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Medicare Part D is a federal program that began in 2006. It provides Medicare beneficiaries with access to retail prescription drugs at affordable copays. Prior to 2006, people on Medicare paid mostly out-of-pocket for their medications for over 40 years.
Medicare Part D is coverage for retail prescription drugs that you obtain from a retail pharmacy. This voluntary program allows you to access medications at a more affordable rate. It also provides insurance against catastrophic drug costs.
You do not enroll in Medicare Part D via Social Security. Instead, you will choose a Medicare Part D plan offered by a private insurance company in your state.
There are a few different costs associated with Medicare Part D. The first is the monthly premium, which is what you pay for the insurance itself. Then, there is cost-sharing that you will pay at the pharmacy for your medications. This cost-sharing may include some deductible spending if your Part D plan has a deductible.
Let’s break those down for you.
The monthly premiums for Part D drug plans vary depending on the specific plan that you choose. Each insurance company sets its own rates.
In 2022, there are many Medicare Part D plans to choose from in each state – sometimes 20 or more. Plans range from as low as $7 in some states to over $200+. Every insurance company sets its own formulary (list) of medications that are covered by the plan. Therefore, they can determine what monthly premium they will charge for the plan each year.
The cheapest Part D drug plan in your state is not always the best one for you. It’s important to choose the plan with a formulary that offers the medications you need. If you just enroll in the cheapest plan without checking the plan’s formulary, you may later learn – after you are locked in – that the plan does not cover one of your medications.
Some people with higher incomes may have to pay more for their Medicare Part D plan. If you earned more than $91,000 filing individually or $182,000 filing jointly, then Medicare will also require you to pay extra for your Part D coverage. This is called the Income Monthly Adjusted Amount or IRMAA. You can read more about IRMAA costs on our Medicare cost page.
When you go to the pharmacy to pick up your prescriptions, you will pay your share of the costs. Some plans have a deductible and then there are the copays that you pay for the medication itself.
The Center for Medicare and Medicaid Services sets the minimum guidelines for Part D plans each year. Each insurance company offering Part D plans must follow these guidelines.
All drug plans have 4 stages, and Medicare sets the threshold for each stage each year. The first stage is the Medicare Part D deductible. In 2022, this deductible is $480. This means that each insurance company can require up to a $480 deductible from you upfront before your benefits kick in. The insurance company can also charge a lower deductible if it chooses to do so. However, no plan can charge a higher deductible than what Medicare allows for that year.
In general, the drug plans that charge the deductible up front will have lower monthly premiums and lower drug copays. Some companies waive the deductible, but then you will see that the premiums and copays are usually higher than plans that charge the deductible.
The Medicare Part D program provides prescription drug coverage for senior citizens. The plans are offered by private insurance companies, and each plan has its own formulary, or list of covered drugs. Most plans have five tiers, with Tier 1 being preferred generic drugs, and Tier 5 being non-preferred brand drugs. The copayment amount for each tier varies from plan to plan.
Medicare offers a Drug Finder Tool, which can be found at www.medicare.gov. Enter your zip code and medications into the tool to find the plans that will be most cost-effective for you.
It’s important to do your annual homework with Part D to ensure the lowest out of pocket drug spending for the next year. Review your plan’s formulary to make sure your medications are covered and to know what you can expect to pay for them. And use the Medicare Drug Finder Tool to compare plans and find the one that’s right for you.
How Much Does Medicare Part D Cost? The amount you pay for your Medicare Part D plan depends on several factors, including your income, the plan you choose, and whether you qualify for Extra Help.
The federal government offers help with paying for your Part D drug plan expenses if you qualify for the Low-Income Subsidy. Anyone can apply for this at Social Security, but help is awarded based on proving low income and limited resources. You must have an annual income that falls below 150% of the Federal Poverty Level based on your household size.
Beneficiaries who qualify will receive assistance with paying their monthly Part D premiums, their annual Part D deductible, and also their copays for retail medications. There are different levels of qualification. The subsidy level generally determines how much assistance you will get with your monthly premiums. Someone qualifying for a full subsidy would have 100% of their Part D premium paid for, up to the benchmark allowed by Medicare for that year.
For example, if you get an award notice for a full subsidy, and the benchmark for the year is $34, then the LIS program will pay up to $34/month toward your premiums. Choosing a drug plan with a premium of $34 or less in that scenario would mean you pay nothing for your drug plan. Furthermore, you will pay no deductible if your plan has one. Your copays for medications are greatly reduced.
If you think you may qualify for the Low-Income Subsidy, it is worth contacting Social Security for an application. You may be able to get help with paying your Part D premiums, deductible, and copays.
Medicare Part D is a voluntary program that covers the cost of prescription medications. If you are 65 years old or older, you should enroll in Part D when you first become eligible. Many people who are still working at age 65 delay their enrollment into Part D until they retire. As long as your employer insurance has drug coverage that is as good as or better than Medicare Part D, you can delay enrollment without penalty.
You can enroll in Part D directly with a Medicare Part D insurance provider or through an agent that specializes in Medicare products. Enrolling through an agent means you will have an extra resource for help when you have questions or problems with your drug plan.
You can also enroll in Medicare Part D via Medicare’s website or by calling Medicare at 1-800-MEDICARE.
Some Medicare Advantage plans also include built-in Part D drug coverage. It’s important to check exactly which medications a Medicare Advantage plan includes before enrolling. Be sure that your plan covers the medications you need. You can only be enrolled in one Part D plan at a time. You cannot be enrolled in both Medicare Advantage and Part D at the same time.
When you first become eligible for Medicare, you have an Initial Enrollment Period (IEP) of seven months to enroll in Part D. This includes the three months before you turn 65, your birth month, and the three months following. A similar window exists for people who first become eligible for Medicare due to disability.
In addition, there is an annual election period from October 15 – December 7 during which you can enroll or disenroll in any drug plan. This is because each Part D plan’s benefits, formulary, pharmacy network, provider network, premiums and/or co-payments/co-insurance may change on January 1 of the following year. The insurance company will mail you an Annual Notice of Change each September.
If you are satisfied with the changes to your plan, it will automatically renew in January. However, some people change their drug plan during the annual election period if their prescription needs have changed and another plan better suits them.
We know that once enrolled in Medicare Part D, you are locked into the plan for the rest of the calendar year. You must wait for the next Annual Election Period to change or disenroll. However, we also know that there might be certain circumstances in which you need to change mid-year. That’s why Medicare has created Special Election Periods (SEP).
An example of a situation that would create a short Special Election Period during which you can make the necessary change is if you move out of state or lose your group medical coverage mid-year. If either of these things happen to you, your application for the new Part D plan must be coded properly to take advantage of that SEP. An incorrect code on the application can cause a rejection, so be sure to work with an agent who specializes in these plans.
Just remember that your insurance agent cannot solicit you for Part D. So if you wish to enroll, you must initiate that with your agent.
There are dozens of drug plans offered in most states. Fortunately, we can assist you with evaluating each plan based on your individual medications. We’ll help you determine which drug plans offer the specific medications you need at the lowest copays.