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Medicare Prescription Drug Coverage

What you need to know about Medicare Part D

Effective as of 2006, Medicare Part D, or prescription drug coverage, is the most recent addition to the Medicare program. Now, anyone with Medicare Parts A and B is also eligible for Medicare Part D.

A few things to note about Part D:

  • Medicare prescription drug coverage is available only through private health insurers that are approved by Medicare
  • You can purchase a stand-alone plan (MA-PD), or your drug coverage can be bundled with your Medicare Advantage plan (Part C)
  • Prices and coverage may vary from plan to plan, so it pays to shop around
  • If you don’t sign up for prescription drug coverage (or have some other form of creditable drug coverage) as soon as you’re eligible, you’ll be charged a late enrollment penalty

When to Enroll

Because Part D has a late enrollment penalty, just like Part B, it’s important that you enroll as soon as you’re eligible. You’re eligible when:

  • You turn 65 (you may enroll starting 3 months before your 65th birthday, the month of your birthday, and up to 3 months after your birth month)
  • You’re under 65 and disabled
  • You enroll in Part B (whether or not you have Part A)

If you don’t enroll at one of these times, you can be charged a late enrollment penalty. In addition, you can be penalized anytime you go a period of 63 days or more without a Medicare prescription drug plan or some other creditable coverage (from a former employer, for example).

The penalty itself is calculated by multiplying 1% of the national base beneficiary premium by the number of full months you were eligible for coverage, but didn’t enroll. You can learn more about the Part D late enrollment penalty at Medicare.gov.

Two Ways to Get Coverage

While Medicare prescription drug coverage is only available through private health insurers, there are two ways you can receive your coverage:

  • A stand-alone Medicare Prescription Drug Plan (MA-PD) 
  • A Medicare Advantage (Part C) plan with prescription drug coverage included

If you have original Medicare and don’t want to switch to a Medicare Advantage plan, then you’ll need to enroll in a stand-alone MA-PD to avoid a late enrollment penalty (unless you have creditable coverage). While many Medicare Advantage plans offer prescription drug coverage as part of the plan, there are some that don’t. If you have a Medicare Advantage plan that doesn’t offer drug coverage, you’ll need to find a stand-alone MA-PD.

Things to Consider When Choosing a Prescription Drug Plan

While price is always important, it’s not the only thing to consider when shopping for a prescription drug plan. You’ll want to keep these other issues in mind when making a decision:

Formulary

A plan’s formulary is just a list of the medications the plan covers. If one or more of the medications you take is not on a plan’s formulary, you’ll want to look elsewhere.

Network

Most plans have a network of pharmacies they want you to use in order to get the best prices. If you go to a pharmacy that’s not in your plan’s network, you may have to pay more for your prescriptions. Make sure your preferred pharmacy is in your plan’s network.

Mail Order

Many prescription drug plans can give you a lower price if you have your medicine sent to you by mail. The plan may also require that you get a 3-month supply at a time. In most cases, this isn't a problem, but you may want to check with your doctor to make sure mail order is right for your medicines. 

Service & Convenience

If you have a Medicare Advantage plan with prescription drug coverage, there’s just one company to contact if there’s ever an issue with your coverage. If you’re prescription drug plan is with a different carrier than your other Medicare coverage, it may be more difficult to coordinate benefits between plans.

A Word about the Donut Hole

If you've done any research into Medicare Prescription Drug Plans at all, you've probably heard about the so-called donut hole. The donut hole is simply a gap in coverage that occurs once you and your plan have met a pre-set spending limit for drugs. When that limit is reached, your drug plan stops paying, and you’re responsible for 100% of your drug costs, for a time. If you reach the next spending plateau, the drug plan kicks back in and pays an even higher portion of your drug costs.

Keep in mind that every prescription drug plan currently comes with a donut hole. The good news, however, is that many people never reach the donut hole. What’s more, there are discounts available on both brand and generic drugs for those who do reach the donut hole, and the coverage gap should be phased out all together by the year 2020.

When You’re Ready to Enroll

If you’re eligible for Part D and ready to enroll, there are plenty of resources available to help you. There’s detailed information about Part D at Medicare.gov, as well as a Medicare Plan Finder. You can also find out of you qualify for Extra Help paying for your prescription drugs.