Medicare Part D: Affordable Prescription Drug Plans

Medicare is a specialized insurance plan designed for seniors. While Medicare offers extensive coverage, it can initially be confusing to understand everything provided through Medicare. Part of the confusion comes from how Medicare is packaged. As of writing, there are four primary components of Medicare, Parts A-D. Each portion of Medicare offers different coverage. To add to the confusion, some parts of Medicare come from the government, while others are available from private insurance agencies.

Medicare Part D does not offer as much general coverage as the other parts. Instead, Part D focuses on prescription drug costs. You can only purchase Part D plans from private insurance agencies. If you already have an existing Medicare plan, you can combine your Part D benefits with your other plans. Because Part D comes from a private insurance provider, the exact benefits vary depending on where you apply. The government has a helpful search tool, which allows you to find and compare plans in your area. Some examples of major insurance providers offering Part D throughout the United States include Anthem, Cigna, Aetna, United Healthcare and Humana.

Medicare Part D Coverage Gap

The main component of Medicare Part D is the coverage gap. The coverage gap is entirely unique to Part D, and takes the place of traditional insurance copays. The gap is informally known as the donut hole. Your coverage gap is the most important part of your Part D plan, as it determines how much you must pay out of pocket before receiving a discount. Once you go beyond your coverage gap, your Medicare insurance covers 75 percent of your prescription costs, as long as you purchase medication approved by your plan.

The coverage gap changes based on the year. As of writing, the 2020 coverage gap is $4,020. There is another gap at $6,350. Once you exceed this gap, your Medicare coverage increases, and you are only responsible for paying for 5 percent of prescription costs. Your coverage gap resets at the start of each year.

Medicare Part D Costs

There are additional costs associated with Medicare Part D, which vary based on location and your plan. In most cases, you are required to pay a monthly premium for Part D coverage. Because Part D coverage focuses on a smaller area than other plans, it is lower than other Medicare premiums. According to the Centers for Medicare & Medicaid Services, the average cost for a Part D premium was $30 to $35. There are some ways to reduce this premium. If you have a Medicare Advantage plan, part of your general premiums apply to prescription drug plans. There are also some private insurance companies that offer Medicare Part D as a free component with other insurance packages.

Some insurance providers also include an annual deductible with Medicare Part D. If your plan has a deductible, you are required to pay full price for your prescription drugs until you reach the deductible. The deductible is a separate system from the coverage gap. Your deduction only begins after you hit the initial coverage gap.

While Part D comes from private insurance companies, they are still required to follow guidelines set by the federal government. This includes what they can set for deductibles. In 2020, insurance companies are unable to increase a deductible beyond $435. Because the coverage gap already exists, the majority of insurance providers often choose not to impose as a deductible, as it causes unnecessary confusion for customers.

When to Apply for Medicare Part D

Another confusing point for all Medicare plans is when you are able to apply for coverage. You can first apply for coverage when you turn 65. Several months before your 65th birthday, you will receive a Medicare packet in the mail. This lists all the plans you are eligible for and more detailed instructions on how to apply.

Each year, there are set enrollment periods for Medicare. The first period is known as open enrollment. Open enrollment always begins on October 15th and runs until December 7th. The next portion is general enrollment. General enrollment begins every year on January first and runs until the end of March.

You only need to enroll in a plan once. If you decide you want to terminate or change your plan, you must wait until one of the enrollment periods. There are also special enrollment periods. Eligibility for these is determined on a case by case basis, normally involving one of your plans being terminated prematurely or a sudden change in your health requiring extended coverage.

Medicare Part D Payment Assistance Options

Many seniors benefit from Medicare Part D, but are afraid to apply because of the costs. If you are a low-income senior, there are several payment assistance options. The first option is the Extra Help program. You will be notified during your initial application if you qualify for Extra Help. You are also automatically eligible if you receive Supplemental Security Income.

If Extra Help is not an option, you can receive assistance from your state. Contact your State Health Insurance Assistance Program or ask at your local Medicaid office to find out what programs are available in your location.