What is Medicare Part D Coverage?
How Medicare Part D can lower prescription drug costs
Medicare is divided into several parts, and each one covers something different. For instance, Medicare Part A is hospital insurance, Part B is medical insurance, and Part D is prescription drug coverage.
What is Medicare Part D coverage?
Medicare Part D can help lower the cost of retail prescription drugs, both brand name and generic. It is an elective benefit to anyone with either Medicare, regardless of income. There are no physical exams required, and you cannot be denied for health reasons or due to the number of prescription drugs you’re already prescribed.
You do not enroll in Part D through the Social Security office, as you would with Medicare Part A and Part B. Medicare Part D plans are offered by insurance and other private companies approved by Medicare. These plans offer different monthly premiums, cover different drugs, and include different pharmacies in their networks, so it’s important to research the details of a plan to find the one that works for you before you sign up.
How does Medicare Part D work?
Here are four things to know about how Medicare Part D coverage is structured (the following dollar amounts are from Your Guide to Medicare Prescription Drug Coverage, published by the Centers for Medicare and Medicaid Services).
- Annual deductible: The amount you spend out of pocket on medications before the insurance company begins to also pay toward them. Medicare sets the maximum deductible each year —for 2020 it’s $435 — though some insurance companies have no deductible or a deductible that’s lower than the maximum.
- Initial coverage limit: Once you’ve met your deductible, you will pay a copay or coinsurance for each medication based on which tier the drug falls into. Tiers include Preferred Generic, which typically has the lowest copay, and Specialty Drugs, which typically has the highest.
- Coverage gap (donut hole): You enter this stage when your total drug costs — including what you and your plan have paid for your drugs — reach a certain limit. In 2020, that limit is $4,020. In this stage, as explained at Medicare.gov, your plan can charge you as much as 25 percent of the cost of both your brand name and generic drugs.
- Catastrophic coverage: In all Part D plans, after you have paid $6,350 (in 2020) in out-of-pocket costs for covered drugs (this amount is just the amount you have paid, not the total drug costs that you and your plan have paid), you leave the donut hole and reach catastrophic coverage. During this period, you pay significantly lower copays or coinsurance for your covered drugs for the remainder of the year.
So, one answer to the question “What is Medicare Part D coverage?” is that it can be a big help in keeping prescription drug costs down. Just make sure to sign up during your initial eligibility enrollment period (the seven-month window that begins three months before your 65th birthday). If you don’t enroll during this period, you may be charged a penalty when you try to sign up later, and that penalty can last for as long as you have Medicare prescription drug coverage.