If you qualify for Medicare, then you probably also qualify for Medicare Part D and Medicare Advantage, both of which offer drug coverage to help reduce prescription drug costs. Unless you have qualifying drug coverage through another source, like your job, or you qualify for Medicaid and Extra Help, which can help with drug costs, you must sign up for Part D when you become eligible for Medicare. Otherwise, you’ll pay a late enrollment penalty on top of any premiums you might owe for the coverage once you do sign up.
Each drug plan varies in cost and what drugs are covered as well as the co-payments required for those drugs. Whether you’re new to Medicare this year or want to learn more about drug coverage, here’s what you need to know in 2018.
The enrollment period for prescription drug coverage is the same as your initial enrollment period for Medicare. Your initial enrollment period – the period when you can sign up for Medicare without any penalties – runs for seven months: three months before the month you turn 65, the month of your 65th birthday and the three months following that month. For example, if you turn 65 on July 11, your initial enrollment period for Medicare is April 1 through October 31. If you sign up for your Part D benefits during the first three months of eligibility, coverage begins the month your eligibility begins. If you join the month of your eligibility or in the following three months, your coverage will start the first of the month after you enroll.
If you don’t enroll in a Medicare drug plan when you are initially eligible, you cannot enroll in the plan until fall open enrollment, which runs from October 15 to December 7. However, if you sign up during open enrollment periods, you may have to pay penalties for signing up outside your initial enrollment period. In addition, there may be a lapse in coverage. Open enrollment is also the time of year when you can make changes to an existing drug plan, and there’s no penalty for switching.
Joining a Drug Plan
Once you’ve enrolled in Medicare, you’ll need to choose your drug plan. You can choose from a Medicare prescription drug plan, known as Part D, or a Medicare Advantage Plan, known as Part C. You can enroll in either of the options through the Medicare website or complete a paper enrollment form to be mailed or dropped off at a Medicare office. If you prefer speaking with someone over the phone, a customer service representative can help you enroll in your plan.
Medicare Prescription Drug Plan (Part D)
Medicare prescription drug plans (Part D) provide you with prescription drug coverage under original Medicare (Parts A and B). The plans are sold, marketed and advertised by private insurance companies, but there are rules that Part D companies have to abide by, even when it comes to marketing products. You are eligible for Part D if you have Part A, Part B or both and you live in an area that is serviced by a Part D plan. Medicare Part D is not required coverage and you don’t have to enroll, but there are penalties if you don’t sign up during the initial enrollment period and need to add it later.
Medicare Part D Costs
Costs for Medicare Part D include your premium, deductible, coinsurance and the coverage gap (“donut hole”), which is when you’ll pay a higher portion of the costs of your prescription drugs. You may qualify for a subsidy to offset the costs of your prescription drug plan if you qualify based on income.
Premiums vary by plan since Part D coverage is sold by private insurers. You might pay nothing for monthly coverage, but you may live in an area with limited options or costlier plans and have a sizable premium. Earlier this year, the Centers for Medicare and Medicaid Services (CMS), which administers Medicare, announced that the average base premium for Part D coverage in 2018 would be $33.50 a month, a decrease over last year’s average base premium.
The amount you pay can change based on income levels and penalties for signing up late. As with Medicare Part B, premiums are adjusted based on the modified adjusted gross income you reported on your tax return two years previously. This is called an income-related monthly adjustment (IRMAA). Costs for Part D premiums include an IRMAA surcharge of between $13 and $74.80 a month – on top of your plan’s premium – depending on your income.
Medicare Advantage Plan (Part C)
Medicare Advantage (Part C) combines original Medicare (Parts A and B) with other benefits. At minimum, Advantage plans must cover everything that Parts A and B cover. These plans are sold via private insurers, and they may include additional benefits like vision, hearing and dental coverage. Medicare pays a determined amount each month to the companies that offer Part C plans. In return, the companies selling Advantage plans are bound by rules set by Medicare.
Each plan can charge its own out-of-pocket costs and may require you to get a referral for a specialist or to obtain healthcare from certain providers. Like Medicare Part D, the cost of Medicare Advantage Plans varies depending on the coverage you choose. Many Advantage plans include drug coverage and can be a more economical way to bundle your health insurance into one plan.
Choosing Between Part D and Part C
When deciding between Medicare Part C and D, there are many things to consider. Medicare Advantage plans might cost the same as Medicare Part D while others have higher premiums. One of the biggest differences between these options is that Medicare Advantage plans are more like the insurance you might have had from your employer or bought on your own. They have different monthly premiums, networks, co-pays and out-of-pocket limits.
In addition, Medicare and Part C plans have contracts that can be cancelled at the end of the contract period. This could mean your plan may not be available the following year if the company chooses not to contract with Medicare again. If you choose Medicare Part D, you may also add a Medigap policy that will cover some of the costs not covered by original Medicare. You cannot have both a Medicare Advantage and Medigap policy.
What to Watch for in 2018
Costs are on the rise in 2018, so if you’re new or renewing your Part D coverage for the year, you’ll need to pay attention to the higher price tag.
- The Part D annual deductible will increase to $405, a $5 increase from 2017;
- The initial coverage limit will increase to $3,750, up $50 from 2017; and
- The out-of-pocket threshold will go from $4,950 to $5,000 next year.
There are also changes to the discounts offered during the coverage gap. This is the period when you’ve hit your initial coverage limit but haven’t exceeded the out-of-pocket threshold for the year. It’s also called the donut hole. The Affordable Care Act instituted discounts for people stuck in the donut hole with the idea of closing this gap by 2020. In 2018, you’ll get a 65 percent discount on brand name drugs in the donut hole and a 56 percent discount on generics.
As for Medicare Advantage, changes in plan structures and fewer options may make things difficult for seniors in 2018. A recent report found that 33 percent of people eligible for Medicare choose Advantage plans but a number of those enrollees dropped the plans because they were unable to get help for chronic illnesses. Changes to cost-sharing, the list of drugs covered and premiums are expected with many Medicare Advantage plans, so it’s important to read all information sent by your plan carefully.
You may also find that you can’t get a Medicare Advantage plan in your area in 2018. The Kaiser Family Foundation reported that in 147 counties across 14 states, there is no Medicare Advantage plan available. If you live in one of these areas, you will have to choose Part D and may want to consider a Medigap plan as well.
Choosing the right Medicare prescription drug plan can be confusing. If you need help, don’t be shy about asking. Look over your budget, evaluate your prescription drug needs and choose a policy that works. Open enrollment for Part D and Medicare Advantage runs through December 15, so now’s the time to review your 2018 drug coverage.