Prescription Drug Plan
Medicare Prescription Drug Plan (PDP)
Medicare doesn’t cover drugs with Original Medicare. You can only get Medicare Prescription Drug Plan (PDP) from one of the private companies that offer plans in your service area. A plan than only covers Medicare Part D Prescription Drugs is called a Stand-Alone Prescription Drug Plan. Medicare subsidizes or pay a portion of the cost of the plan’s premiums to the plan you choose. In other words, you pay some premiums but the actual cost of the plans is higher and it is paid by the government. These companies sign contracts with Medicare and are highly regulated and must follow strict guidelines setup by Medicare.
What You Should Know Before Signing up for a Prescription Drug Plan
The Prescription Drug Plan stages
Prescription Drug Plans can have four stages: Deductible, Initial Coverage, Gap coverage (or Donut Hole) and a Catastrophic Coverage. Some plans don’t have deductibles and therefore have three stages. The amount of money you pay for each drug will change as you move from one stage to the next. Part D is subsidized by the Federal Government. The premium you pay for a plan is not the total cost. Medicare pays a large portion of the premium directly to the insurance company.
Here are the four stages:
Deductible
The plan starts counting how much you pay in prescription drugs January 1 of every year. If you have a plan with a deductible, you will have to pay the total drug cost until you meet your deductible.
Initial Coverage
After the deductible, you usually pay a copay (set amount) or a coinsurance (percent of cost) during the Initial coverage.
Coverage Gap (Donut Hole)
This stage is sometimes referred as the donut hole. It is a slang name for the coverage Gap in the Medicare Drug plan. When a member reaches the donut hole, the insurance company will not pay at all for the drugs (Medicare stop subsidizing the drugs). Then, after you pass that stage, the plan starts paying again for the drugs. The donut hole starts when you reach a total yearly cost of $5,030 (2024). The total yearly costs consist of what you pay and what the insurance company pays. In the Coverage Gap, you will pay 25% of the actual drug cost. The insurance company will start paying for drugs again when your yearly out-of-pocket reaches $8,000 (2024).
Note: If you are taking very expensive brand name drugs, you might want to talk to your doctor to find out if some of them can be replaced with less expensive generic drugs. That will minimize your out-of-pocket expenses with your prescription drugs.
Catastrophic Coverage
In the final stage, drugs are again subsidized by the Federal Government and you pay 5% of the cost or $4.15 (2023) copay for generic (including brand drugs treated as generic) and $10.35 (2023) copay for all other drugs.
Drug Tiers
All plans categorize drugs by tiers. The cheaper the drug the lower the tier (for example generic drugs are tier 1 or tier 2 and very expensive drugs are tier 4 or tier 5). By the same token, the lower the tier the lower your copay. A drug can be tier 1 with company A and tier 3 with company B. So, the same drug will cost you more with company B because it is categorized as a higher tier. Each company decides how many tiers they want to have and what tier they assign to each particular drug.
Example of Drug cost
Let say you take a tier 3 brand name drug that cost $520 per month. With many company’s plans your tier 3 copay can be around $50 per month. If your plan has a deductible for tier 3, you will have to pay the deductible first. After your deductible, you start paying your copay of $50. Once you reach the total yearly costs of $4,130 (in about 8 months $520 x 8 = $4,160), you will pay 25% of the cost or $130 (25% of $520) for that drug. Note: this example is oversimplified but it should give you an idea of your cost.
INSULIN SAVINGS PROGRAM
Some plans participate in the Insulin Savings Program. This program provides affordable, predictable copayments on select insulins through the first three drug payment stages. If you are on insulin, make sure you join a plan that offers this program.
EXTRA HELP FOR YOUR PRESCRIPTION DRUGS
(Low Income Subsidy or LIS)
Extra Help is additional financial assistance that Medicare members with low resources receive from Social Security for their prescription drugs. When the government added prescription drug to the Medicare program, they determined that plans will have a monthly premium, a deductible and a limit of how much the plan can pay per member (Coverage Gap). Also, copays for brand name drugs could be very high for some people with limited income. The Extra Help will cover the premiums, the deductibles and eliminate the Coverage Gap for people that qualify. In addition, beneficiaries will get reduced copays for the medications. There are different levels of Extra Help. The amount they pay for their medications depends on the level of Extra Help they qualify.
For 2021 these are the Resources and Income limit to qualify for Extra Help:
Resources: $14,790 for an individual or $29,520 for a married couple living together.
Annual Income limit: $19,140 for an individual or $25,860 for married couple living together.
To learn more about Extra Help and to find out what Social Security considers a Resource and Income, check the publication “Understanding the Extra Help with Your Medicare Prescription Drug Plan” from Social Security website ssa.gov.
See if you qualify for Extra Help and apply
Get more information about Extra Help on Medicare.gov:
Find a Pharmaceutical Assistance Program for the drugs you take
https://www.medicare.gov/pharmaceutical-assistance-program/
Learn more about the Prescription Drug plan at medicare.gov:
https://www.medicare.gov/drug-coverage-part-d
There are many companies that offer Medicare drug plans. I am contracted with many of them but it is not practical to contract with all of them. In most cases one of the companies I represent has the lowest out-of-pocket cost (or very close to it).
Shop and Compare Prescription Drug plans in the county you reside (Filter by Plan Type “Prescription Drug-Part D”):
So, how can you choose the plan that gives you the least out-of-pocket cost for your Medications?
If you are in excellent health, you are not on any medication and don’t foresee a near future change in your health, the answer is easy. Go with the lowest cost plan. You will be able to re-evaluate your needs every year during the Annual Enrollment Period (October 15 – December 7). Any changes during this period will take effect on January 1 of the following year.
If you are on some medications, you can go to each company’s website. They have a tool where you can enter all your drugs and find out if it is covered and how much is your copay or coinsurance. However, that can be a very tedious and time-consuming task if you want to compare many companies. Here is a tool that can check in one place all the companies that offer plans in your service area:
As always, if you are not very good with computers, you can fill out my Prescription Drug Quote form and I will help you out.