Medicare Part D

Medicare Part D

• What is Medicare Part D Prescription Drug Coverage?
• Who is Eligible to join a Part D Prescription Drug plan?
• What is covered under Part D?
• What is not covered?
• How much does it cost?
• When can you Join, Switch, or Drop a Medicare Drug Plan?
• What is the Late Enrollment Penalty?

What is Medicare Part D prescription drug coverage?

Medicare Part D, also known as a Prescription Drug Plan or "PDP," was created under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (2003 Medicare Act) to help cover the costs of prescription drugs. Prescription drug coverage is offered only by private companies contracted with Medicare through stand-alone plans (for beneficiaries who have Original Medicare) and through HMOs, PPOs, and PFFSs (for beneficiaries who have a Medicare Advantage plan). Anyone who has Original Medicare or Medicare Advantage is eligible to enroll in Part D. Enrollment in Part D is voluntary.

Caution: If you have employer or union coverage, call your benefits administrator before you make any changes, or before you sign up for any other coverage. If you drop your employer or union coverage, you may not be able to get it back. You also may not be able to drop your employer or union drug coverage without also dropping your employer or union health (doctor and hospital) coverage. If you drop coverage for yourself, you may also have to drop coverage for your spouse and dependents. 

Tip: Refer to Your Guide to Medicare Prescription Drug Coverage which is the official government booklet that tell you how the program works, how to get extra help paying for drug coverage if you have limited income and resources, and how it may affect any current drug coverage you have.

Who is Eligible to join a Part D Prescription Drug Plan?

To join a Medicare Prescription Drug Plan, you must have Medicare Part A OR Part B. In contrast, to join a Medicare Advantage plan, you must have Medicare Part A AND Part B. You must also live in the service area of the Medicare drug plan you want to join.

Caution: If you don't currently have creditable prescription drug coverage (coverage that is expected to pay, on average, at least as much as Medicare's standard prescription drug coverage), you should think about joining a Medicare Precription Drug Plan as soon as you're eligible. If you don't join a Medicare Prescription Drug Plan when you're first eligible and you decide to join later, you may have to pay a late enrollment penalty.

What is covered under Part D?

 In general, private companies that offer Part D coverage are allowed to design their own benefit plans, as long as the overall value of the plan is at least as good as the basic plan outlined in the 2003 Medicare Act. Different plans offer different lists of covered medicines (called a formulary), and at different costs. Beneficiaries should compare the different drug plans available in their area to find the one that best suits their needs.

The basic Part D plan generally meets the following criteria:

• The annual deductible can't be more than $310 for 2011
• The plan must cover at least two drugs in each drug class
• The plan must cover substantially all drugs in these six categories: antidepressants, antipsychotics, anticonvulsants, antiretrovirals (AIDS treatments), anticancer drugs, and immunosuppressants
• Members must be able to seek an exception if a drug is medically necessary but not covered under the plan
• Plans must have a network of pharmacies that provide convenient access
• Lists of covered drugs and pharmacy networks must be readily available to members
• Plans must work with nursing homes
• Plans must help transition a member's current drug coverage
• Plans must offer catastrophic coverage that is at least as good as the coverage outlined in the 2003 Medicare Act

What is not covered?

Some drugs are not required to be covered by Medicare Part D, including:

• Over-the-counter drugs
• Most prescription vitamins and minerals
• Certain anti-anxiety and anti-seizure drugs (barbiturates and benzodiazepines which will become covered in 2014)
• Fertility drugs
• Erectile dysfunction drugs when used for the treatment of sexual or erectile dysfunction
• Drugs for weight loss or gain, and anorexia
• Cosmetic and hair growth drugs
• Drugs that treat symptoms of the common cold (e.g., coughs, congestion)
• Drugs covered under Part A or Part B

TIP: Although not required to be covered, some plans choose to cover some of these drugs.

How much does it cost?

How much you'll pay for Medicare drug coverage depends on which plan you choose. But in general, here's what you can expect to pay in 2011:

• Monthly premium: Most plans charge a monthly premium. This is in addition to the premium you pay for Medicare Part B. You can have the premium deducted from your Social Security check, or you can pay your Medicare drug plan company directly. Premiums vary greatly by company. The National Base Beneficiary Premium used by Medicare to calculate the late enrollment penalty is $32.34 for 2011. Effective January 1, 2011, the "Patient Protection and Affordable Care Act" (Section 3308) provides for a reduction in the premium subsidy for Medicare beneficiaries who earn a higher income (Part D Income Related Medicare Adjustment Amount). The new provision parallels the Medicare Part B premium adjustment and the result is that people with an annual income over $85,000 for single tax filers or over $170,000 for couples filing jointly will pay a higher monthy Medicare Part D premium. The amount of the additional premium will be based on the National Base Beneficiary Premium set by Medicare of $32.34 for 2011. The amount of this additional premium will be deducted directly from the beneficiary's Social Security check, regardless of the premium payment method chosen by the beneficiary.

