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Medicare Part D - Medicare Prescription Drug Plans & Quotes
Medicare Drug Plans Overview
Medicare Part D is the prescription drug program for people who are on Medicare. Medicare Part D is very confusing for most senior citizens and, although relatively simple, most information given on these types of plans is not easy to understand. This guide will help you understand what Medicare Part D is, how it works, and what to look out for.
Before we get into some of the finer details, an overall summary of how these plans work will be useful. First off, Medicare Part D is a system designed by Medicare in order to offer more affordable Prescription Medication Insurance to people enrolled into Medicare. Medicare has four parts (A, B, C, and D), and Medicare Part D is the fourth and final part. We refer to Medicare Part D as "D" for "Drugs" - its easier for most folks to remember.
Medicare Part D is the drug plan itself, it is NOT a separate part of Medicare. If you have a stand alone Medicare-approved drug plan, you simply have Medicare Part D coverage. Medicare does not provide this type of coverage directly, however Medicare has contracted with private insurance companies to offer this type of coverage, and these private companies must follow certain laws and regulations set-fourth by Medicare in order to provide this coverage; the drug plans have to work a certain way.
Medicare Prescription Drug Plan Guide
1) Overview: Medicare Part D Drug Plans are sold by private insurance companies approved by Medicare. Plans sold by different insurance companies will be somewhat similar, although will vary in price and coverage. When shopping for a Medicare Part D Drug Plan, you are primarily looking to reduce the total amount of expenses that you would otherwise incur without the Drug Plan.
It is important that you consider purchasing a Medicare Part D Drug Plan when you are first eligible, even if you do not need it, or else you may have to pay a late penalty otherwise. People can generally purchase a Part D Plan up-to 3 months before going on Medicare, during the month of the 65th birthday, and up to 3 months after. This timeframe is commonly known as your "Initial Enrollment Period". If you do not purchase a Medicare Part D Plan during your "Initial Enrollment Period", or did not previously have "credible coverage" through an employer group health plan or something of the like, you will have to pay a late enrollment penalty equal to roughly 1% of the national average plan premium for every month that you could have had a Part D Plan and did not. This penalty will be a monthly penalty that you would be required to pay every month, as long as you have a Part D Drug Plan. Below we explain more on how this penalty is calculated.
How the Late Enrollment Penalty is Calculated
We cannot tell you exactly what your penalty will be, although we can give you a rough estimate of the maximum penalty that you might be charged. If you were eligible for Medicare Part D drug coverage starting January 1, 2007, and you did not purchase coverage until 3 years later (starting January 1st, 2010) you would pay approximately $10 per month in penalty charges. This monthly penalty amount ($10) would be in addition to your standard drug plan cost. The penalty amount of $10 in this example would be the same cost, no matter which plan you join. If you enroll into a drug plan after you are initially eligible, your monthly late enrollment penalty cost will be determined by Medicare and your drug plan will automatically charge you that much more money every month. If you had a drug plan that would normally cost $30 per month, it will now cost you $40 per month.
To estimate the penalty you would be required to pay, first find the national base drug plan premium for the year ($30.36 average in 2009, $31.94 in 2010, and $32.32 in 2011) and take 1% of that amount ($.30 in 2009, $.32 in 2010, and $0.32 in 2011). Then, multiply that by the number of uncovered, full calendar months since the end of your "Initial Enrollment Period" (IEP), during which you did not have "creditable coverage". Take the answer you get and round it to the nearest 10 cents. This amount will be added to your plan's monthly premium amount, even if the plan's premium is $0. Your penalty will change each year that the national average drug plan premium changes.
What is the Donut Hole?
