Medicare Part D is a federal program administered through private insurance companies. These companies offer retail prescription drug coverage to Medicare beneficiaries. Prior to 2006, when the Medicare Part D began, tens of thousands of Medicare beneficiaries in America had little help with retail drug costs. They would often spend thousands of dollars each year paying for their medications out of pocket.
Simply put, Part D is insurance for your medication needs. You pay a monthly premium to an insurance carrier for your Part D plan. In return, you use the insurance carrier’s network of pharmacies to purchase your prescription medications. Instead of paying full price, you will pay a copay or percentage of the drug’s cost. The insurance company will pay the rest.
Your Part D insurance card will be separate from your Medigap plan. Keep in Mind if you decide to go with a Medicare Advantage Plan many of these plans include a Part D. Medicare Part D plans all follow federal guidelines. Each insurance carrier must submit its plan outline to the Centers for Medicare and Medicaid Services annually for approval.
There are 4 stages to a Part D drug plan:
1. Annual Deductible – in 2017, the allowable deductible is $400. Plans may charge the full deductible, a partial deductible, or waive the deductible entirely. You will pay the network discounted price for your medications until your plan tallies that you have satisfied the deductible. After that, you enter initial coverage. 2.Initial Coverage– during this stage of Part D drug coverage, you will pay a copay for your medications based on the drug formulary. Each drug plan will separate its medications into tiers. Each tiers has a copy amount that you will pay. For example, a plan might assign a $7 copay for a Tier 1 generic medication. Maybe a Tier 3 is a preferred brand name for a $40 copay, and so on. The insurance company tracks the spending by both you and the insurance company until you have together spent a total of $3700 in 2017. 3.The Coverage Gap– after you’ve reached the initial coverage limit for the year, you enter thecoverage gap. During the gap, you will still generally have significant discounts for generic medications. You will pay only 40% of your brand name medications, and 51% of generics. (This is so much better than in 2006 when many people had to pay 100% of their drugs in the gap.) Your gap spending will continue until your total out of pocket drug costs have reached $4,950 in 2017. 4.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 feature in Part D drug plans helps you limit your potential spending if you have expensive medications.
Part D drug plans also have changes from year to year. Your plan’s benefits, formulary, pharmacy network, provider network, premium and/or co-payments/co-insurance may change on January 1st of each year. Medicare gives you an annual election period during which you can change your plan if you desire to do so.