• Annual deductible: Most plans require you to satisfy an annual deductible of up to $310.

• Co-payments: Once you've satisfied the annual deductible, you'll pay the copayment or coinsurance as stated in your plan until the combined amount paid by you and your drug plan reach $2,840. After that, there's a coverage gap. Beginning in 2011, brand name drugs will be discounted by 50% and generic drugs by 7% while you are in the cocverage gap until you reach catastrophic coverage. You reach catastrophic coverage once you have spent $4,550 in out-of-pocket costs (the 50% brand name drug discount during the coverage gap is included to meet your $4,550 in out-of-pocket costs, but the 7% generic discount is not included), not including your monthly premium. Your Medicare drug plan will then cover 95% of any further prescription costs. For the rest of the year, you'll pay either a coinsurance amount (e.g., 5% of the prescription cost) or a small copayment for each prescription.

Caution: Costs and limits may change each year, and not all plans will work exactly this way.

Tip: Extra help with Medicare drug plan costs is available to people who have limited income and resources. Medicare will pay all or most of the drug plan costs of beneficiaries who qualify for help. You can get an application for help from Medicare, or you can pick up one up at your local pharmacy.

When can you Join, Switch, or Drop a Medicare Drug Plan?

Medicare prescription drug coverage is available in two ways:

• You can join or remain in a Medicare Advantage plan that provides all your Medicare benefits, including Part D benefits
• You can enroll in a stand-alone plan, which will cover only Part D while you continue to get your other services through Original Medicare

Caution: If you are in an HMO or PPO, you must receive drug coverage through that plan.

If you are currently enrolled in Original Medicare, you can enroll in a Part D plan (or make changes in your Part D coverage) during the Annual Coordinated Election Period (AEP) which runs from October 15 to December 7 of each year. If you're new to Medicare, you have seven months to enroll in a drug plan: three months before, the month of, and three months after becoming eligible for Medicare.

If you do not enroll in a Part D plan during your Initial Enrollment Period, you will be able to enroll, disenroll, or change drug plans during the Annual Coordinated Election Period (AEP) from October 15 through December 7. However, a premium penalty will generally apply unless the reason you didn't join sooner was because you already had prescription drug coverage that was at least as good as the coverage available through Medicare.

Tip: Beginning in 2011, there will no longer be an Open Enrollment Period whereby you can change Medicare Advantage plans. Rather, there will be an Medicare Advantage Disenrollment Period (MADP) from January 1 to February 14 each year. During this time, you can disenroll from your Medicare Advantage plan and return to Original Medicare. You will then be able to enroll in a stand-alone Part D Prescription Drug Plan.

You can join or change plans during a Special Enrollment Period (SEP) in certain situations, including (but not limited to):

• Moving out of your plan's service area
• Losing drug coverage provided by a non-employer through no fault of your own
• Losing employer-provided drug coverage for any reason
• Losing full Medicaid coverage
• Entering, residing in, or leaving a long-term care facility

Refer to Medicare Enrollment Periods for more details about Special Election Periods.

Tip: You can switch to a new Medicare drug plan simply by joining another drug plan during one of the times shown under Medicare Enrollment Periods. You don't need to cancel your old Medicare drug plan or send them anything. Your old Medicare drug coverage will end when your new drug plan begins.

Caution: If you are enrolled in a Medicare Advantage Plan (Part C) that includes prescription drug coverage and you enroll in a Medicare Prescription Drug Plan, you will be disenrolled from your Medicare Advantage Plan and returned to Original Medicare.

What is the Late Enrollment Penalty?

The late enrollment penalty is an amount that is added to your Part D premium. You may owe a late enrollment penalty if one of the following is true:

• You didn't join a Medicare drug plan when you were first eligible for Medicare, and you didn't have other creditable prescription drug coverage. Creditable Prescription Drug Coverage is coverage that is expected to pay, on average, at least as much as Medicare's standard prescription drug coverage. Usually, this coverage is provided from an employer or union. People who have this kind of coverage when they become eligible for Medicare can generally keep that coverage without paying a penalty if they decide to enroll in a Medicare Prescription Drug plan later.
• You didn't have Medicare prescription drug coverage or other creditable prescription drug coverage for 63 days or more in a row.

NOTE: If you get Extra Help paying for your Prescription Drug coverage, you don't pay a late enrollment penalty.

The cost of the late enrollment penalty depends on how long you didn't have creditable prescription drug coverage. Currently, the late enrolment penalty is calculated by multiplying 1% of the "National Base Beneficiary Premium" which is $32.34 for 2011, times the number of full, uncovered months that you were eligible but didn't join a Medicare drug plan and went without other creditable prescription drug coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium.

NOTE: Since the "National Base Beneficiary Premium" may increse each year, the penalty may also increase. You may have to pay this penalty for as long as you have a Medicare drug plan.