Ultimately, the answer to the question “what is Medicare Part D?” can be summed up with a basic equation: “D=Drugs”!
Part D, also known as the Medicare Prescription Drug Benefit, is a federal program to help Medicare patients pay for prescription drugs. It was enacted in 2003 and went into effect on January 1, 2006.
Here’s a few simple details:
- It is optional
- You have to have Part A and Part B in order to have D
- You pay a monthly premium to have it
- There is an annual deductible. In 2019 it is $415.
- Instead of paying full-price for drugs, you pay a co-pay
- It covers “self-administered” prescription drugs (given to yourself )
- It doesn’t cover “professionally-administered” drugs (such as infusions given in a hospital or doctors office. Those are largely covered by Part B)
- Your Part D card will be a SEPARATE CARD from your Part A and B card
How does Medicare Part D work?
There are 4 stages to a Part D drug plan. They are as follows:
- Annual Deductible– in 2019, the deductible is $415. You will pay the network-discounted price for your meds until your plan tallies that you have met the deductible. After that, you enter Initial Coverage.
- Initial Coverage– during this stage of Part D you’ll pay a co-pay for your meds based on the drug formulary (aka: preferred list of drugs). Each drug plan will separate its medications into tiers.
Each tier has a set co-pay you’ll pay. For example, a certain plan might assign a $7 co-pay for a Tier 1 generic medication. Maybe a Tier 3 is a preferred brand name drug that is assigned a $40 co-pay, and so on.
The insurance company tracks the spending by both your out-of-pocket cost PLUS what the insurance company has paid until TOGETHER you’ve spent a total of $3820(in 2019). That’s the limit!
- The Coverage Gap– after you’ve reached the initial coverage limit you’re in the coverage gap (aka the DONUT HOLE). Here you’ll still have good discounts for generic medications. You’ll pay only 25% of your brand name meds costs and 37% of generic costs. (This is so much better! You used to have to pay 100% back in 2006!)
Your gap spending will continue until your total out of pocket drug costs have reached $5100(in 2019).
Please note! To get into the gap, Medicare tracks the total costs of what BOTH you and your insurance company have spent. But to get OUT of the gap (donut hole) they count ONLY what YOU have paid in deductibles, co-pays and gap spending for that year, plus manufacturer discounts. They do NOT count anything the federal government contributes!
- Catastrophic Coverage– after you’ve reached the end of the coverage gap, your plan will kick in to pay 95% of the costs of your formulary medications for the rest of the year. This is a great feature for those with chronic illnesses and those with expensive medications!
Real-Life Examples
Everyone’s health is different, therefore everyone’s costs will be different. I’ll use my own parents as two great examples!
Dad: My dad is 76 and takes only one prescription medication. It happens to be a generic so his monthly cost is $7 TOTAL. That’s $84 a year! Needless to say, he never even reaches his deductible the entire year.
And then there’s my mom…
Mom: My mom is 75 and has Multiple Sclerosis, chronic pain and chronic migraines. One of her MS meds is an injectible and the cost is over $5000 a MONTH. Between that plus the multiple pain meds and migraine meds and a blood pressure med or two….. she’s blown through her deductible, initial coverage and the donut hole by JANUARY!!!!! She’s all the way into catastrophic coverage by February!
Get Signed Up!
Although it is an optional plan, I would encourage your loved one to get signed up for Medicare Part D.
There are hundreds of medications that cost hundreds or thousands of dollars per year. These would be difficult to afford without coverage! If you’re still not sure, here’s a great article from Boomer Benefitstitled “Why You Need Part D”.
Talk to an insurance agent or call 1-800-MEDICARE to enroll on your own! A small monthly premium could save you or your loved one a fortune in the event of a very rainy day!
