Two ways to get Part D
Part D plans are offered by private insurance companies approved by Medicare. You can get drug coverage in one of two ways:
- A stand-alone Part D plan. This works with Original Medicare. People with a Medicare Supplement plan usually add one of these.
- A Medicare Advantage plan that includes drug coverage. Most Medicare Advantage plans do.
Drug lists and tiers
Every plan has a list of the drugs it covers. This list is called a formulary. Two plans can cover very different drugs, so your list matters.
Drugs on the list are sorted into levels called tiers. Lower tiers, often generic drugs, usually cost less. Higher tiers usually cost more.
Plans can also have rules for certain drugs:
- Prior authorization. The plan must approve the drug before it will pay.
- Step therapy. You may need to try a lower-cost drug first.
- Quantity limits. The plan may limit how much you can get at one time.
Drug lists can change during the year. Your plan will let you know about changes that affect you.
Pharmacy networks
Each plan works with a network of pharmacies. Some plans have preferred pharmacies, where you may pay less. Many plans also offer mail order. If you have a pharmacy you like, we'll check how each plan treats it.
Costs to understand
- Premium. Most stand-alone plans charge a monthly premium.
- Deductible. Some plans have a yearly deductible before they start paying their share.
- Copays and coinsurance. What you pay for each prescription, depending on its tier.
Part D now has an annual cap on out-of-pocket drug costs. The amount is set each year, so check Medicare.gov for the current figure.
If you'd rather not pay large drug costs all at once, the Medicare Prescription Payment Plan lets you spread your out-of-pocket costs into monthly payments across the year. Your plan can tell you how to sign up.
If your income is above a certain level, you may pay an extra amount for Part D. Social Security decides this based on your tax return.
The late enrollment penalty
If you go 63 days or more in a row without Part D or other creditable drug coverage after your first chance to sign up, you may owe a late enrollment penalty. It's added to your monthly premium, and you generally pay it for as long as you have Part D.
What creditable coverage means
Creditable coverage is drug coverage that's expected to pay, on average, at least as much as standard Medicare drug coverage. Coverage from a current employer, a union, TRICARE, or the VA often counts.
If you have drug coverage through work, your plan should send you a notice each year that says whether it's creditable. Keep that notice. You may need it later to show you didn't need to pay a penalty.
Even if you take few or no prescriptions today, it's worth thinking about drug coverage when you're first eligible. Joining later can mean a penalty that lasts.
Extra Help with drug costs
Extra Help, also called the Low-Income Subsidy, is a Medicare program that helps people with limited income and savings pay for Part D premiums, deductibles, and copays.
You can apply through Social Security at ssa.gov or by calling 1-800-772-1213. If you have Medicaid, Supplemental Security Income (SSI), or help from a Medicare Savings Program, you usually get Extra Help automatically.
People who get Extra Help don't pay the Part D late enrollment penalty.
How I check your drug list
This is where I can save you the most time. Here's what I do:
- I take your list of prescriptions, with the dose and how often you take each one.
- I check each drug against each plan's drug list, tier, and rules.
- I check your pharmacy, and compare it with mail order if that's an option.
- I estimate your total yearly cost for each plan, not just the premium.
Every fall, I check your drugs again, because plans change their drug lists and costs each year.