What Medicare Part D Covers
Medicare Parts A and B do not include prescription drug coverage. This is where Medicare Part D comes in. Medicare Part D is an optional prescription drug coverage component of Medicare. Consumers can add Part D on to Original Medicare or choose to incorporate prescription drug coverage into their Medicare Advantage Plans. In either case, the exact drug formularies vary by plan and network.
Just as Part D offers extra benefits, it also incurs extra costs. These costs depend on the plan, but generally, they involve some combination of a monthly premium, a yearly deductible, copayments and coinsurance, and a late enrollment fee.
- Monthly premium:The monthly premium is what consumers pay each month for Part D insurance. This premium depends on the plan. If you enroll in Part D on top of Original Medicare, this premium will be extra. If you enroll in prescription drug coverage as a part of a Medicare Advantage Plan, your Part D premium may be rolled into the Advantage Plan monthly income.
- Deductible: The yearly deductible is the amount you are expected to pay out of pocket before the insurance offers coverage. Some plans do not have a yearly deductible, but this depends on the plan.
- Copayments and Coinsurance: Most Part D plans involve some form of copayment and coinsurance for each drug. This is the amount consumers pay after the deductible. The exact copayment depends on the plan and its formulary.
- Late enrollment fee: If you decide to enroll in Part D after your Initial Enrollment Period, you are subject to a late fee. The late fee depends on how long you did not have drug coverage. It is calculated by multiplying 1% of the “national base beneficiary premium,” which was $32.74 in 2020, by the number of full, uncovered months that the individual was eligible for a Medicare drug plan or other creditable drug coverage but did not join. The final amount is rounded to the nearest $0.10 and added to your monthly premium.
To avoid the late fee, consumers should enroll in Part D during their Initial Enrollment Period, enroll in a Medicare prescription drug plan if they lose other coverage, and keep records showing that they had drug coverage.
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What Part D Covers
Part D covers prescription drugs and catastrophic coverage. The particular medications that are covered differ depending on the plan. Each plan categorizes drugs into different tiers on their formulary. Each tier has a different cost and a different amount of coverage. Lower tiers have lower costs, and higher tiers are more expensive medications. Contact your plan to learn more about your exact formulary.
Additionally, Part D plans include catastrophic coverage once the deductible is met. This means that you only have to pay coinsurance or copayment for covered drugs for the rest of the year.