Medicare Part D

When should I buy my Part D Plan?

Medicare Prescription Drug coverage can be added when you’re first eligible for Medicare Part B or any year during the October 15- December 7 Annual Election Period.  Coverage added during the election period will be effective January 1 of the following year.  If you do not enroll in a Part D plan and have no other “Creditable” drug coverage, you will be subject to a penalty imposed by the Federal Government.

“Creditable” coverage means coverage at least as good as that offered by Medicare D plans, such as coverage provided by the Veterans’ Administration (VA), retiree coverage, group coverage, etc.

The penalty imposed is 1% of the national average Part D premium for every month you could have had coverage but did not.  The penalty will start when you eventually purchase either a Part D plan or drug coverage inside of a Medicare Advantage plan.  So, for example, if you wait 3 years before purchasing a Part D plan and then buy coverage, you will then have a 36% penalty PERMANENTLY.  If the national average premium that year is $40/month, then your penalty will be $14.40 every month (adjusted as the national average premium updates each year) for as long as you have the drug coverage.  So we recommend purchasing your plan as soon as you’re eligible for Medicare, unless you have “Creditable Coverage” through group insurance or the VA, for example.

What is a Part D Plan?

Part D plans are offered by insurance companies, with part of the cost subsidized by the Federal Government.   There are 25 different options for stand-alone coverage in California in 2018 Depending upon which plan you select, you will also be asked to pay a portion of the cost, ranging from $19.40 monthly to over $100 monthly.  Each plan provides coverage for a different list of medications, and we can help you research which list of medications (or “formulary”) will work the most efficiently with your specific prescriptions.  If you change medications mid-year, all plans must include at least two drugs in each therapeutic category, so your doctor can work with you to find a prescription that will work within your plan.

Plans may have a deductible of up to $405 in 2018.  This deductible is not required on every plan, and those without a deductible may be slightly higher in cost.

There are four coverage levels in the prescription drug plans:

  • Deductible (from $0 to $405)
  • Initial Coverage Level — where the plans pay most of the cost and you’ll pay either a copayment or a percentage of the cost of your drugs
  • Coverage Gap (also known as the “donut hole”) — where you’ll receive a 50% discount from the brand-name drug manufacturers and a portion of the cost will be paid by the plan.  In 2018, the plans will cover 15% of the Brand Name medication cost and 56% of the Generics. You’ll be paying the balance.  This begins when the total cost of your medications for the year reaches $3750.
  • Catastrophic Coverage Level — where you’re only responsible for about 5% of the cost of your medication (or a small copayment).  You’ll enter this phase of coverage when your total out of pocket expenses (plus the brand name discount) reach $5,000.

When we get together we can go into more detail about when you’ll move from one level to the next, based on your use of prescriptions.

What determines which is the best Part D plan for me?

The first consideration is the list of medications you’re taking (or will be taking) this year.  Medications are categorized in “tiers” where Tier 1 prescriptions have the lowest copayment under the plans, and Tier 4 or 5 will have the highest copayment.  Each plan uses a different formulary, or list of medications, and one drug may be Tier 1 with one plan and Tier 2 or 3 with another.  If a drug is not listed in the formulary, there is no coverage under that plan and the cost of that medication will not count toward satisfaction of the deductible or any of the benchmark amounts to move into or out of the “donut hole”.  If you’d like to look at the plans that work best with your specific prescriptions, you may want to follow these Instructions for looking up Prescriptions on the Medicare Website.

The second consideration is which pharmacy you use.  Many of the Part D plans have “Preferred” pharmacies, where your copayments will be lower than if you use a pharmancy that is not preferred.  If you’re comfortable with mail order services, most of the Part D plans also have their own “Preferred Mail Order” pharmacies, which can further lower your cost.

Finally, those individuals who continue to be “self employed” after receiving Medicare may benefit from a more expensive Part D plan with lower copayment amounts, since the premium for the plan may be tax deductible, while the out of pocket costs are likely not deductible.  Please be sure to let us know if you’re filing taxes as “self employed”.

What does Part D Cost me?

The standard cost of any Part D plan will be displayed on the Medicare website, in any report we give you, and in the Summary of Benefits published by the plan (and given to you when we meet).  These numbers run from $19.40/mo up to $100/mo or more.  In addition to the standard premium, those Medicare Beneficiaries who earned a “Modified Adjusted Gross Income” greater than $85,000 (or $170,000 as a couple) on their 2016 tax return for 2018 plans will be charged an additional premium.  This works the same way the extra premiums for Part B work, and are outlined in the publication Premiums for higher income beneficiares 2018.

When can I Change Plans?

Part D plans may be changed every year.  The Annual Election Period runs from October 15 – December 7 each year, with the changes effective January 1.  Your plan selection runs for the calendar year.  In addition, there are certain qualifying events, like moving to a new service area, losing group coverage, qualifying for Medi-Cal or Extra Help, etc. that will allow you a “Special” enrollment period to select a new plan.

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