Medicare is more than half a century old, but it has continued to evolve over time. Medicare Part D is the newest component of the healthcare program, having taken effect in 2006, and millions of Medicare participants rely on Part D for the prescription drug benefits it offers. However, Part D works a little differently than most of Medicare. Below, you'll learn more of the specifics of how much Part D costs and what it covers.
What Medicare Part D costs
Medicare Part D involves several different types of costs, but unlike many other parts of the Medicare program, there are relatively few aspects of Medicare Part D that are uniform across all available plans. Private insurance companies offer Part D plans, and within parameters, they get to set many of the specific terms of the policies they offer. However, there are some common aspects to all Part D plans.
First, most Part D plans charge participants a monthly premium. Individuals who earn less than $85,000 and couples with income of less than $170,000 pay only the standard premium, but higher-income Medicare participants have to make additional payments that can add as much as $72.90 per month to their Part D premium costs.
In addition, many Part D plans have an annual deductible that you have to meet before coverage kicks in. The maximum deductible that Medicare allows for 2016 is $360, but plans aren't required to charge the maximum amount. Indeed, some Part D plans don't have any deductible at all.
Part D plans typically charge coinsurance or copayment amounts for the prescription drugs they offer. In some cases, you'll pay a fixed dollar amount for certain classes of drugs, regardless of their underlying costs. In other cases, you might pay a percentage of the actual cost of each drug.
Either way, Part D plans are required to offer catastrophic coverage that assures that participants will only pay a small coinsurance or copayment amount. For 2016, the out-of-pocket limit at which this catastrophic coverage applies is $4,850.
What Medicare Part D covers
Each individual Medicare Part D plan has its own list of covered drugs that it offers, which Medicare refers to as formularies. Many Part D plan providers will break out different types of drugs into different categories and create tiers that define the benefits for each category. For instance, higher-cost drugs might be put in one tier that has higher copayment or co-insurance amounts, while lower-cost drugs might be put in another tier with more affordable costs for participants.
For the most part, a plan has to keep covering the same drugs throughout the calendar year. There are rules that allow for mid-year drug changes in limited circumstances, but at the very least, you have to get written notice at least 60 days prior to the change taking effect. Moreover, the plan must honor a refill request and offer a 60-day supply of the drug under the pre-change rules, even if that 60-day period goes beyond the original time period.
For 2016, a new rule governing Medicare drug coverage adds some complexities to the equation. Starting early this year, the professionals prescribing the drugs you need must be enrolled in Medicare or have an opt-out request filed with Medicare in order for your prescriptions to be covered under your Part D plan. If your prescribing professional hasn't enrolled, then you'll get a provisional fill of your prescription for three months. But the long-term goal is to make sure that prescribers enroll, as you'll have to find a different professional who is enrolled in order to get a drug beyond the three-month provisional period.
Medicare Part D was revolutionary when it was created, and it has now become a critical component of managing healthcare costs for Medicare participants. Knowing what Part D covers and how much it costs is essential in making sure you pick a plan that works best for your healthcare needs.
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