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Medicare Part D: A Clear & Concise Guide [2022]

By Rikin Shah | Licensed Life & Health Insurance Agent

What Is Medicare Part D?

Medicare Part D is a program that provides prescription drug coverage to people with Medicare.

It was enacted in 2003 by the Medicare Modernization Act and modified by the 2010 Affordable Care Act (also known as “Obamacare”).

Part D prescription drug plans are administered by private insurance companies and are not standardized.  That is, plans will vary in terms of the benefits they offer, their geographic availability, and the premiums they charge.

In the below article, we will address the five topics below, with regard to Medicare Part D:

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Chapter 1

What Is Medicare Part D?

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How Part D Plans Work

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When & How To Get Part D

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How Much Part D Plans Cost

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Mistakes To Avoid

What Is Medicare Part D?

The Federal Medicare Program provides health insurance coverage to Americans 65 and older as well as those with certain disabilities.  It is administered by Congress and the Centers for Medicare and Medicaid Services (CMS).

What Is Medicare Part D?

Since 2003, Medicare recipients have been able to access prescription drug coverage through Medicare Part D.  Part D plans are marketed and administered by private insurance companies and subsidized by the federal government.  Puy simply:

Medicare Part D assists you with the cost of medications that you typically have filled at a pharmacy.

Seniors can choose to enroll in either:

  • A stand-alone prescription drug plan (PDP) to supplement traditional Medicare; or,
  • A Medicare Advantage prescription drug plan (MA-PD), which cover all Medicare benefits including drugs

In 2021, 48 million of the more than 62 million people covered by Medicare are enrolled in Part D plans.

What Part D Does and Does NOT Cover

Medicare Part D coverage is limited to prescription drugs that are recognized as safe and effective.

This means that medications must be shown to treat a medical problem or condition, rather than merely make one feel better or alter one’s appearance.

Currently, the federal government has approved more than 4,000 drugs for Part D coverage. These include medications for common, chronic conditions such as high blood pressure, diabetes, and depression.

Medicare Part D: How It Works

Medicare sets a standard level of coverage, which each Part D plan must abide by.

Plans can vary on pharmacies they use, prescription drugs they cover, and how much they charge.

Plans design their prescription drug coverage using different methods, like:

  1. Network pharmacies
  2. List of covered prescription drugs (formulary)
  3. Coverage rules

Network Pharmacies

Medicare prescription drug plans have contracts with pharmacies that are part of their network.  Your medications may not be covered if you go to a pharmacy outside of your plan’s network.

Your plan’s network might include preferred pharmacies, a mail-order program, or a choice for retail pharmacies to give you a 2- or 3-month supply, in addition to retail pharmacies:

  • Preferred pharmacies: If your plan has preferred pharmacies, you may save money by using them. Your prescription drug costs (like a copayment or coinsurance) may be less at a preferred pharmacy because it has agreed with your plan to charge less.
  • Mail-order programs: Some plans allow you to fill prescriptions at home by mail. This can be a good way for people who take drugs often and don’t want to go to the doctor.
  • 2- or 3-month retail pharmacy programs: Some pharmacies may also offer a 2- or 3-month supply.

Covered Medications

Many Medicare drug plans have their own list of covered drugs, called a formulary.

Plans cover both generic and brand-name prescription drugs.  All Medicare drug plans have to cover at least two drugs from a list of categories, but they can choose which specific drugs they want to include in their plan.

Within these protected classes, plans must cover nearly all drugs: antipsychotics, antidepressants, anticonvulsants, immunosuppressants, cancer drugs, and HIV/AIDS drugs.

Drug Cost Tiers

To lower costs, many drug plans divide their drugs into different “tiers.”  Plans can divide their covered drugs as they choose.  Drugs in a lower tier will cost less than drugs in a higher tier.

  • Tier 1: Most generic prescription drugs. Lowest copayment.
  • Tier 2: Preferred, brand-name prescription drugs. Medium copayment
  • Tier 3: Non-preferred, brand-name prescription drugs. Higher copayment
  • Specialty tier: Very high-cost prescription drugs. Highest copayment or coinsurance

Eligibility & Enrollment

You can enroll in Medicare Part D at any point during your Initial Enrollment Period (IEP).  Generally, this occurs when you turn 65, as long as you have worked and paid taxes for ten years.

If this is the case, your IEP is the 7-month period that includes the three months before your 65th birthday month, the month of your 65th birthday, and the three months after your 65th birthday month.

