If you’re a Medicare beneficiary, or you’re about to become one, then you’ve probably heard about Medicare Part D. This portion of Medicare is separate from original Medicare (Parts A and B), and it was introduced in 2003 as part of reforms signed into law by then-President Bush. Before you sign up for coverage, let’s take a look at what Part D entails.
What Is Covered Under Medicare Part D?
Medicare Part D is a prescription drug coverage program. It was designed to help seniors cover the cost of medication, which can get increasingly expensive as you age. Part D is available to anyone who is eligible for coverage under normal Medicare rules, which, for most people, means reaching age 65.
When you have Medicare Part D coverage, the costs of your prescription drugs are subsidized. Your coverage should help you spend less on prescriptions over the course of the year than you would if you were buying medication at retail cost. Even if you don’t currently use any prescription drugs regularly, Medicare Part D is like insurance; by having it in place ahead of time, you’ll be covered when you do need it.
Various private companies offer Medicare Part D plans. Each has its own premiums, guidelines, deductibles, and formulary. The formulary is the list of drugs that are covered under a plan and to what extent they’re covered.
Medicare Part D Costs In 2017 & 2018
Each Medicare Part D plan has its own premium, so the amount that you will pay for your coverage each month depends on which plan you choose. In 2017, Part D beneficiaries paid about $34 a month, on average, for coverage.
People with higher incomes pay a surcharge for Part D coverage just as they do for Part B coverage. The higher fee applies to individuals with annual incomes greater than $85,000 for an individual or $170,000 for a married couple. Major changes to your income – higher or lower – can affect how much you pay for premiums.
Part D plans typically also have a deductible. Until you meet this deductible, you are responsible for paying all drug costs yourself. Part D deductibles can be no more than $400 in 2017. This will increase to $405 in 2018. Some plans have zero-dollar deductibles, but the premiums for these plans are often higher.
Once you’ve met your deductible, the initial coverage benefit kicks in. During this time, the plan will help you pay for your prescriptions. The general idea is that you should have to pay only 25 percent of drug costs during this time. Because various plans structure their formularies in different ways, however, you may not pay a straight 25 percent. Often, companies offer a tiered system in which you pay one price for lower-tiered drugs and a higher price for higher-tiered ones. Companies are supposed to structure their systems so enrollees pay an average of 25 percent of drug costs during this time.
What is the Medicare Part D Donut Hole?
The “donut hole” is a term that refers to a coverage gap that some people with Medicare Part D face. It’s the period when you’ve reached the cap on drug spending (for your insurer) for the initial coverage period, but you haven’t yet hit your out-of-pocket spending limit for the year. In 2017, the initial coverage period cap is $3,700. This will increase to $3,750 in 2018.
After your drug costs for the year have totaled $3,700, you will have to pay a higher price per prescription until you reach your out-of-pocket spending limit for the year. In 2017, you are responsible for 40-51% of prescription costs during the coverage gap. There are exceptions; for example, some Part D plans with higher monthly premiums provide drug assistance during this time. The discount on brand name drugs goes up to 65 percent for 2018, and generic discounts are worth 56 percent.
It’s no fun to fall in the coverage gap, but the donut hole is becoming a little less unpleasant every year. The Affordable Care Act has been gradually reducing the amount for which people are responsible for the coverage gap. By 2020, the percentage of drug costs you’ll have to pay during this time will be down to 25 percent, similar to what it is during the initial coverage period. That is unless President Trump completely unwinds all aspects of the ACA. That is yet to be determined as Trumpcare has yet to gain any traction with either side of the isle.
The donut hole doesn’t last forever. Once you reach the total spending limit to reach catastrophic coverage – $4,950 in 2017 and $5,000 in 2018 – your plan will pay for most of the cost of your remaining medications for the year. You’ll only be responsible for a small coinsurance or copayment depending on your plan.
How Can You Save Money with Part D?
One of the best ways to reduce your costs with Medicare Part D is by selecting lower-cost prescriptions, such as generics. If you don’t use many prescriptions during a year, then choosing generics the few times that you do will save you money since you’re not likely to hit your deductible anyway. Many retail pharmacies offer cheap generics that are just as effective as their brand name counterparts, so check with your doctor about getting prescribed generic alternatives.
If or when you do meet your deductible, by asking for generic drugs, you’ll still save money. For tiered plans, generics usually fall into a cheaper tier than name brand ones. Plus, using low-cost drugs during the initial coverage period can help you to avoid the coverage gap for longer than if you stuck with brand names.
Another way to save money with Medicare Part D is by carefully comparing plans before enrollment. Monthly premium charges and drug coverage vary widely among plans. The arrangement that is best for you depends largely on which prescriptions you use. A plan that saves your friend a ton of money might end up costing you a significant chunk of change because you and your friend take different medications.
The Medicare website offers help for learning which plan is the best for you. With the Medicare Plan Finder, you can enter your personalized info and find details on various plans that are available in your area and how much they are likely to cost you. Plans change from year to year, so take time annually to evaluate your current plan and decide whether there’s a better option for your needs for the coming year.