Medicare Part D | Coverage Overview

The most recent addition to the Medicare program is Part D. This part provides prescription drug coverage for both brand name and generic medications. Individuals with original Medicare can purchase a separate Part D plan during specified enrollment periods. Beneficiaries who have chosen to participate in Medicare Part C, also known as Medicare Advantage, generally already have prescription drug benefits as part of their health plan.

Enrolling in Medicare Part D

Medicare Part D plans can be purchased through health insurers or other private companies approved by Medicare. There are three times during which a Medicare beneficiary can sign up for Part D coverage, either through a separate prescription drug plan or through a Medicare Advantage policy.

  1. Initial enrollment period: The initial enrollment period occurs when a senior citizen turns age 65. There is a seven-month window for initial enrollment, beginning three months before a beneficiary's birthday and extending through three months after the birthday month. Individuals who are disabled have an initial enrollment period that begins three months before the 25thmonth of disability and ends three months after that month.
  2. Open enrollment period: The open enrollment period occurs annually from October 15th- December 7th. During this time, beneficiaries can enroll in a Medicare Advantage plan or a Medicare Part D prescription drug plan.
  3. 5-star special enrollment period: A final enrollment period is allowed for those plans rated 5-stars, the highest rating given by the government. At any time during the year, beneficiaries can switch to a 5-star Medicare plan so long as the individual resides within the plan's service area. This enrollment option can only be used once per year.

Because not all plans are offered in all areas, individuals who move during the year may also be eligible to switch to a new prescription drug and, in some cases, sign up for a prescription drug plan outside of the designated enrollment windows.

Medicare Part D premiums

There is no standard premium for Part D coverage. For those enrolled in Medicare Advantage, their plan premium generally includes prescription drug coverage. Individuals selecting original Medicare and a Part D prescription drug plan pay the standard Part B premium plus the prescription drug plan premium. Since the price of prescription drug plans can vary, beneficiaries should carefully review the premium amount and other out-of-pocket costs before enrolling.

The Medicare donut hole

When Medicare Part D was initially enacted, it provided much-needed prescription drug coverage for senior citizens and disabled individuals. However, the original law included a significant coverage gap, known as the "donut hole." This gap meant that beneficiaries who exceeded certain thresholds in drug expenses had to pay out of pocket for medication until their costs reached a second threshold, at which catastrophic coverage begins and prescription drugs are once again paid for by the insurer.

With the passage of the Affordable Care Act in 2010, steps were put into place to eliminate the donut hole. Starting in 2011, Medicare began paying 50 percent of the cost of name brand prescriptions purchased by seniors who are within the coverage gap. For generic drugs, Medicare paid 14 percent of the cost in 2012. Those amounts are scheduled to slowly increase until 2020, when beneficiaries will only pay 25 percent of the cost of both name brand and generic drugs while in the coverage gap.

Medicare prescription drug coverage

Each Medicare Part D prescription drug plan or Medicare Advantage plan has its own list of approved medications that it covers. In addition, some plans place prescription drugs into tiers which can affect how much a beneficiary must pay out of pocket.

Before signing up for a plan, beneficiaries should check to make sure their prescriptions are covered by the plan as well as compare any co-payment or co-insurance required by the insurer.

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