Medicare part D prescription drug plans are designed to help you pay some of the cost of your prescription drugs. These plans are optional, however if you do not sign up when you become eligible there may be a penalty attached to the premium of any prescription drug plan that you do enroll in at a later date. The part D plans are offered by private insurance companies and vary by premium, deductible and copayments.
How do they work?
How these plans work is one of the more complex elements of Medicare. Whether the plan is a stand-alone prescription plan combined with a Medicare supplement or if it is coverage built into a Medicare advantage plan and prescription coverage structure is the same. Each plan has a formulary which is a list of prescriptions covered by the plan. Then each prescription is placed in a category known as a tier. Preferred generic drugs which are usually the least expensive ones are typically tier 1 and usually have the lowest copayment or coinsurance. The more expensive the prescription the higher the tier and the higher the copayment or coinsurance.
There are three phases, the initial coverage period, the coverage gap or donut hole and the catastrophic coverage phase. When you transition from one phase to another is based on the retail cost of the prescription drugs that you are taking.
Initial coverage phase.
Some plans have an annual drug deductible that must be met before the plan begins to pay. During the initial coverage phase the Medicare model says that you will pay approximately 25% of the retail cost of your prescriptions and the plan will pay approximately 75%. When the total retail cost of your prescription drugs reaches $3,750 in 2018 you will transition into the coverage gap or donut hole.
The coverage gap or donut hole.
Most Medicare drug plans have the coverage gap (also called the “donut hole”). The coverage gap begins after you and your drug plan together have spent a certain amount for your covered drugs. In 2018, once you enter the coverage gap, you pay 35% of the plans cost of covered brand-name drugs and 44% of the cost for covered generic drugs until you reach the end of the coverage gap. Not everyone will into the coverage gap because their drug costs.
What will count toward getting through the coverage gap?
• Your annual deductible
• Your coinsurance or copayments during the Initial Coverage Phase
• The discount you get on covered brand-name drugs in the coverage gap
• The cost of your prescriptions while in the coverage gap
This is the final phase of your annual journey through Medicare part D. Once you reach this phase you will pay the greater of either $3.35 for generic drugs and $8.35 for brand-name drugs or 5% of the cost whichever is greater. You will remain in this phase for the rest of the year when everything will reset for January 1st in the process begins anew.
What Pharmacies can I use?
Private insurance companies that carry Medicare prescription drug plans use a pharmacy network much like a Medicare advantage plan uses a network of providers. Today, most have a preferred pharmacy with which they are partnered with and copayments are usually lower at the partner pharmacy than other pharmacies that are in the network. Also, some companies have preferred standard pharmacy networks where copayments are lower at the pharmacies in the preferred category than in the standard category.