Medicare Part D Plans

Medicare Part D, also called the Medicare prescription drug benefit, is a United States federal-government program to subsidize the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries.

What is Part D?

Medicare Part D is a federal program administered through private insurance companies. These companies offer retail prescription drug coverage to Medicare beneficiaries. Prior to 2006, when the Medicare Part D began, tens of thousands of Medicare beneficiaries in America had little help with retail drug costs. They would often spend thousands of dollars each year paying for their medications out of pocket.

Fortunately, today’s Medicare beneficiaries have better coverage with Part D. Beneficiaries can enroll in a standalone Part D drug plan that goes alongside their Original Medicare benefits, or they can choose a Part D drug plan that is built-in to a Medicare Part C plan.

What is Part D and how does it work? It is an optional prescription drug program for people on Medicare.

Medicare Part D is simply insurance for your medication needs. You pay a monthly premium to an insurance carrier for your Part D plan. In return, you use the insurance carrier’s network of pharmacies to purchase your prescription medications. Instead of paying full price, you will pay a copay or percentage of the drug’s cost. The insurance company will pay the rest.

Your Part D insurance card will be separate from your Medigap plan.
Medicare Part D plans all follow federal guidelines. Each insurance carrier must submit its plan outline to the Centers for Medicare and Medicaid Services annually for approval.

To improve your understanding of Medicare Part D, let’s look at the basic way that each Part D plan works:

How does Medicare Part D work?
There are 4 stages to a Part D drug plan, as follows:

Annual Deductible: In 2020, the allowable Medicare Part D deductible is $435. Plans may charge the full Part D deductible, a partial deductible, or waive the deductible entirely. You will pay the network discounted price for your medications until your plan tallies that you have satisfied the deductible. After that, you enter initial coverage.
Initial Coverage: During this stage of Part D drug coverage, you will pay a copay for your medications based on the drug formulary. Each drug plan will separate its medications into tiers. Each tiers has a copy amount that you will pay. For example, a plan might assign a $7 copay for a Tier 1 generic medication. Maybe a Tier 3 is a preferred brand name for a $40 copay, and so on. The insurance company tracks the spending by both you and the insurance company until you have together spent a total of $4020 in 2020.
The Coverage Gap: After you’ve reached the initial coverage limit for the year, you enter the coverage gap. During the gap, you will pay only 25% of the retail cost of your medications. (This is so much better than in 2006 when many people had to pay 100% of their drugs in the gap.) Your gap spending will continue until your total out of pocket drug costs have reached $6350 in 2020. Please note that to get into the gap, Medicare tracks the total costs of what you and the insurance company have spent, but to get OUT of the gap, they are counting only what you have paid in deductibles, copays and gap spending that year, plus manufacturer discounts. They do not count anything the federal government contributes.
Catastrophic Coverage: After you’ve reached the end of the coverage gap, your plan will kick in to pay 95% of the costs of your formulary medications for the rest of the year. This feature in Part D drug plans helps you limit your potential spending if you have expensive medications.

Medicare Part D Explained - Medicare Tracks Your Part D Spending

It’s important to note that Medicare itself tracks your True Out of Pocket Costs (TrOOP) for each year. This can protect you from paying certain costs twice. For example, say you have already satisfied the deductible on one plan. Then you later switch mid-year to a different Medicare Part D plan because you moved out of state. Your new plan will already see that you have paid the deductible for that year. The costs for coverage gap and catastrophic coverage work the same way.

Part D drug plans also have changes from year to year. Your plan’s benefits, formulary, pharmacy network, provider network, premium and/or co-payments/co-insurance may change on January 1st of each year. Medicare gives you an annual election period during which you can change your plan if you desire to do so.

Drug utilization rules that affect your Part D coverage

Medicare allows drug plan carriers to apply certain rules for safety reasons and also for cost containment. The most common utilization rules that you may run into are:

Quantity Limits – a restriction on how much medication you can purchase at one time or upon each refill. If your doctor prescribes more than the quantity limit, then the insurance company will need him to file an exception form to explain why more is needed.
Prior Authorization – a requirement that you or your doctor must obtain plan approval before allowing a pharmacy to dispense your medication. The insurance company may ask for proof that the prescription is medically necessary before they allow it. This usually affects medications that are expensive or very potent. The doctor must show why this specific medication is necessary for you and why alternative drugs might be harmful or ineffective.
Step Therapy – the plan requires you to try less expensive alter

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