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  • Medicare Part D Prescription Drug Coverage

    Understanding Medicare    »    What are the different parts to Medicare?    »    Prescription drug coverage

    Medicare began offering Medicare Part D prescription drug benefits in 2006. If you are enrolled in Original Medicare and would like prescription drug coverage, you can enroll in a stand-alone Prescription Drug Plan.

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    There are certain times of year when people can enroll in Medicare Prescription Drug coverage. Upon becoming Medicare eligible, people have seven months to enroll in Medicare Part D, beginning three months before the month you become eligible and ending three months after the month you become eligible. Each year, people with Medicare can either enroll in a new Medicare Part D plan, switch Medicare Part D plans, or disenroll entirely from Medicare Prescription Drug coverage. This Annual Enrollment Period runs from October 15th through December 7th.

    Medicare Prescription Drug coverage will help you pay for some of the cost of your current outpatient prescription medications and for medications your doctor may prescribe in the future.

    You will likely pay both a monthly premium and a cost-sharing amount for all of your prescriptions in a Medicare Part D plan. The Federal government has created a standard minimum set of benefits that all available Medicare Part D plans must meet, but plans can offer alternatives above the standard. There are many Medicare Prescription Drug plans available around the country, and it is important to understand all of the key differences between Medicare Part D plans before you select and enroll in one.

    Cost and Coverage

    The Medicare Prescription Drug program helps cover the cost of your outpatient prescription drugs. Each Medicare Part D plan has a premium, a different cost-sharing structure, and each one offers a different set of drugs - though most plans cover the vast majority of drugs most commonly used by Medicare beneficiaries. Each plan's list of covered drugs is called its formulary.

    Some people with limited income and resources may qualify for assistance in paying for the costs of a Medicare Part D plan. If you think you might qualify for help, contact 1-800-MEDICARE and ask for information on the Extra Help program. If you also have Medicaid or are enrolled in a Medicare Savings Program, you will automatically be eligible for the Extra Help program.

    Each Medicare drug plan can have different coverage and costs, but all plans are required to provide a minimum level of coverage. Your actual costs may vary depending on the prescriptions you use, the plan you choose, whether you choose a pharmacy within your plan's network, and whether your prescriptions are on your plan's formulary. OneExchange's Prescription Profiler tool can help you to determine the cost and coverage of plans and help you find the plan that is best for you.

    Monthly premium

    Most drug plans charge a monthly premium that varies by plan. You pay this premium in addition to the Part B premium. If you belong to a Medicare Advantage plan (like an HMO or PPO) or a Medicare Cost Plan that includes Medicare prescription drug coverage, the monthly premium may include an amount for prescription drug coverage.

    Yearly deductible

    Amount you pay for your prescriptions before your plan begins to pay. Some drug plans don't have a deductible.

    Copayments or coinsurance

    Amounts you pay at the pharmacy for your covered prescriptions after the deductible. You pay your share, and your drug plan pays its share for covered drugs.

    Coverage in the gap

    Most Medicare drug plans have a coverage gap, which is sometimes called a "donut hole". This means that after you and your drug plan have spent a certain amount of money for covered drugs in a given year, you have to pay all costs out-of-pocket for your prescriptions up to a yearly limit. Your yearly deductible, your coinsurance or copayments, and what you pay in the coverage gap all count toward this out-of-pocket limit. The limit doesn't include the drug plan's premium or what you pay for drugs that aren't on your plan's formulary.

    Under the health reform law enacted in early 2010, the Affordable Care Act, beginning in 2011 the coverage gap will start to shrink. In 2011, the cost of single source brand drugs inside the coverage gap will be discounted by 50%. Over the next ten years, the discount inside the gap will grow by a few percentage points each year until it reaches the full 75% in 2020.

    In 2013, seniors who hit the “donut hole” will receive improved coverage on their brand-name drugs. Manufacturers will continue to cover 50 percent of the cost of the brand-name drugs and the plan will pay another 2.5 percent, providing seniors with total coverage of 52.5 percent in the donut hole. Therefore, seniors will pay 47.5 percent of the costs for brand-name drugs in the donut hole. Coverage of generic drugs in the gap will increase from 14 to 21 percent. By 2020, cost sharing for both brand and generic prescription drugs will be the same during the “donut hole” as during the initial coverage period. Consequently, in 2020, individuals will pay 25 percent of drug costs, and the Part D plan will pay 75 percent.

    Catastrophic coverage

    Once you reach your plan's out-of-pocket limit, your costs are reduced substantially, because you have reached "catastrophic coverage." Catastrophic coverage assures that once you have spent up to your plan's out-of-pocket limit for covered drugs, you only pay a small coinsurance amount or copayment (no more than 5% of the drug cost) for any covered drug for the rest of the year. In 2013, catastropic coverage begins when the individual reaches the out-of-pocket threshold of $6,733.75.

    There are plans that offer some coverage in the gap, like for generic drugs. However, plans with gap coverage may charge a higher monthly premium. Check with the drug plan first to see if your drugs would be covered during the gap.

    If your doctor thinks you need a drug that isn't on the list, or if one of your drugs is being removed from the list, you or your doctor can apply for an exception or appeal the decision to the health plan. Your plan must let you know at least 60 days before removing a drug from its formulary, and it can choose to add new drugs as they become available.

    Plans can also place restrictions on how you get your drugs. Here's how:

    • Some plans may require prior authorization. A plan may require the physician to demonstrate medical necessity before the pharmacist is allowed to dispense the drug. Often the plan will want the doctor to try a different drug first.
    • Some plans may use quantity limits. This places an upper limit on how many doses of a prescription a person can have during one month.

    Changes from health reform

    Beginning in 2011, the Affordable Care Act requires drug makers to provide a discount on brand name drugs while you are in the coverage gap. The discount will be 50% of the cost of your covered brand drugs. You will receive the discount when you go to the pharmacy to fill your prescriptions. In order to determine whether you are in the coverage gap and will receive the discount, you should consult the explanation of benefits (EOB) you receive from your Medicare Part D plan.

    Also beginning in 2011, the health reform law establishes a process for progressively closing the Medicare Part D coverage gap. The gap will be completely closed in 2020. This means that beginning in 2020, after you pay your yearly deductible you will continue to pay approximately 25% of the cost of your covered drugs until you reach catastrophic coverage. Between years 2011 and 2020, you will still pay a higher share for your drugs in the coverage gap, but that portion will decrease a little bit each year until 2020. The portion of beneficiary cost sharing will shrink to 25%, and plans will contribute the final 25%.

    Since 2007, people enrolled in Medicare Part B with certain income levels have had to pay higher premiums. In 2012, similar rules will apply to people enrolled in Medicare Prescription Drug coverage.