NOTICE: Medicare Prescription Drug plans change almost every single year. Please refer to this article “2020 Medicare Prescription Drug Plans” only for the year 2020. I will write a new article for 2021 as soon as that information has been released by CMS. If you are reading this after 2020 please click here to go to our Blog Page to find the current year version.
What is Medicare Part D?
Medicare Part D prescription drug coverage, often referred to as Part D, is provided and coordinated by Medicare-approved private insurance companies. If you are enrolled in a Part D plan it will help you pay for your prescription drugs.
Any beneficiary who is eligible for Original Medicare, Part A and/or Part B, can sign-up for Part D. Medicare Part D coverage is optional, but if you don’t enroll in Part D as soon as you’re eligible, you might pay a late-enrollment penalty if you enroll later.
You can get Part D coverage through a stand-alone Prescription Drug Plan or If you’re enrolled in a Medicare Advantage plan (also know as Part C), you can get this coverage through a plan that includes drug benefits, which is known as MAPD.
Different insurers offer different types of plans, so your monthly plan premium and out-of-pocket expenses will vary from plan to plan.
Every plan has a formulary — that is, a list of covered drugs. The formularies vary among plans.
Based on your Income, some people may qualify for what is know as LIS (Low-Income-Subsidy). If you get approved, this program will cover even more of your out of pocket cost that are associated with your prescription drugs. It will also eliminate any late-enrollment penalties. If you would like to know more about LIS, please read my article “What is LIS“.
How To Enroll In Medicare Part D
you can apply directly through the insurance company. Generally, you should be able to enroll by submitting a paper application, calling the plan, or enrolling online. You may also enroll through a licensed insurance agent by Clicking Here. Medicare Part D Prescription Drug Plans aren’t allowed to call and ask you to enroll into their plan.
When you enroll in prescription drug coverage, you will have to provide your Medicare number and the date your Medicare Part A and/or Medicare Part B coverage started. You can find this information on your Medicare card.
When can you enroll in Medicare Part D
There are specific times when you can enroll, disenroll, or make changes to your Medicare prescription drug coverage. Those periods are listed below.
Initial Enrollment Period for Part D
You can enroll in Medicare Part D coverage during your Initial Enrollment Period (IEP) for Part D, which is the period that you first become eligible for Medicare Part D. For most people, the IEP for Part D is the same as the IEP for Medicare Part B and begins three months before you turn 65 years of age, includes the month you turn 65, and ends three months after.
If you enroll in Medicare Part D during your Initial Enrollment Period, your Medicare Part D coverage will begin on the first day of the following month that you apply for the plan. If you enroll in one of the three months prior to turning 65 years of age, your Medicare Part D coverage begins on the first day of the month that you turn 65.
Annual Election Period
If you do not enroll during your Initial Enrollment Period for Part D, you can enroll into prescription drug coverage during the Annual Election Period (AEP), also called Open Enrollment Period, which occurs from October 15 to December 7 of every year. During this time, you have the chance to make changes to your current Medicare prescription drug coverage for the following year, including:
- Enrolling into a Medicare Prescription Drug Plan.
- Switching from one Medicare Prescription Drug Plan to another Prescription Drug Plan.
- Switching from a Medicare Advantage plan that does not include drug coverage to a Medicare Advantage plan that does, and vice versa.
- Dropping your Medicare prescription drug coverage entirely.
Medicare Advantage Open Enrollment Period
If you have prescription drug coverage through a Medicare Advantage plan, you can choose to leave this plan and go back to Original Medicare during the Medicare Advantage Open Enrollment Period(OEP). If you disenroll from your Medicare Advantage plan at this time, you will have from January 1 until March 31 to enroll in a stand-alone Medicare Prescription Drug Plan, since Original Medicare doesn’t include prescription coverage.
5-Star Special Election Period (SEP)
Medicare Advantage plans and Medicare Prescription Drug Plans are rated on a scale of 1 to 5 for overall quality and performance, with a 5-star rating being “excellent.” The ratings are given by Medicare, based on member satisfaction surveys, as well as plan and provider feedback. The ratings may change from year to year.
If you are a member of a plan that does not hold a 5-star rating, you can use the 5-star Special Election Period to enroll in a Medicare Advantage with prescription drug coverage or a Medicare Prescription Drug Plan that has been awarded a 5-star rating outside of AEP. You can only use this enrollment period to enroll into a 5-star plan once per calendar year.
Medicare evaluates plans based on a 5-Star rating system. Star Ratings are calculated each year and may change from one year to the next.
Special Election Period
Outside of the above times, the only time an individual eligible for Medicare can apply for, change, or opt out of a Medicare Part D Prescription Drug Plan is with a Special Election Period (SEP). Some special situations that may qualify you for an SEP include, but are not limited to:
- If you move out of your plan’s service area
- If your plan ends its contract with Medicare
- If you lose your creditable prescription drug coverage, or your plan changes and is no longer considered creditable
- If you live or move into an institution, such as a nursing home
- If you qualify for Extra Help
Your Out-of-Pocket Costs After You Enroll
Your Medicare Part D costs depend on the plan you have and prescriptions you take. Some of your costs may include plan deductibles, copayments/coinsurance, and a plan premium.
