Understanding Medicare Part D – Prescription Drug Coverage

Medicare is a government health insurance program for eligible individuals. To be Medicare Part Deligible you must be: 65+ years old; have collected SSDI benefits for more than 24 months; or have been diagnosed with end stage renal disease (ESRD) or ALS. There are currently about 56 million Americans enrolled in Medicare.

Medicare coverage is broken up into “parts:”

  • Part A: Hospital Insurance – includes hospital care, skilled nursing facilities, nursing homes, hospice, and home health services.
  • Part B: Medical Insurance – includes services from doctors, preventive care, outpatient care, lab tests, mental health care, ambulance services, and durable medical equipment.
  • Part D: Prescription Drug Plan (PDP) – different plans to choose from depending on where you live, with different premiums and formularies.
  • Part C: Advantage Plans. Part C is an alternative to Parts A & B and it includes the benefits and services covered under Parts A & B, and usually Part D. You can select a PPO or HMO plan that is run by a Medicare approved private insurance company.

For more information about Medicare, read our Quick Guide to Medicare, or watch our webinar on “Making Sense of the Medicare Maze.”

Medicare Part D is optional, but if you are taking prescription medication and do not have Part D, you may have to pay for medications out-of-pocket. If you decide later that you want Part D, but didn’t sign up when you were first eligible, you pay have to pay a late enrollment penalty.

How much you pay for Medicare Part D and out-of-pocket prescription drug costs depends on a number of factors, like which Part D plan you choose, how many prescriptions you take and how often, whether your pharmacy is in your plan’s network, whether your prescription drugs are on your Medicare Part D plan’s formulary, and more. To find which Medicare Part D plans are available where you live, click here.

Part D premiums generally range from $10-$100 per month (depending on the plans available in your area and on the specific plan you choose). The maximum deductible—the amount you must pay out-of-pocket before Medicare will contribute to your prescription costs—in 2017 is $400. After paying your deductible, then Medicare will pay 75% of your prescription drug costs and you will pay 25%, up to a total of $3,700.

What many refer to as the “donut hole” in Medicare Part D coverage is a gap in coverage when you have spent a certain total amount on covered prescriptions. In 2017, once you and your plan have spent $3,700 on covered drugs, you’re in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap. For more information and examples of the coverage gap, visit Medicare.

Even with Part D coverage, prescription drugs can be expensive. Depending on your income level, you may qualify for financial assistance to help pay for your prescriptions drugs. A Low-Income Subsidy provides Medicare beneficiaries with assistance in paying their Part D monthly premium, annual deductible, coinsurance, and copayments. Some people may be eligible for Extra Help, a program aimed for those who do not automatically qualify for a Low-Income Subsidy. You may be entitled to Extra Help if you are entitled to Medicare and get full coverage from a state Medicaid program, you are enrolled in a Medicare Savings Program, or you get SSI disability benefits. The Medicare Savings Program pays for the Medicare Part A and the Medicare Part B premiums. It also pays Medicare cost-sharing expenses, including deductibles, coinsurance, and copayments.

For more information on how to reduce your prescription drug costs, visit the following link. Examples include switching to lower-cost medication if approved by your health care team, or switching to mail-order programs from your plan.

You can also visit CancerFinances.org to find other financial assistance resources.

For help with Medicare and making plan choices, you can visit Medicare.gov or call 1-800-MEDICARE. You can also speak to a local counselor through the State Health Insurance Assistance Program. Click here, then pick your state from the drop down menu on the right, under “Find someone to talk to,” and it will provide the local contact information.