The "Donut Hole" is an analogy used to explain the coverage gap in Medicare Part D drug plans. On Part D drug plans, the plan itself will help pay for your prescription Medications until you have reached a certain limit ($2,840 in 2011), and from this point on, you will have to pay the total cost of the medications out-of-pocket until you reach the maximum out-of-pocket cost limit ($4,550 in 2011). This gap of $1,710 ($4,550 - $2,840) is what you would have to pay; which is the full cost of your medications while you are in the "donut hole". After you reach the coverage gap limit ($4,550 in 2011) then you will enter what is called "catastrophic coverage" in which you will have the greatest amount of drug coverage until then end of the calendar year. To learn more about the donut hole, view the following link: Medicare Donut Hole. Below is also a picture diagram of how and why it is called the "donut hole"...
2) Pricing of Medications & What's Covered
Different drug plans charge different prices for medications. The primary and standard classification of medications is by using a "tier system". The tier system orginanizes medications according to price levels. There are "Tier 1", "Tier 2", "Tier 3", and "Tier 4" (specialty tier). The Part D drug insurance plan you purchase will classify different medications into different tiers based off of their retail prices. Below is a chart that helps depict what medications fall within what tiers, and examples of what you will pay for each. Generally, the higher the tier, the more expensive the medication is.
|Tier||You Pay||What is Covered||Cost Example*|
|Most generic prescription medications||$6.00|
|Preferred brand-name prescription medications||$27.00|
|Non-preferred brand-name prescription medications||$52.00|
|4 (Specialty tier)||
|Unique, very high-cost medications||25%-33% of drug cost|
(*)These amounts are not actual costs. They are examples of co-pay or co-insurance costs for a 30-day supply. Costs vary by drug plan, company, and by medication.
Most common medications are covered by drug plans, although it is very important to check with your specific plan to see if the medication you are taking is covered by the company. A "formulary" is a list of medications that the company covers. If the company does not list your specific medication in their formulary, then they do not cover your medication. Some plans and companies cover medications that others do not.
3) Shopping Prices & Comparing Plans
The three most important things to consider when choosing a drug plan are:
a) Premium (monthly cost)
b) Co-pays (fixed cost for buying a medication. E.g. you pay $7 for a generic med.)
c) Co-insurance (percentage you have to pay. E.g. plan might pay 80%, you might pay 20%)
D) Deductibles (amount you pay before plan kicks in)
All drug plans have a premium, co-payments, and co-insurance, although not all plans have a deductible. The average deductible in 2011 is $310.00 for the year - annually. Some plans might seem cheaper, but by the time you factor in paying for this annual deductible, it might actually be more expensive. When shopping for a policy and comparing prices, it is best to compare the total annual cost of the drug plans, and factor in all of your estimated expenses. This will give you a good idea of how much the plans will really cost you. A plan that costs $20 /month with less coverage might cost you more money during a year than a plan that costs $50 /month with excellent coverage.
4) How to Apply for a Part D Drug Plan
Many people are not aware that you can call Medicare directly to compare prices and enroll in a drug plan over the phone. If you call 1-800-MEDICARE, you will speak with a Medicare representative who will walk you through the entire process. They will ask you to read a list of all your current Medications, then they will enter those it into their computer system to compare the prices on all drug plans available within the U.S. After you purchase a drug plan, if you have questions about the specific policy you enroll into, you will simply contact the insurance company that Medicare helped you sign up with. Even if you already have a drug plan, we recommend calling Medicare every year to compare prices, and ensure that you have the best policy and best price currently available.
Only having Original Medicare (Medicare Parts A & B) and a Part D drug plan is generally NOT adequate coverage for most senior citizens. It is important to consider purchasing a Medicare Supplement Insurance Policy to protect yourself from the large gaps left by Medicare. To talk to one of our expert Medicare Advisors, please contact us at (855) 419-3826, or fill out a quote request form.
Unless you are in your "Initial Enrollment Period" or some other type of "special election period", you can only change or enroll in a new Medicare Part D drug plan during the "Annual Enrollment Period" which lasts from October 15th to December 7th. If you have a Medicare Advantage Plan that also includes drug coverage, you can elect to drop that coverage and return to Original Medicare from January 1st to February 14th, with the option of purchasing a stand-alone Medicare Part D drug plan and a Medicare Supplemental Insurance Policy.
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