After you enroll in a Medicare Part D prescription drug plan, you will be responsible for certain costs. When you understand what these costs are, you can plan for them throughout the year.
Here are a few EXAMPLES of Medicare Part D out-of-pocket costs that you might have to pay.
Your deductible is the amount you may need to pay per year before your prescription drug coverage benefits begin. This Medicare Part D cost is a set amount that is limited by Medicare. In 2020, Medicare prescription drug plans can’t charge any more than $435 for the annual deductible. Not all plans charge the $435, you can find plans with where the deductible is $0, $25, $50 or another amount up to $435.
Medicare prescription drug plans have monthly premiums. Some plans may have low premiums such as $13 per month while others are $55 per month. You can also find plans where you might pay as little as $0 per month.
You have to compare the plans, just because a plan is $0 per month that does not mean you want that plan. If you are taking drugs that cost $75 per fill with the $0 dollar plan but they are $10 with the $56 dollar plan that means you are paying more than you have to on the $0 dollar. I hope I’m not confusing you but I hope you understand what I mean.
This also depends because if you have a Medicare Advantage Plan that has Part D already included, know as MAPD, you will not have to pay a separate premium for it.
Copayments & Coinsurance
A copayment is an amount that you have pay every time you pick up a prescription at the pharmacy.
For example, a medication might cost you $10 for a 30 day supply. The amount of the copayment will vary based on your plan and on the type of medication you’re taking. Remember to always ask if your medication is available as a generic and not brand name.
To understand this cost, you’ll need to understand how plans price their medications. Each drug plan has a list of covered prescription drugs called a formulary. Formularies are usually divided into “Tiers,” where your basic generics are Tier 1 or 2 more costly medications are in the higher Tiers.
You’re copayment for a Tier 1 or 2 medication might be $10 to $20 but a Tier 4 or 5 might be $50 or more. Again this all depends on the plan you choose and the drugs you’re taking.
Your Medicare Part D cost isn’t always a copayment. Sometimes you pay a coinsurance amount. Coinsurance is a percentage of the cost of the prescription drug. This amount varies based on the Tier which the drug is in and the plan you have.
For example, let say your doctor write you script for a drug that cost $200 and your copayment is 25%, that means you have to pay $50.
Medicare Part D has a coverage gap, also known as the “donut hole.” If you and your plan, taken together, spend a certain amount on your medications during a calendar year, you might reach the coverage gap. During the coverage gap, your Medicare Part D costs might be higher.
If you and your plan spend a combined $4,020 on covered prescription drugs in 2020, you reach this coverage gap phase. During this phase, you’ll pay 25% of your plan’s cost for covered brand-name and generic drugs during the coverage gap. You will pay the 25% until you and your plan together reach $6,350.
If you and your plan together spend $6,350 in 2020 you will reach what’s called the Catastrophic Coverage phase. At this point and until the end of the year you will only pay a small copayment for your drugs. Most people never reach this point.
Eligible beneficiaries who have limited income may qualify for a government program that helps pay for Medicare Part D prescription drug costs called EXTRA HELP.
Medicare Extra Help eligibility
You may qualify for the low-income subsidy if:
- Your annual income and assets are below the eligibility thresholds. The Medicare Extra Help program eligibility limits may change from year to year. For the most up-to-date levels, visit Medicare.gov.
- Your annual income is higher than the eligibility limit, but you support other family members who also live in the same household; or you live in Hawaii or Alaska.
Assets that count toward eligibility include:
- Cash and bank accounts, including checking, savings, and certificates of deposit
- Real estate outside of your primary residence
- Stocks and bonds, including U.S. savings bonds
- Mutual funds and IRAs
When calculating eligibility for the low-income subsidy, Medicare does not count resources such as your home (or primary residence); insurance policies; or a car. Many people qualify for Medicare Extra Help savings and do not know it. The best way to find out if you qualify is to go ahead and apply.
How to apply for Medicare Extra Help
To apply for the Medicare low-income subsidy, simply fill out an “Application for Extra Help with Medicare Prescription Drug Plan Costs” (SSA-1020) form with Social Security. You can apply and submit this form by:
- Applying online at www.socialsecurity.gov/extrahelp.
- Calling Social Security at 1-800-772-1213 (TTY 1-800-325-0778) and requesting an application be mailed to you or applying over the phone. Social Security representatives are available by phone Monday through Friday, from 7AM to 7PM.
- Applying in person at your local Social Security office.
After you submit your application, Social Security will review it and send you a notification in the mail if you are eligible. If you qualify for Extra Help and are not yet enrolled in a Medicare Part D Prescription Drug Plan, you can enroll in a plan at that time.