What You Should Know About Medicare Part D
Medicare insurance provides insurance for seniors, but it is divided into multiple parts. As of writing, the four primary components of Medicare are Part A-D. Some of these plans are provided through the federal government and cover the majority of your basic insurance needs, such as doctor visits or hospital stays. Other parts are specialized for specific healthcare concerns.
Medicare Part D is one of the specialized programs. It only provides coverage for prescription drug costs. Part D plans are provided through private insurance companies. You can purchase Medicare Part D alongside any other Medicare plan. Every state has different Part D plans available, but the federal government has created a search tool so you can find and compare plans in your area. Most of the major insurance providers, including Anthem, Cigna, Aetna, United Healthcare and Humana provide Part D plans.
Medicare Part D Coverage Gap
Medicare Part D uses a different coverage system compared to other insurance plans. The main component of Medicare Part D is the coverage gap, informally known as the donut hole. The coverage gap determines how much you are required to pay out of pocket without any discounts. Once you hit the coverage gap for your Part D plan, you are only required to pay 25 percent of the prescription drug cost.
The coverage gap changes depending on the year. As of writing, the coverage gap for 2020 is $4,020. The coverage gap applies up until you hit $6,350. After this period, you only pay up to 5 percent of the costs for prescription drugs. The coverage gap resets at the start of each year.
Medicare Part D Costs
In addition to the coverage gap, Medicare Part D has a traditional monthly premium. The exact cost of premiums greatly varies depending on where you live. However, according to the Centers for Medicare & Medicaid Services, the average premium cost in 2020 was $32. If you have a Medicare Advantage plan, part of your premium may apply to prescription drugs. Additionally, there are a few private insurance plans which include Medicare Part D for free, so you do not have to pay any premiums.
There are also some plans that have an annual deductible. With an annual deductible, you are required to pay the full price of your prescription drugs until you hit the limit. The deductible is separate from the coverage gap, and only applies after you hit the coverage gap. However, the federal government sets a limit on how much private insurance providers can set for a deductible. In 2020, insurance companies cannot impose a deductible of more than $435. Because of the coverage gap, most insurance agencies do not impose a deductible, as it often ends up confusing applicants.
Payment Assistance Options
There are several payment assistance programs available to low income applicants. The first is the Extra Help program. When you initially apply for Medicare, you will receive a notification which shows whether you qualify for Extra Help. Additionally, you qualify for assistance if you receive Supplemental Security Income (SSI).
If you do not qualify for Extra Help, you may be able to get assistance from a state agency. Contact either your state Medicaid office or your State Health Insurance Assistance Program to find out what financial assistance is available. Finally, some drug manufacturers provide discounted rates.
When to Apply for Medicare Part D
You can only apply for Medicare coverage, no matter what plan, when you are at least 65 years of age. Several months before you turn 65, you will receive a packet of information informing you what plans you are eligible for and how to apply. With any Medicare plan, there are set enrollment periods. The first is open enrollment, which always begins on October 15th and goes until December 7th. Next, there is the general enrollment period. General enrollment always opens on January 1st and goes until the end of March.
Once you select a plan, you are automatically enrolled in the following years, unless you wish to terminate your plan. Your insurance plan may no longer be available in the next year. If this happens, you will receive a termination letter leading up to the next open enrollment period.
Part D and Other Insurance Plans
Medicare Part D is compatible with most other insurance plans, but there are a few notable interactions. If you receive insurance from either an employer or a union, you may be able to add Medicare Part D to your current plan. You must speak with your benefits administrator to find out if your plans are compatible.
COBRA insurance provides coverage for prescription drugs. If your COBRA coverage ends after the Medicare enrollment period, you are given a small window, known as a special enrollment period, where you can apply for Medicare Part D.
Previously, Medigap insurance also included Part D coverage, but as of 2020, the programs are no longer compatible. If you purchase Medicare Part D, you lose the prescription coverage from your Medigap insurance.