On Part Four of the Medicare Blog, we are taking a deeper look into Medicare Part D Prescription drug coverage. When receiving Medicare, you need drug coverage whether it is a stand-alone Part D plan (PDP) or with a Medicare Advantage Plan, also known as Medicare Advantage and Prescription Drug plan (MAPD). We will look at what is and isn’t covered, how you can get the best value from your plan, and we will also tell you why some people don’t like donut holes.
Medicare Part D plans cover three main areas:
Types of drugs most commonly prescribed for Medicare beneficiaries as determined by federal standards.
Specific brand name drugs and generic drugs included in the plan’s formulary, or list of covered drugs.
A formulary is a list of drugs that are covered by a plan. With many plans, they have a tiered formulary with Tier 1 being the least expensive and Tier 5 being the most expensive.
Commercially available vaccines not covered by Part B.
How are drug costs set, and what am I going to have to pay?
Each plan negotiates prices with drug manufacturers and pharmacies. Your copays or coinsurance rates are based on your plan’s negotiated prices. The amount you pay for your drugs throughout the year also depends on the drug coverage stage that you go through throughout the year. Part D has four coverage stages:
Annual Deductible. In this stage, you will pay for your drugs until you reach the deductible amount set by your plan. Some Part D plans have a $0 deductible. If your plan has that $0 deductible, your coverage will start in the initial coverage stage with the first prescription you fill.
Initial Coverage. Here, you will pay a copay or coinsurance and the plan pays the rest. You will stay in this stage until your total drug costs reach a set amount. Your total drug costs are what both you and your plan pay. The set amount to exit initial coverage in 2021 is $4,130.
Coverage Gap. Once you and your plan reach that set amount in the initial coverage stage, you will enter the coverage gap, also known as the donut hole. You will then pay 25% of the cost for both generic and brand name drugs. This is a bigger share you will pay for your drugs than you have had to pay in the previous stage. You will stay in the donut hole until your total out of pocket costs reach a set amount. In 2021, you will exit this stage when you reach $6,550.
Catastrophic Coverage. Once you exit the coverage gap, you will pay a small copay or coinsurance amount. You will stay in this stage for the rest of the plan year.
People who take few prescription drugs may remain in the deductible stage or initial coverage stage. People who take many medications or whose medications are expensive may move into the coverage gap or catastrophic coverage stage during the year. The coverage stage cycle starts over at the beginning of the plan year, on January 1.
What isn’t covered then by Part D?
Here is the list of things that aren’t covered
Drugs not on the plan formulary
Drugs prescribed for anorexia, weight loss, or weight gain
Drugs used to promote fertility
Drugs used for cosmetic purposes or hair growth
Prescription vitamins and mineral products
Non-prescription drugs
Drugs that may be covered by Part A and B
If you are ever unsure if your medication is covered under your plan, don’t hesitate to ask us so you don’t get stuck paying an unexpectedly expensive drug bill.
But I am not on any medications, so I don’t need any drug coverage, right?
Wrong. Unfortunately, the Federal Government doesn’t want someone not paying for coverage, then signing up when they need it to cover an expensive drug. To prevent this, they will penalize someone 1% the national prescription drug premium average for every month they didn’t have coverage (this amount was $32.74 in 2020). They call this Late Enrollment Penalty or “LEP”. For example, if someone decided not to get drug coverage when they became eligible, but two years later they wanted coverage, they would have to pay an additional $7.86 (.3274 x 24 months) on top of their premium. Although this might not seem bad, the longer you wait the higher the penalty. I know what some of you are thinking, “I am working past the age of 65, will I still receive that penalty if I don’t sign up?” Thankfully, as long as you have creditable coverage whether that is through an employer or somewhere else, you shouldn’t receive the LEP. Once you lose creditable coverage, you have 63 days to sign up for an MAPD or PDP plan in order to avoid the LEP. Creditable coverage is coverage that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. If you are unsure of whether your plan is creditable coverage or not, you should contact the plan administer or HR.
What are the differences between getting Part D through an MAPD or a stand-alone Prescription Drug Plan?
All of the information you have read so far reigns true for both an MAPD plan and a PDP. The only big difference is how you receive the coverage. Do you have an MAPD plan where the cost is bundled into your health coverage, or do you have a Medicare Supplement and have to pay a separate premium for your Prescription Drug Plan?
So how can I make sure I get the most value from my plan?
If you have prescription drug coverage, you should never have to pay more than is necessary. Here are five tips to make sure you are getting value from your plan:
1. Know the formulary. Make sure that all the medications you are taking are on your plan’s formulary. If it is not, see if your doctor can switch you to a drug that is.
2. Consider generics. Ask your doctor or provider about a generic or low-cost alternative. For example, some Tier 3 drugs which are relatively expensive may be a “tri-“ prescription which is three drugs put together as one. Instead, you could ask for a low-cost alternative and take three low-tier drugs instead.
3. Use a network preferred pharmacy. Just like health insurance, prescription drug coverage plans have networks. Not only is there in and out of network pharmacies, but they also have standard and preferred pharmacies. Save by getting the lowest prices by going to your plan’s preferred pharmacies.
4. Show your member ID card. Even if you have been to that pharmacy before, make sure to show them your member ID card to ensure you are getting your discounted plan prices when filling a prescription.
5. Use the mail-order pharmacy. You may get even more savings as well as convenience when you order your medications through your plan’s mail order as you can order up to a 3-month supply of prescriptions.
What is your recommendation?
Whether you decide to go with a Medicare Advantage plan or a Medicare Supplement plan, we do recommend that you receive Prescription drug coverage. Even if you are not taking any Medications at this time, there may be a day that you have to take an expensive prescription, and we wouldn’t want you to be stuck paying a penalty every month until you do not need prescription coverage.
There is a lot to remember and a lot to look into, but thankfully, you don’t have to do it alone. We at Yoder Insurance Solutions are here for you and because of you! Every year, we send out a letter to make sure that your medications are on your plan’s formulary, that your pharmacy is your network’s preferred pharmacy, and that you are using generic drugs, not name brand. We will help layout the best cost savings plan for you personally, and then you can decide which route to go.
The next blog is the final blog in this five-part series on What You Need to Know About Medicare. In it, we will do a brief overview of the previous blogs, as well as telling you which route we recommend you take. As always, if you have questions about any life or health insurance matter, or you want to hear more about Part D prescription Drug Coverage, don’t hesitate to give us a call.