Since January 1, 2006, all people with Medicare have had the option to add prescription drug coverage. Medicare Part D is a federal program that subsidizes the costs of prescription drugs. If you have traditional Medicare, you can join a prescription drug plan. If you sign up for a Medicare Advantage plan, a prescription drug plan is already included.
Enrollment
If you are new to Part D, you have a 6-month window—3 months before turning 65 and 3 months after—to enroll. If you do not enroll within this timeframe, you can enroll later, but you will have to pay a small late enrollment penalty for every month you were not enrolled past the deadline. This penalty, which changes yearly according to the national average premium for that year, will be added to your monthly Part D premiums for the rest of time you have Medicare. However, you do not have to pay the late enrollment penalty if you have coverage that is “as good or better than” the standard Part D plan from a private insurer during the initial.
Cost Sharing
As with other types of health insurance, you are responsible for some costs (annual deductible, lifetime maximum, coinsurance, annual out-of-pocket expense maximum, copayments). These are important factors to review when comparing prescription drug plans, especially coinsurance, copayments, and deductibles, because they can vary greatly from plan to plan. You can learn more about plans in your area and their costs from Medicare.
Prescription Drugs
Plans also vary in what drugs they cover. Each plan establishes its own formulary. A formulary is a list of covered drugs for which payment will be made. Typically, a formulary is organized into tiers, with each tier associated with a set copayment amount. Formularies usually have three to five tiers, with the lowest tier having the lowest copayment. You can use Medicare’s Formulary Finder to search for drug plans that will cover your medications.
Coverage Gap
Medicare Part D drug plans have a coverage gap, which is better known as the “Donut Hole,” or coverage gap, in which you must pay the full cost (100%) of your medicines. Some plans limit or eliminate the coverage gap, but these plans often charge higher premiums.
The 2010 doughnut hole, or coverage gap, falls between $2,830 and $6,440. Once you and your plan have paid $2,830 for your medications (after your deductible is satisfied), you are responsible for the next $3,610 or until total costs reach $6,440. Once you have reached this upper expense limit, your coverage will resume. Your Medicare Part D plan will pay 95% of your drug costs while you are responsible for 5%.
As part of health care reform, in 2010 Medicare beneficiaries who reach the coverage gap will be sent a tax-free $250 rebate check. You will not need to fill out any additional paperwork to receive the rebate. Look for your check in the mail. Also, beginning in 2011 Part D enrollees who reach the coverage gap will receive a 50% discount on the total cost of their brand-name drugs in the gap. Over time, Medicare will gradually phase in additional subsidies in the coverage gap to reduce the coinsurance rate from 100% to 25% by 2020.
Other Things to Consider:
- Remember to reevaluate every year the prescription drug plan you are enrolled in. Open enrollment, which is when you can switch plans, is from November 15 to December 31. Make sure your plan covers as much as it possibly can compared with other available plans.
- Check out the American Cancer Society’s list of available resources to help with drug plan decisions.
- Remember you cannot have Medicare Part D and a Medigap policy that includes drug coverage. You will have to either drop the drug coverage from your Medigap policy or change Medigap policies if you want to keep the Medicare Part D coverage.
- Medicare does offer a low-income subsidy for those struggling with drug costs. Contact the Social Security Administration at 1-800-772-1213 to request a review for subsidy.
- Visit the Center for Medicare Advocacy and the American Cancer Society for more information on Medicare Part D.