How Medicare Part D Works
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Before deciding whether to sign up for Medicare prescription drug coverage, you need to understand how the program works together as a whole. Grasping the big picture makes it easier to deal with the details.
Who can get Medicare drug coverage?
Anyone on Medicare (with either Part A or Part B) is entitled to drug coverage (known as Part D) regardless of income. No physical exams are required. You cannot be denied for health reasons or because you already use a lot of prescription drugs.
How do I get Medicare prescription drug coverage?
You must enroll in one of the private insurance plans that Medicare has approved to provide it. Wherever you live, you can get drug coverage in one of two ways:
- Through a “stand-alone” plan (PDP) that offers only drug coverage. This type is mainly intended for people who choose to receive their other health benefits from the traditional Medicare fee-for-service program.
- Through a Medicare Advantage plan (MA-PD) that covers both medical services and prescription drugs. This type is for people who choose to receive all their Medicare benefits in one package, usually through a health maintenance organization (HMO) or a preferred provider organization (PPO).
There is no single monthly premium for Part D prescription drug coverage. Each drug plan sets its own premium for each calendar year. Some Medicare Advantage plans do not charge an extra premium for drug coverage.
Do drug plans vary much?
Yes. There are big differences in premiums and deductibles, in the range of drugs that plans cover, the co-pays they charge and the pharmacies they use. In particular, co-pays vary enormously among different plans, even for the same drug. To determine exact costs and benefits, it is important to carefully compare plans in your area (see Choosing a Part D Drug Plan).
What will I pay for my drugs?
You could pay a different price for the same drug according to the phase of coverage that you’re in at any point during the year.
- Deductible: If your plan has a deductible, you pay full price for your drugs until the deductible amount is met and coverage kicks in. “Full price” means the price your plan has negotiated with each drug’s manufacturer. This price may be less that you would pay retail at the pharmacy.
- Initial coverage period: Your share of each prescription is either a flat co-payment (for example, $20) or a percentage of the drug’s cost (for example, 25 percent). Most plans have three or four levels (known as “tiers”) of co-pays, rising in price from the least expensive generic drugs through “preferred” brand-name drugs to “non-preferred” brands and finally to specialty or high-cost drugs.
- Coverage gap (“doughnut hole”): In 2017 you pay 40 percent of your plan’s price for brand-name and biologic drugs in the gap and 51 percent for generics. Fifty percent of the discount for brand drugs is provided by their manufacturers; the rest of the discount for brand drugs and the whole discount on generics is provided by the federal government. If your plan provides any coverage in the gap, these discounts are applied to your remaining costs.
- Catastrophic level of coverage: Your share of each prescription is about no more than 5 percent of the cost of the drug. You would also pay a different price if you receive Extra Help or have additional coverage from elsewhere (such as retiree drug benefits or assistance from a state pharmacy assistance program).
What if I join Medicare and enroll in a Part D plan partway through the year?
The cycle of coverage follows the same order (deductible, initial coverage period, coverage gap, catastrophic coverage), starting when you join the plan. There is no reduction in the deductible (if your plan has one) if you start partway through the year.
Will I be able to get all the drugs I take now?
Maybe, but not necessarily. Each plan has a list of preferred drugs it covers, known as a formulary. No Part D plan covers every prescription drug. A plan must cover at least two drugs in each class of drugs used to treat the same medical condition. It must also cover nearly all drugs used in six classes: antidepressants, antipsychotics, anticonvulsants, antiretrovirals (for HIV/AIDS), immunosuppressants (for transplants) and anticancer drugs. But a few drugs are excluded from Medicare coverage by law.
Plans are allowed to change some of the drugs they cover during the year. If this affects a drug you are using, your plan must inform you of the change at least 60 days in advance, unless it has been withdrawn from the market for safety reasons.
You have the right to ask your plan to cover a drug not on its formulary by requesting an “exception” to its policy (also known as a “coverage determination”) if your doctor can show that a non-formulary drug is necessary for your health.
What about drugs that are covered by Medicare Part B?
Medicare Part B generally continues to pay for drugs it covered before Part D began — usually those that are administered at a hospital or doctor’s office. In some cases, the same drugs are covered by either Part B or Part D according to different circumstances. In this case, your Part D plan may contact you or your doctor to verify the circumstances in order to decide whether payment should be made by Part B or D.
How often can I switch drug plans?
You can normally change plans only once a year during annual open enrollment, which runs from Oct. 15 to Dec. 7.
There are exceptions. In some circumstances—for example, if you move out of your plan’s area or your plan ceases services in your area, or you move into or out of a nursing home—you’re entitled to a special enrollment period (SEP) so that you can change drug plans during that time. People with limited incomes who receive Extra Help can switch to another plan at any time during the year. For a full list of circumstances, see the Medicare Rights Center’s guidance on special enrollment periods.
