It’s important to review multiple plans before deciding which plan to buy, or if you’ll buy one at all. You can only buy Medicare Part D if you also have either Medicare Part A and/or Medicare Part B. You must have both Part A and Part B to join a Medicare Advantage plan that offers prescription drug coverage. Not all Medicare Advantage plans offer drug coverage.
How Does Medicare Part D Work?
Part D adds prescription drug coverage to your existing Medicare health coverage. You must have either Medicare Part A or Part B to get it. You can elect Part D during the seven-month period that you have to enroll in Parts A and B when you become eligible for Medicare (usually when you turn age 65). You’ll pay a premium for Part D coverage as well as a deductible and copays that differ between types of drugs. Drugs covered by each Part D plan are listed in their “formulary,” and each formulary is generally required to include drugs in six categories or protected classes:
AntidepressantsAntipsychoticsAnticonvulsantsImmunosuppressants for treatment of transplant rejectionAntiretrovirals andAntineoplastics.
The drugs in the plan’s formulary may be further placed into different tiers that determine your cost. What these tiers are called and what they include can differ between plans. Here’s an example:
Tier 1: The most generic drugs with the lowest copaymentsTier 2: Preferred brand name drugs with medium copaymentsTier 3: Non-preferred brand name drugs with higher copaymentsSpecialty: Drugs that cost more than $830 per month, the highest copayments, for years 2022 and 2023.
A formulary generally includes at least two drugs per category. One or both may be brand name drugs, or one may be a brand name and the other generic. Check with your doctor to see if one of the alternatives is acceptable if a prescription you take isn’t listed in the formulary. It might be the generic equivalent of the brand name drug you take or an altogether different drug in the same category. Use Medicare’s Plan Finder to compare Medicare plans during the Medicare open enrollment period from Oct. 15 to Dec. 7 each year.
The Medicare Donut Hole and Catastrophic Coverage
In addition to the premium, the deductible, copays, the formulary, and the different drug tiers, you should consider the “coverage gap” (also called the Medicare “donut hole”) to understand how Part D plans work and how much yours will cost. The donut hole indicates when there’s a temporary limit on the coverage offered by your Part D plan. The Medicare donut hole starts when you and the plan have spent $4,430 total on covered prescriptions in 2022, and it ends once you’ve spent $7,050 out of pocket. The thresholds increase to $4,660 and $7,400 respectively in 2023. You’ll generally pay no more than 25% toward the cost of prescription drugs during this time. You’ll enter another level of Part D called “Catastrophic Coverage” after you leave the coverage gap. You’ll be charged a small coinsurance amount or copayment, such as the greater of 5% or a small copay for the remainder of the coverage year, at this level.
How To Decide If You Need Part D
Selecting a Part D plan when you become eligible is often a good idea if you need prescription drug coverage, especially if you don’t currently have what Medicare considers “creditable prescription drug coverage.” You’ll probably pay a late enrollment penalty if you decide you want coverage later if you don’t elect Part D coverage during your initial enrollment period and you don’t have creditable prescription drug coverage. The late enrollment penalty permanently increases your Part D premium. But you can generally enroll in Part D later without paying a penalty if you do have creditable coverage and you keep it.
How Do I Choose a Part D Plan?
Perhaps the most important consideration when choosing a Part D plan is whether that plan covers the specific prescriptions you take. You can input the drugs you take and compare plan options using Medicare’s comparison tool. Otherwise, consider your priorities. Do you want protection from high drug costs? Do you want coverage in case you need prescription drugs later but currently take none or few? Is a low premium important to you? Select multiple plans to compare the star rating, the premium, and the deductible between plans. Click on “Plan Details” to see that plan’s costs by drug tier.