If you don’t enroll in Medicare Part D when first eligible or during your initial enrollment period, you will need to pay a penalty.

Beginning in 2018, the penalty is 10% of the premium — this includes monthly premiums and any surcharges or additional premiums.

Who qualifies for Medicare Part D

To qualify for Medicare Part D, you must have Part A or enrolled in Part B and be entitled to Medicare because of age or disability. You also need to live in the plan’s service area, pay premiums, have no other drug coverage that meets Medicare’s standards, meet specific income requirements if your income is above a certain level, and already be enrolled in either Medicaid or the Children’s Health Insurance Program (CHIP).

The Social Security Administration says that about 99% of people with Medicare can receive prescription drug coverage. To find out if you already have this coverage, contact your current insurer.

How Much Do Medicare Part D Plans Cost?

Those who enroll in Medicare prescription drug plans can expect to pay premiums each month. These costs will vary based on location and prescription plan selection. After the initial enrollment period, those with prescription drug coverage under Medicare Part D may also need to pay a yearly deductible and copayments for prescriptions filled at a pharmacy.

Costs for Medicare drug coverage

Throughout the year, you’ll make these payments to a Medicare drug plan:

  • Premium
  • Yearly deductible
  • Copayments or coinsurance
  • Costs in the coverage gap
  • Costs if you pay a late enrollment penalty

Your actual drug coverage costs will vary depending on:

  • Your prescriptions and whether they’re on your plan’s list of covered drugs (formulary)
  • The “tier” the drug is in
  • The benefit phase you are in (i.e., if you’ve met your deductible, if you’re in the catastrophic coverage phase, etc.)
  • The pharmacy you use (e.g., preferred, standard, out-of-network, or mail order)

What is a formulary?

Every prescription drug plan has a list of prescription drugs it covers.  This list is called the formulary.

For example, if you need prescription drugs to help control diabetes, your prescription drug plan may offer several different types of diabetes medications on its formulary. If one type doesn’t work for you, another prescription drug plan may offer a diabetes prescription medication that works better.

Formulary information is also important when deciding whether to enroll in a prescription drug plan with prescription drugs that your current prescription drugs are not on the formulary for.

Which Companies Sell Part D Plans?

As shown above, the top five companies, by total enrollment, are:

  1. UnitedHealthcare (23%)
  2. Humana (17%)
  3. CVS Health (16%)
  4. Centene (11%)
  5. CIGNA (8%)

Medicare Part D FAQs

Medicare Part D coverage is limited to prescription drugs that are recognized as safe and effective. This means that medications must be shown to treat a medical problem or condition, rather than merely make one feel better or alter one’s appearance. Currently, the federal government has approved more than 4,000 drugs for Part D coverage. These include medications for common, chronic conditions such as high blood pressure, diabetes, and depression.

In most cases, an individual on Medicare Part D can switch plans as often as they want to. Typically, there may be a waiting period before the new plan can take effect depending upon when you enrolled in the new plan. In some situations, if a person is late with a payment, there might be a fee associated with switching plans.

The coverage gap is a design flaw in Medicare Part D coverage. It refers to a period of time when you have limited or no coverage for your prescription drugs (in other words, you have to pay their full cost out-of-pocket). This can be a problem for seniors who are on a fixed income, yet need medications to treat their chronic conditions.

Conclusion

This article has discussed Medicare Part D in detail. We’ve covered the different types of PDPs, the categories of not covered medicines, and how much these plans will cost you in terms of premiums and total out-of-pocket costs.

Given how expensive prescription drugs can be, it is essential to choose a prescription drug plan whose coverage is tailored to your needs.

As always, please feel free to reach out if you have any questions or need some additional guidance!

Warm Regards,
The GetSure Team

  1. Medicare.gov. 

    (n.d.). 

    What Medicare Part D drug plans cover. 

  2. Medicare.gov. 

    (n.d.). 

    How Medicare Drug Plans Use Pharmacies, Formularies, & Common Coverage Rules. 

  3. Medicare.gov. 

    (n.d.). 

    Costs for Medicare drug coverage. 

  4. KFF. 

    (June 8, 2021). 

    Key Facts About Medicare Part D Enrollment, Premiums, and Cost Sharing in 2021. 

  5. KFF. 

    (October 13, 2021). 

    An Overview of the Medicare Part D Prescription Drug Benefit. 

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