The ABC’s of PDP’s (Medicare Prescription Drug Plans)
by Susan R. Tolbert, Licensed Health Agent
Individuals eligible for Medicare may receive prescription drug coverage with a stand-alone Part D plan or with a Medicare Advantage plan that includes prescription drug coverage. The initial enrollment period for joining a Medicare prescription drug plan coincides with the sign-up period for Original Medicare. This is a seven-month window when first eligible for Medicare and runs the first full three months before the birthday month of the beneficiary, includes the birthday month when turning 65, and includes the 3 full months after the beneficiaries birthday month. If individuals miss their initial enrollment period and are not under creditable drug coverage through another plan, such as an employer group plan, they will incur a penalty for late sign up. The penalty of additional premium will remain on the prescription drug plan for as long as the beneficiary participates in any Medicare Part D plan.
The Federal Medicare Program oversees Part D plans by establishing the criteria and minimum requirements for the plans that are provided by private insurance companies. These plans must be approved by Medicare to offer their prescription drug plans.
All Part D plans require members to progress through stages. While the deductibles and co-insurance will vary among plans, the out-of-pocket maximum on all plans in 2022 is $7,050 at which point the beneficiary moves into the catastrophic stage which places the member at the lowest co-payments for the remainder of the year. Understanding the four stages of Medicare prescription drug plans enables members to better calculate their out of pocket cost on their respective plan. The monetary thresholds listed below are based on plans for 2022.
Stage 1 – Deductible
Medicare caps the deductible amount on prescription drug plans at $480.00. While this means there will be no plan with a deductible greater than $480.00, there are plans that offer lower deductibles, and there are plans that offer a $0 deductible. In addition, there are plans that offer a $0 deductible on Tier 1 and Tier 2 medications, but require a deductible on the remaining Tiers 3, 4, or 5 of the prescription drug plan. Plan options available to beneficiaries vary by location.
Stage 2 – Initial Coverage Stage
After reaching a plan’s required deductible, the member enters the initial coverage stage. In this stage, members will make co-payments or coinsurance according to the specified amount for that plan until the total cost of medications purchased reaches $4,430. (This threshold includes the members co-payment and the portion paid by the plan towards the cost of the medications.)
Stage 3 – Coverage Gap
When a member reaches the coverage gap stage, he or she will be responsible for 25% of the cost of medications whether brand name or generic. This cost share percentage could be lower or even at no cost on some Part D plans. Stage 3 has infamously over the years been known as the donut hole, when members had to pay almost the entire cost of their medications until reaching stage 4. The donut hole has now closed due to legislation passed in 2010. When a member has paid $7,050 towards his or her medications, including the deductible payment, he or she will move into the last stage, the catastrophic coverage stage.
Stage 4 – Catastrophic Coverage Stage
When and if a member reaches the catastrophic coverage stage, the cost for generic medications will be the greater of 5% or $3.95 for generics and $9.85 for brand name medications.
It is important to keep in mind that the plans run annually from January 1 – December 31. So progression through the drug stages will start over on January 1 each year.
Prescription drug plans must make members aware of any plan changes for the new year in September. This allows members to use the Medicare Annual Enrollment Period which runs from October 15 to December 7 to disenroll from their current PDP and select a new PDP if they would like to change plans. The new plan will go effective January 1. There is no underwriting or denials of individuals to Medicare prescription drug plans. The only requirement is being entitled to Medicare Part A and/or enrolled in Medicare Part B. Also, you must live in the service area of the Part D plan that you wish to enroll in.
If an individual is on a Medicare Advantage plan that includes prescription drug coverage, please note that disenrolling from your plan also disenrolls you from the health coverage portion of the plan.
When looking at Part D plans, the consideration of the plan’s formulary (covered drugs) is critically important. While the Medicare program sets guidelines for the types of drugs that Part D plans must cover, each Part D plan decides which specific drugs it will cover, at which tier level, and at what co-payment or co-insurance amount.
Of course, making sure the pharmacies you prefer to use are participating pharmacies in your plan should not be overlooked.
Individuals in need of assistance for paying some or part of their prescription drugs can contact the Social Security Administration and apply for assistance through a Federal program called Extra Help. Also, some states offer prescription medication assistance through SPAP, State Pharmaceutical Assistance Program.
Please feel free to contact me at susan@newbrookeinsurance.com if you have any questions about Medicare prescription drug plans.