Medicare Part D Prescription Drug Coverage
Medicare Prescription Drug Coverage is available to all Medicare beneficiaries. This benefit, also referred to as Medicare Part D, is one of many changes brought about by the Medicare Modernization and Improvement Act of 2003 (MMA). Medicare consumers who are entitled to Part A (hospital insurance) and/or enrolled in Part B (medical insurance), are eligible for the prescription drug coverage. People who are eligible for both Medicare and Medicaid benefits (dual-eligible) may also enroll. Enrollment in a drug plan is on a voluntary basis and requires completion of an enrollment form. Although enrollment is voluntary, there are time limitations during which consumers must enroll to receive the benefits. The following enrollment periods offer consumers the opportunity to participate in this coverage:
The Initial Enrollment Period for Medicare actually starts three months before you turn 65, so you can start applying for and setting up your coverage when you’re 64 and nine months. And you should do that.Medicare is made up of four component Parts. Specifically:
- The Initial Enrollment Period applies to an individual first starting Medicare benefits and includes the three months before an individual turns 65 to three months after turning 65. Disabled individuals may enroll three months before and three months after their 25th month of disability;
- Annual Coordinated Election Period: October 15 through December 7 of each year;
- Special Enrollment Period (must have a qualifying circumstance such as a change of residence).
The standard Medicare drug coverage includes three levels of expense that beneficiaries will move through during the year as they purchase their prescription drugs. Out-of-pocket costs for covered medications in 2011 included:
- An annual $310 deductible
- 25 percent of prescription costs between $310 and $2,840 (a total of $632)
- 100 percent of prescription costs between $2,840 and $6,448 (a total of $3,608)
Once prescription costs reach $6,448 (a total of $4,550 true out-of-pocket costs—not including the premium), consumers will pay $2.50 for generics and preferred drugs and $6.30 for all other drugs, or a 5 percent co-pay—whichever is greater. There are two important documents that are part of any Part D drug plan:
- Pharmacy Directory, analogous to the Provider Directory in a Part C plan, which lists network pharmacies that have agreed to fill covered prescriptions for plan members. This Directory is usually updated once a year;
- Formulary or List of Covered Drugs, which describes the prescription drugs covered by the plan. The list is developed by the plan, usually with the help of a team of doctors and pharmacists—and the list must meet requirements set by Medicare. It also tells you if there are any rules that restrict coverage for certain drugs. And this list is also usually updated once a year.
An important note: Only payment for prescription drugs that are part of a plan’s formulary will count toward the deductible and out-of-pocket limit. A Part D plan may also cover some drugs that are not listed in the Formulary. If you use a prescription drug that’s not listed, you can contact the plan’s Member Services office to inquire whether it is…and whether it can be added. (You may need some supporting materials from your doctor to get a drug added.) An “exceptions” process will be in place for a beneficiary to request a covered Part D drug at a lower cost-sharing level, or to request a drug that is not on the plan’s formulary. The beneficiary’s physician must determine that the lower-cost drug on the formulary is not as effective as the requested drug, or that they would have adverse effects on the enrollee.
Drugs that are excluded from coverage under Part D plans include: Barbiturates, Benzodiazepines (anti-anxiety medications), weight loss and weight gain medications, drugs covered under Part A or Part B benefits, fertility drugs, cosmetic drugs, cough or cold remedies, or vitamins (except prenatal). When you use Part D prescription drug benefits, the plan will send you a report that explains the payments that it has made for prescription drugs. This report is usually called an “Explanation of Benefits” (EOB). And it will usually include a summary portion that describes the drugs you’ve used during previous periods—most often the previous month and year.
Most people pay a standard monthly Part D premium. However, you may have to pay an extra amount if your annual income is higher than certain limits ($85,000 or above for an individual or married individuals filing separately or $170,000 or above for married couples). If you have to pay the extra amount, the Social Security Administration—not your plan—will send you a letter telling you so and what that extra amount will be. And there’s another reason that you might have to pay more for the Part D drug coverage: If you did not join a Medicare drug plan when you first became eligible or if you’ve had a “continuous period of 63 days or more” when you didn’t have “creditable” prescription drug coverage, you will have to pay a late enrollment penalty. (“Creditable” coverage means a drug plan that is expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage.)
The amount of the late enrollment penalty depends on how long you waited before you enrolled in drug coverage or how many months you were without drug coverage after you became eligible. In some cases, you can pay the penalty in a lump sum—but, usually, you’ll be asked to pay it as a surcharge to your monthly Part D premium.
Some Part C/Medicare Advantage plans include prescription drug coverage that follows the same rules as the Medicare Part D coverage. This Medicare Advantage Prescription Drug (MA-PD) coverage provides an integrated benefit covering their hospital, physician, and drug costs. To qualify for a MA-PD plan you must be entitled to Medicare Part A and enrolled in Part B. But, generally, it’s better to use a Part C plan that doesn’t offer drug coverage and get a stand-alone Part D policy. This way, if you decide to change the Part C plan you use—or if you choose to go back to traditional Medicare—your prescription drug coverage won’t be affected.