Original Medicare (Part A and B), introduced in 1965, did not cover outpatient prescription drugs. Over time, Medicare beneficiaries paid increasing amounts for out-of-pocket drug costs that, by 2003 were rising by roughly 12% annually. These higher costs to beneficiaries led Congress to pass the Medicare Prescription Drug Improvement and Modernization Act of 2003 to create Medicare Part D Prescription Drug Coverage. Now, almost 46 million beneficiaries have obtained Medicare drug coverage.
Let’s explore Medicare prescription drug coverage in more detail.
Medicare Prescription Drug Coverage
Medicare Part A (hospital coverage) and Medicare Part B (medical coverage) are offered through the federal government, but Medicare Part D prescription drug coverage is privatized. Through private insurance companies approved by the government, beneficiaries can either purchase a stand-alone Part D plan (to complement their Original Medicare coverage) or a Medicare Advantage plan that bundles Original Medicare with drug coverage. Each participating plan’s list of covered drugs will vary by tier, copays and coinsurance. These costs, which often also include a deductible, will typically change year after year, so paying close attention to the changes in your Part D benefits is very important. According to Medicare.gov, “All plans must cover a wide range of prescription drugs that people with Medicare take, including most drugs in certain protected classes, like drugs to treat cancer or HIV/AIDs.”
The Centers for Medicare and Medicaid Services (CMS) requires all Medicare drug plans to cover drugs in the six protected classes: Anticonvulsants, Antidepressants, Antineoplastics/ anticancer drugs, Antipsychotics, Antiretrovirals (for HIV/AIDS) and Immunosuppressants (for transplants).
Medicare drug plans also cover the main categories of medications used by beneficiaries. Note that categories and covered medications will change over time as new drugs are regularly introduced into the market.
Medicare Part D plans will not cover:
- Over-the-counter medications
- Drugs intended for cosmetic purposes (hair growth, wrinkle treatments, etc.)
- Drugs that treat erectile dysfunction or any other type of sexual dysfunction
- Medications for the sole purpose of gaining or losing weight
Understanding Your Medicare Prescription Drug Plan’s Formulary
One term that you should familiarize yourself with, regardless of enrollment into a stand-alone Part D plan or a Medicare Advantage plan with Part D coverage, is formulary. A formulary is the list of medications that are covered by your plan. Understanding how a formulary works is an essential part of choosing your plan and taking full advantage of its benefits. Within the list of covered drugs, providers break down the category of coverage into tiers. Each tier helps designate the costs of any particular medication. While a particular medication can be on different tiers in different plans, you’ll consistently find the preferred generic medications are classified as Tier 1 and the more expensive brand medications will be found in Tiers 3-5. If you can resolve your medical conditions with generic medications, which are typically found in Tiers 1 and 2, you can keep your costs to the lowest levels.
When you look at any plan’s formulary, you’ll see the following information:
- The drug’s name. For certain prescriptions, this may include the average dosage as well.
- The drug tier.
- A third column with any notes about that particular drug. This includes any comments on restrictions for usage, such as prior authorization or quantity limits.
When reviewing the plan’s formulary, you can expect to see brand-name and generic versions of the most commonly prescribed drug categories included. This formulary is the first and most important step in evaluating and ultimately selecting a Medicare drug plan that fits your specific needs.
The Importance Of Annual Medicare Drug Plan Reviews
Your Medicare drug plan’s coverage, deductibles and copayments can change from year to year. Per CMS requirements, you must be notified of any changes to your plan for the upcoming year between September 15- and September 30. This information will be mailed to you and is formally called the Annual Notice of Changes (ANOC). Any change referenced in the ANOC will take effect on January 1 of the upcoming year. The ANOC should serve as a reminder to check your plan’s formulary for drug inclusion and tier assignment. Your ANOC will also provide you information on how to access the plan’s information online. If, after further research, you conclude your current plan will not meet your future needs, you have the opportunity to change your plan during the Annual Enrollment Period (AEP), which is October 15 – December 7.
The delivery of your ANOC is specifically timed to provide you this information before AEP so you have the full amount of time to make any changes to your plan. This is typically the only opportunity to change your Medicare coverage during the year, so it’s important to review coverage options to enroll in a suitable plan during the AEP.
Keep in mind that changes in drug coverage or costs may occur even more frequently during the course of the year. Any drug that is deemed unsafe by the Food and Drug Administration (FDA) or any drug taken off the market for safety reasons can be removed from your plan at any time. Others may be changed in the middle of the year with adequate written notice. That’s why it’s crucial to know your plan’s formulary and research other options by conducting annual plan reviews.
Medicare drug coverage is a critical benefit that many Medicare beneficiaries rely on to reduce their out-of-pocket prescription drug costs. Within this overview, you should now be equipped to conduct further research on plan options. If you are still unsure about how to research and compare options or seek guidance in understanding how and when you can make plan changes, contact us today. Medicare Portal offers reliable assistance from our local Medicare insurance agents who are ready to answer all your questions.