What are Prescription Drug Plans?
Prescription Drug Plans (aka Part D) offer insurance coverage solely for prescription drugs. They DO NOT cover over-the-counter drugs, compounded drugs, or holistic medicines. For most states, there are currently over 20 Prescription Drug Plans available and they are sold by a myriad of private insurance companies.
Is purchasing a Prescription Drug Plan required?
Medicare rules stipulate that you must have “credible prescription drug coverage” when your turn 65. If you don’t, you will be assessed a penalty at the time you do obtain this coverage. This penalty is called a Late Enrollment Penalty (LEP) and it is added to the monthly premium of your drug plan. Click here for more information on Late Enrollment Penalties.
“Credible prescription drug coverage” can present itself in many forms. You don’t have to have a private, stand-alone prescription drug plan in order to have coverage that is considered credible. In fact, there are several types of drug coverage that qualify as credible coverage with Medicare. Here is a list of the most common types:
- Employer coverage
- VA benefits
- Medicare Advantage Prescription Drug plan (MAPD)
- Stand-alone Prescription Drug Plan
- Former employer retiree plans
However, just because you have one of these types of coverage does NOT guarantee the coverage is credible. We highly recommend you consult your employer’s Human Resources Department, your insurance agent, or the Office of Veteran’s Affairs to confirm your coverage qualifies.
How do I pick a drug plan?
Easy question, complicated answer. With so many plans to choose from, selecting the right one can be daunting. And, there are different ways to tackle this. Some choose a plan offered by a carrier they are loyal to. Others pick the cheapest plan.
At Sovereign Seniors LLC, we take a practical and customized approach to recommend the drug plan that will cover all your drugs and save you the most money. To do this, we gather pertinent information about the drugs you take, the strength of each prescription, the pharmacies you prefer, the frequency you fill each prescription, and your preferred way of filling your prescriptions. This information is used in tandem with the Medicare.gov website to evaluate each plan’s ability to meet your needs. Contact us for a free review of your prescription drug coverage and for help selecting a plan.
How much do plans cost?
Because there are numerous Prescription Drug Plans available in any give state, there is no straight answer to this question. Premiums vary significantly. The Center for Medicare and Medicaid Services (CMS), however, has shared that the “Part D base beneficiary premium for 2023 is $32.74.” If you are trying to budget this monthly cost and do not yet know your exact plan and its’ cost, this is a good number to use.
It is possible your premium will be higher than the base amount quoted by your carrier. Just like with your Original Medicare Part B premium, high wage earners will be assessed an Income Related Monthly Adjustment Amount (IRMAA) if your modified adjusted gross income (MAGI) on your tax return from two years ago exceeds certain thresholds. The chart below indicates how much extra you will pay if you are assessed an IRMAA in 2023.
What on earth is the Donut Hole?
In a nutshell, this is the best way we can think of to simplify a complicated topic: The price you are paying to fill a prescription drug at the pharmacy might not remain the same throughout the year. Why? Because the price you pay for your drugs depends on what stage or “coverage period” you are currently in. The Donut Hole is, arguably, the most expensive coverage period one could experience. That is why many speak of it with such frustration. Look at the chart below:
On January 1st, 2023, all individuals with a Prescription Drug Plan begin their coverage journey on the left side of the above chart which marks the beginning of the Initial Coverage Period. Once the accumulated costs that both you and the insurance company have paid for your drugs exceeds $4,660, you enter the Donut Hole. When the total amount you have paid out of your pocket for your drugs (known as your True Out Of Pocket or TrOOP) exceeds $7,400, you proceed to the Catastrophic Coverage Period and remain there for the rest of the year.
The difference between these three stages is how much you pay for your prescriptions. These amounts are noted in italics on the chart above. As you can see, you begin the year paying toward any deductible you may have and/or you are paying copays to fill your prescription drugs. Once you enter the Donut Hole, costs change and you will pay 25% of the cost of your drugs. For many prescriptions, this is a price increase from what you were paying previously. And finally, upon reaching the Catastrophic Coverage Period, costs significantly decrease and you remain at this stage for the remainder of the year.
The big takeaway is this: the more drugs you take and/or the more expensive your drugs are, the greater likelihood you will reach the Donut Hole and the Catastrophic Coverage Period. For more information regarding the Donut Hole (aka the Coverage Gap), click here.
How can I reduce my drug costs?
The high costs of prescription drugs is a hot topic…in communities across the country as well as with our politicians in Washington D.C. Here are a few current ways to reduce the cost of your prescription drugs:
- If you have limited resources, the Social Security Administration offers a program called Low Income Subsidy (LIS) or Extra Help. To qualify for this program, your income and savings needs to fall within certain ranges. To learn more or see if you qualify, click here.
- GoodRx. This website offers free coupons and searches for the lowest local prices on your drugs. They offer a discount card which you present at the pharmacy when paying. While this program offers tremendous relief to thousands, there are a few things to note for Medicare beneficiaries:
- If your insurance coverage details are already stored in your pharmacy’s system, it’s possible they will not accept your GoodRx card or honor the discount.
- The price you pay on prescriptions using GoodRx will not apply to your deductible.
- This –and all–pharmacy discount plans DO NOT qualify as credible prescription drug coverage. You will still need to have credible prescription drug coverage in order to avoid Medicare’s Late Enrollment Penalty.
- Contact the pharmaceutical company. Most pharmaceutical companies offer cost-relief programs (or coupons at a minimum).