrollment Penalty (LEP)?
Unless you are exempt, Medicare will impose a penalty if you do not join a Part D plan when first eligible to do so. Those exempt from the penalty include people who:
- Had creditable coverage, or
- Qualify for the Low Income Subsidy (LIS), or
- Were eligible for a Special Enrollment Period because they were impacted by Hurricanes Katrina, Wilma or Rita
The penalty is 1% of the national base monthly premium ($34.10 in 2016) for every full month the individual could have been but was not enrolled. The base calculation changes annually, and is based on the average national base premium.
The lifetime penalty is added to the person’s monthly premium is collected by the Part D plan, not directly by CMS. If a penalty is imposed before the beneficiary is 65, it is removed when the he or she turns 65.
If the late enrollment penalty was imposed in error, there is a process to request reconsideration. Medicare uses Maximus, an independent review organization, to process reconsiderations. The process can take months, and the decision is final.
Note: The late enrollment penalty must be paid during the time the penalty is being reconsidered. On approval, the beneficiary will be reimbursed for all erroneous penalty charges.
What is a Medicare Part D Drug Formulary?
Most seniors are surprised to learn that Part D prescription drug plans are not required to cover all Medicare approved medications. Every drug plan has a unique list of medications called a formulary that lists covered medications in pricing tiers. Plans create their formulary using the guidelines set by the United States Pharmacopoeia.
The formulary system makes choosing a plan challenging. It forces you to compare the medication you use across all formularies in order to find the best price.
There's no easy way around it. If you take medications, you'll need to figure out what your out-of-pocket costs would be for the drug plans in your area. You can do this using Medicare's drug plan comparison tool.
What Medications Are Not Covered by Part D Plans?
Here is a brief list of the medications that Part D plans are not allowed to cover:
- Medications that are not approved by the FDA
- Medications not available to sell in the United States
- Medications which are covered under Medicare Part A or Part B
- Medications for weight loss or weight gain
- Medications for fertility
- Medications for sexual disorders (e.g., erectile dysfunction)
- Medications used for cosmetic purposes (e.g., Rogaine for hair growth)
- Nonprescription drugs (e.g., OTC cold, cough and flu medications)