Medicare Part D
Medicare Part D includes a variety of plans for prescription drug coverage. Plans are sold by private insurance companies and will lower the cost of prescriptions instead of paying the full price for medications. Part D members will pay a copay. There are a few unique features of Part D that beneficiaries need to understand.
Coverage Phases
The copay for prescription drugs will vary depending on which coverage phase the individual is in. Individuals with low-cost medications will not move through the phases as quickly as those with more expensive medications.
There are four Part D coverage phases.
The very first coverage phase in Part D plans is the deductible phase. Individuals are responsible for the deductible amount as indicated by their specific plan.
Often, tier one drugs (common, generic drugs) do not apply to the deductible.
If a deductible is indicated, an individual must meet that prior to receiving coverage for the prescription drugs. Currently, no plan may exceed a $445 deductible.
deductible.
Initial coverage is the second phase of Part D plans. Once the deductible has been met, the plan will help pay for prescription drug expenses.
Individuals must still pay any copays or coinsurance amounts, but these will be at a discounted price. The amount of time spent in this phase depends on the cost of the individual’s medication. This coverage phase ends when the total cost of medications (what the individual pays plus what the insurance has paid) reaches $4130.
The coverage gap is also referred to as the donut hole. Once the total drug cost has reached $4130, plan members will find themselves in the coverage gap.
While in the coverage gap, beneficiaries will pay more for their prescriptions. For the majority of name-brand medications, the member will pay 25% of their cost. Generic medications will amount to approximately 37% of their cost.
Members will remain in the coverage gap until their out-of-pocket cost reaches $6550.
Once the member has paid $6550 out-of-pocket, they will enter catastrophic coverage.
During this last phase, the member enjoys lower costs of medications. For generic drugs, the member will pay $3.60 or 5% of the price, whichever is higher. For name-brand drugs, the member will pay $8.95 or 5% of the price, whichever is higher.
Plan premiums, non-covered medications, and expenses from an out-of-network pharmacy do not count towards the out-of-pocket costs.
Tracking TrOOP
TrOOP stands for True Out-of-Pocket costs, and it refers to the maximum out-of-pocket expense for Medicare Part D plans. In 2023 the TrOOP amount will be $7400. Once this amount has been met by an individual, catastrophic coverage begins. As we mentioned earlier, catastrophic coverage significantly reduces the member’s prescription drug expenses for the remainder of the year.
Even if you switch plans mid-year, the amount you paid in your previous plan counts towards the new plan’s deductible, coverage gap, and total TrOOP amount. Members will receive an EOB each time they fill a prescription. The year-to-date TrOOP amount can usually be found on the EOB.
Part D Annual Premiums
Premiums for Part D plans will vary based on the insurance carrier. The average monthly premium for Medicare beneficiaries is $31.50.
Individuals with a higher income may pay a higher premium. The additional charge is called the income-related monthly adjustment amount. If the individual incurred a late enrollment penalty, that amount would also be added to the monthly premium.
There is financial assistance available to those with low incomes. Individuals must meet certain requirements in order to be eligible for assistance.
Is Medicare Part D mandatory?
Individuals are not required to enroll in a Part D plan. However, delaying enrollment without other creditable coverage in place will cause the individual to incur late enrollment penalties. Once penalties have been applied, they will never be removed.
Even if an individual is not currently taking medications, it is best to enroll in a Part D plan as soon as they are eligible. There are very low-cost plans available for those who take no medications.
Preferred Pharmacy Networks
Each Part D plan has its own requirements regarding which pharmacy its members use. Some plans will offer no coverage at certain pharmacies, and others may set some pharmacies as “preferred” and others as “standard.”
Using a preferred pharmacy will lower the out-of-pocket cost for medications.
Medicare Part D Deductible
Insurance companies set their own deductibles for each Part D plan. Oftentimes, the deductible only applies to drugs in tier two and above. Common, generic drugs are usually in tier one, where the deductible does not typically apply. However, this varies by plan, and individuals should be sure to check which of their medications must meet the deductible.
Medicare Part D
ENROLLMENT
There are many things to consider when choosing a Part D plan, and there are TONS of plans available for purchase. It can be overwhelming. But, you don’t have to make those choices alone! Our agents can compare plans across multiple carriers to find the perfect plan for you. The best part? Our services are completely complimentary.
Once you choose a plan, enrollment is simple. We will fill out the necessary paperwork, you’ll choose how to pay your premium, and then we’ll submit the application for you.
Our work doesn’t end there. We will always be available to answer your questions and can assist you with any future changes.
Part D Drug Formularies and Specialty Tiers
Each Part D plan has a drug formulary. This includes the prescription drug coverage found in Medicare Advantage plans.
The drug formulary is the list of covered medications within the plan. Those medications are placed in tiers. Generic, common medications are placed in lower tiers, while name-brand, specialty medications are placed in higher tiers. The higher the tier, the more the individual will pay.
However, exceptions can be made. If a provider informs the drug company that there is no replacement for the specialty drug, a discount may be given for drugs in a higher tier. These exceptions are not common but may save beneficiaries money when applied.
Specialty drugs may also require that the provider obtain approval from the insurance company before administering the medication. The insurance company may also require the member to try a less expensive medication before approving coverage for more expensive ones.
The Part D Annual Notice of Change
The Annual Notice of Change (ANOC) is sent out to all Part D members every year at the end of September.
The ANOC will notify the member of any upcoming changes to their Part D plan. Changes may include changes to the premium, deductible, and overall coverage. Changes to the plan will go into effect on January 1 of the upcoming year. Unless the member chooses a new plan, their coverage will continue under the same plan with the new changes.
If a member is not satisfied with the changes, they can enroll in a different plan during the Annual Enrollment Period. AEP occurs every year from October 15 through December 7. Individuals may change plans during this time. The new coverage will begin on January 1.
