Medicare Part D

Part D is known as Medicare prescription drug coverage that is offered by private insurance companies. Medicare Part D prescription drug plans help lower the cost of prescriptions by having the members paying copayments instead of paying the full price of prescribed drugs. 

How do you get Part D?

There are two ways you can get Part D prescription drug coverage: 

• Join a Medicare Advantage plan that includes prescription drug coverage.
• You can join a stand alone Part D plan if you are on Original Medicare and/or Medigap plan.

Medicare Part D Coverage Phases

There are four phases of coverage in Medicare Part D prescription drug coverage. The coverage gap (known as Donut Hole) is a confusing subject among Medicare beneficiaries. Understanding all of the stages of Part D coverage will help you fully understand the coverage gap. 

The Annual Deductible

This is the first phase and you are responsible for prescription costs until you meet the deductible. Medicare updates this Part D deductible every year. During this stage you are responsible for paying 100% of the retail cost of your drugs until the deductible amount has been reached. Once you’ve met your plan’s deductible, you will move to the next phase, which is the Initial Coverage. If your plan has no deductible then you will automatically skip this stage and start in the Initial Coverage phase right away.

Initial Coverage

This is the phase once your deductible has been met. Your plan helps you cover the costs of your prescriptions. You are responsible for the costs of any copayments or coinsurance amounts laid out by the plan, while your plan pays its share of the cost. During this phase, Medicare adds the amounts that both you and Part D plan have paid to come up with the total drug costs.

The Coverage Gap (Donut Hole)

After you reach your Initial Coverage limit, you will enter the Coverage Gap (Donut Hole) which is a phase in which you pay higher cost sharing for prescription drugs until you spend enough to qualify for the Catastrophic Coverage. Generally you are responsible for paying 25% of brand name and generic drug costs. Some plans cover generic drug costs during this phase. To move from this phase to the Catastrophic Coverage, you need to spend a certain amount ($6,550 in 2021) in out-of-pocket costs. 

Catastrophic Coverage

Once you leave the Coverage Gap, you will immediately enter the Catastrophic Coverage phase. From this point through the remainder of the year, Part D plans usually increase their cost-sharing percentage which substantially decreases your copayments or coinsurance that you must pay for your covered prescription drugs

Essential things to know about Medicare Part D Prescription Drug Coverage

• The best time to sign up for Part D is when you first become eligible for Medicare, even if you don’t take any prescribed medications as delaying enrollment can result in a Part D late enrollment penalty. Other than during Initial Enrollment Period, you can also join or change your existing Part D prescription drug plan during Medicare Annual Enrollment Period (AEP) between October 15 - December 7 each year and your changes will take effect on January 1 of the following year. There are also General Enrollment Period and Special Enrollment Period available. 
• The average monthly premium for Part D prescription coverage is $33.06. Premiums may vary depending on the plan. You pay this in addition to the Part B premium. If you’re in a Medicare Advantage (Part C) plan with drug coverage, the monthly premium may include an amount for drug coverage. If you have a higher income, you might pay more for your Medicare Part D prescription drug coverage due to Part D-IRMAA.
• When it comes to filling your prescription, you want to make sure that you do so at one of your drug plan’s “preferred'' pharmacies to receive the lowest advertised copayment or coinsurance.