When evaluating your Medicare prescription drug costs, it’s important to select a plan that fits within your budget and allows access to your covered medications through the pharmacy of your choice or mail order. The costs for Medicare prescription drug coverage can vary depending on your list of medications, where you live and how you fill your prescriptions. This blog post provides information on the costs you can expect for stand-alone Medicare Part D prescription drug plans.
What Is Medicare Part D?
Medicare Part D is a federal program offering prescription drug coverage to Medicare beneficiaries (already enrolled in Medicare Part A and/or Part B) that is administered through approved private insurance companies. Interested insurance carriers must submit annually to CMS a plan outline of how they will provide Part D benefits that comply with Medicare’s minimum prescription standards.
Prior to 2006, many Medicare recipients experienced high prescription drug costs due to the lack of comprehensive Medicare prescription drug benefits. It wasn’t uncommon for Medicare beneficiaries to spend thousands of dollars out of pocket for needed prescription drugs. Thanks to the passing of Part D legislation in 2006 that established Medicare Part D, Medicare beneficiaries could now get financial relief for brand and generic drugs.
There are two ways Medicare beneficiaries can receive prescription drug benefits.
Their options are:
- Enroll in a stand-alone Part D plan. (This would be for those enrolled in Original Medicare, Parts A and B.)
- Enroll in a Medicare Advantage plan, also known as Plan C, with prescription drug benefits When considering this option, look for Part C plans titled “MAPD” for Medicare Advantage Prescription Drug.
Costs for Medicare Part D Prescription Drug Coverage
As with other Medicare plans, Medicare Part D prescription drug coverage comes with specific cost structures that are necessary to understand, including:
If you enroll in a stand-alone Part D plan, you will pay a monthly premium in order to receive benefits. Should you enroll in a Plan C, you may or may not have a monthly premium.
A deductible is the yearly amount you will have to spend out-of-pocket on your prescription drugs before your coverage kicks in. Under most plans, your Tier 1 and 2 medications will not count towards the annual deductible. Only Tier 3 and above medications would be required to meet the deductible before receiving cost-sharing from the plan.
After paying your deductible, you could be responsible for a portion of the costs of your covered prescription drugs, which changes depending on the coverage period you are in. Unlike a copay, this would be a percentage of the medication costs. For example, in the coverage gap, also known as the donut hole, you would pay 25% of your prescription drug costs. Copayments, which are fixed dollar amounts, can be found for many Tier 1 and 2 medications.
Understanding Medicare Part D Stages of Coverage
Medicare Part D has four stages of coverage that dictate a beneficiary’s out-of-pocket costs each year. The first stage of Part D coverage is the annual deductible. For the year 2021, the Medicare Part D allowable deductible is $445. Participating plans can offer plans with a lower deductible, but they cannot offer a plan with a deductible higher than $445.
The second stage of Medicare Part D coverage is the initial coverage phase. During this phase, the beneficiary will typically pay copays for prescriptions. Your medications will be categorized by a tier, 1-5, that will dictate your copay or coinsurance. Based upon the medications you need, you will pay a specific amount according to the tier that the medication you need is designated.
The third component to Medicare Part D coverage is the coverage gap, also known as the donut hole. After a beneficiary reaches the initial coverage limit for a year, that recipient enters a coverage gap. Within the gap, you should expect to pay 25% of the retail cost of your prescription medications.
The fourth component to Medicare Part D coverage is catastrophic coverage. In 2021, this stage begins when the true out-of-pocket (TROOP) amount reaches $6,550. When a Part D beneficiary reaches the maximum TROOP spend of the coverage gap, they are responsible for only 5% of the medication costs, and the plan will pay 95% of the costs of medications for the remainder of the year. This catastrophic coverage feature within the Medicare Part D plan helps beneficiaries cap potential spending should needed prescription medications be expensive.
Connect With A Local Medicare Insurance Agent Today
Medicare Part D prescription drug coverage is often highly advantageous for Medicare beneficiaries. It’s important to understand the standard and variable costs you can expect with a Medicare Part D plan, separate from your Original Medicare plan costs. For assistance evaluating Part D plans and gaining more information on anticipated plan costs, consult with our licensed Medicare insurance agents today! Medicare Portal offers free one-on-one advisory services over the phone, online and in-person at your convenience.