Although Original Medicare offers fairly comprehensive benefits, it doesn't cover prescription drugs. Luckily, you can get this coverage with Medicare Part D.
Part D prescription drug plans or PDPs are by far the most common way for beneficiaries to get covered. These plans function in a unique way and don’t all offer the same levels of coverage. It can be a chore to find out whether or not a given plan covers the drugs that you need, so we’ll go over everything you need to know to get it straight.
How Do Medicare Part D Plans Work?
Let’s start by taking a look at how Part D works at a general level. Part D drug plans are offered by private insurance companies, not the federal government. This means that there is more variety to plan details than there is under Original Medicare, which consists of Medicare Part A and Medicare Part B.
You can enroll in Part D plans during your Initial Enrollment Period, or other enrollment periods throughout the year, such as the Open Enrollment Period. If you've left the coverage area of one plan due to a move, then you'll be able to transfer to another using a Special Enrollment Period.
Part D plans can vary from Original Medicare in a few ways: cost, availability, and coverage.
Types of Medicare Prescription Drug Coverage
Although Part D is usually what people associate with drug coverage, there are other ways to get this coverage as well.
Medicare Advantage plans, also known as Medicare Part C plans, can sometimes offer prescription drug coverage as well. These plans will not function as standalone plans but will be bundled with regular insurance plans that are offered by private health insurance companies under Medicare Advantage.
Because these plans are bundled, it can sometimes be hard to find a plan that offers a perfect mix of ordinary coverage and drug coverage. If you have a Part C drug plan, you won’t be able to get a standalone drug plan as well. For those who do find a plan that works, it can be a very convenient way to ensure full coverage.
Part D Drug Plan Costs
The cost of Part D insurance will be different depending on which company you buy it from and other factors such as your age and health. Part D also includes something known as the income-related monthly premium amount. This is an additional fee that you will pay directly to the government, rather than your insurance company. The amount depends on your income, and you can find the full details from the Social Security Administration here.
Part D can also vary when it comes to cost-sharing. This refers to things like your deductible, coinsurance, and copay. However, plans can’t include a deductible higher than $505 in 2023.
Coinsurance and copayment structures will be discussed in more detail in the section on formularies below, but for now, all you need to know is that they can vary as well.
The Part D Donut Hole
Part D involves a unique structure that results in something known as the donut hole, or more simply the coverage gap. When you have Part D, your coverage is split into three parts: initial coverage, the donut hole, and catastrophic coverage.
Once you reach a certain amount of coverage paid by your plan, you will enter the coverage gap. At this point, you will have to pay higher out-of-pocket costs. The exact breakdown is slightly complicated, and Medicare.gov provides a full analysis of costs in the coverage gap.
For most people, the coverage gap won't be a huge burden due to the way the costs are distributed. But, it's important to understand the details if you suspect you're nearing the end of your initial coverage period.
Part D Availability
Part D plans, unlike Original Medicare, will not usually be available in the same form throughout the entire country. Because these plans are offered by independent private insurance companies, they will vary by state, with some plans only being available in some states.
For this reason, you shouldn’t rely on the information you find online about plan availability or pricing as anything more than a guide. Make sure to seek out a quote from companies that you know offer plans in your area for the most accurate availability information
Understanding Part D Formularies: Which Drugs Are Covered?
Similar to other aspects of Part D, the drugs that each plan will cover can vary widely. When you want to find out which covered drugs a plan offers you will have to look at its formulary.
A formulary, or drug list is basically a tiered list of medications at differing coverage levels. Plans will usually offer generic drugs for a cheaper price than brand-name drugs, and some drug costs can end up high even if the drugs are covered.
In general, there is no standard formulary; you will have to investigate each plan’s formulary structure independently. You can also call a plan’s information center to find out about specific medications if there are ones you are interested in.
Plans will also often use quantity limits as part of their coverage details. This means that even though they cover the drug, they only cover a certain amount of it before you have to pay out-of-pocket.
There are a few other things that can determine which drugs are offered. For example, if the Food and Drug Administration (FDA) deems that a drug is unsafe, it will almost certainly stop being covered by your plan. However, these events are not particularly common.
Although each plan has a different formulary, some medications are required by law to be covered by every Part D plan. Let’s take a look at these next.
Drugs That Are Always Covered by Every Part D Plan
Part D uses something known as a protected class to categorize drugs. This is set by the Centers for Medicare & Medicaid Services (CMS) and contains six classes. Any drug in this class will always be covered by every single Part D plan, with no exceptions. The six classes are as follows:
1. Antidepressants - used to treat major depression and anxiety disorders
2. Antipsychotics - used to treat psychosis and schizophrenia
3. Anticonvulsants - used to treat epileptic seizures
4. Immunosuppressants - used in conjunction with organ transplant
5. Antiretrovirals - used in treatment for HIV/AIDS
6. Antineoplastics - used in cancer treatment
There is another restriction that states that Part D plans may not impose prior authorization or step therapy on antiretrovirals, although this can be done for drugs in the other classes.
Part D Extra Help
Some Medicare beneficiaries may be eligible for a program known as Extra Help, which provides coverage at a lower cost for those that qualify. The full details surrounding Extra Help eligibility are outside of the scope of this article, but you should look at this information from the Social Security Administration to find out if you qualify.
Key Things to Remember About Part D Coverage
If you’re going into the process of getting a Medicare Drug Plan, you can never be too careful about finding the right plan. Because most people aren’t used to looking at formularies in detail, make sure you do a thorough job of this part of the process; if you pick a plan that doesn’t cover the drugs you need, you can be out of luck.
Also keep in mind that you may find a Medicare Advantage plan that covers the drugs you need, but that doesn’t offer more general coverage that works for you. As always, make sure to examine everything from a variety of angles and to explore every option available for you so you can find the plan with a perfect formulary for your needs.
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