Part D (Prescription Drug Coverage)

Medicare’s Prescription drug coverage. Medicare Parts A and B do no cover most prescriptions. However, drug coverage is available to everyone in Medicare by enrolling in a stand alone Part D plan or MAPD.

Part D

Phases of Part D Prescription Drug Coverage:

Your cost of prescriptions changes as you move through the various phases of prescription drug coverage.

Phase 1 💰
You pay until you reach your annual deductible
Deductible: This is the period before your coverage begins when you are still satisfying Medicare Part D's annual deductible.
Phase 2 💊
You pay a co-payment or co-insurance depending on the plan you selected, and your plan pays the rest.
Your Initial Coverage: After your have satisfied your deductible, your Medicare plan covers 75% of the drug cost. You pay the remaining 25%, up to a maximum amount called the initial coverage limit.
Phase 3 🍩
You pay a higher amount of your prescription costs until reaching your out-of-pocket drug expense limit.
The Coverage Gap or "Donut Hole" you enter the coverage Gap after you and your Medicare plan reach your initial coveraeg limit. Once your enter this gap period, you are responsible for 25% of your brand-name prescription drug cost, the pharmaceutical company is responsible for 70% of the prescription drug cost, and your Medicare part D plan is reponsible for 5% of the prescription frug cost. You remain in the coverage gap until you reach your out-of-pocket limit.
Phase 4 💳
Your co-pay is reduced
Catastrophic Coverage" begins after you reach your out-of-pocket limit; this is after you and the pharamceutical company-portion of the Coverage Gap reach $6,550. For the rest of the year, your Medicare Part D plan pays 95% of your drug costs and you pay the remaining 5%.

Medicare Part D Donut Hole 2024

Medicare Part D is a prescription drug benefit that helps Medicare beneficiaries pay for their medications. However, Part D plans have a coverage gap, also known as the donut hole, which is a temporary limit on what the plan will cover for drugs. The donut hole was gradually closed by the Affordable Care Act (ACA), but it still affects many people who have high drug costs.

The projection of coverage change in 2024

The initial coverage limit is the amount that you and your plan have to spend on covered drugs before you enter the donut hole. In 2023, the initial coverage limit was $4,660. This means that once you and your plan spent $4,660 on your medications, you reached the donut hole and had to pay more for your drugs. The initial coverage limit usually increases yearly to account for inflation and drug price changes. For 2024, the initial coverage limit is projected to be $4,840, a 3.9% increase from 2023. This projection is based on the estimated growth rate of per capita drug spending in Medicare Part D, which is 5.8% for 2024. The initial coverage limit also reflects the impact of the Inflation Reduction Act (IRA), which limits the annual increase of the base beneficiary premium to 6%

Once you reach the donut hole, you have to pay 25% of the cost of your drugs, whether they are brand-name or generic. This is the same percentage that you pay before the donut hole, but it may be different from what you actually pay out-of-pocket, depending on your plan’s design. For example, if your plan has a copay instead of a coinsurance for your drugs before the donut hole, your costs will change once you enter the donut hole. Also, the way that the cost of your drugs is covered changes in the donut hole. For brand-name drugs, most of the cost is covered by a discount provided by the drug manufacturer (70%) and your plan (5%), while you pay 25%. For generic drugs, most of the cost is covered by Medicare (75%) and your plan (0%), while you pay 25%. The manufacturer discount for brand-name drugs was increased from 50% to 70% in 2019 as part of the ACA’s efforts to close the donut hole. The Medicare coverage for generic drugs was increased from 56% to 75% in 2020 as part of the Bipartisan Budget Act of 2018. These changes reduced the beneficiary’s share of costs in the donut hole and helped them reach catastrophic coverage faster.

To get out of the donut hole and move into the catastrophic coverage level, where you pay only 5% of the cost of your drugs or a nominal copay, your out-of-pocket spending has to reach a certain amount. This amount includes what you pay for your drugs in the donut hole, plus the manufacturer discount for brand-name drugs. In 2023, this amount was $7,400. For 2024, this amount is projected to be $7,700, which is a 4.1% increase from 2023. This projection is based on the estimated growth rate of per capita drug spending in Medicare Part D, which is 5.8% for 2024. The out-of-pocket threshold also reflects the impact of the IRA, which limits its annual increase to no more than $200 above inflation

The changes in Part D coverage in 2024 are mainly due to inflation and drug price trends. However, there may be other factors that affect Part D coverage in the future, such as legislative or regulatory actions. For example, some proposals have been made to lower drug prices by allowing Medicare to negotiate with drug manufacturers or import drugs from other countries. These proposals could potentially reduce Part D costs for beneficiaries and taxpayers, but they also face political and legal challenges. Therefore, it is important to stay informed about Part D coverage and compare plans every year to find the best option for your needs and budget

Choosing a Medicare Drug Plan: Considerations

Medicare drug plans are not all the same, and there are many options available. Here are some steps to complete before selecting your plan.

💰 Cost

  • Monthly Premiums: Consider the monthly costs of each plan before making your selection.
  • Deductibles: Choose whether you want a higher or lower deductible plan.
  • Co-pay / Co-insurance: Find out how much you will pay for hospital stays, doctor visits, and prescription drugs.

📑 Coverage

  • Formulary: Most drug plans have a formulary, a list of drugs that the pan covers. Plans ay have  rules-or tiers-about coverage for different drugs on their formulary.
  • Drug restrictions: When researching different drug plans, ask about any drug restrictions or limits in coverage. This will help ensure you are choosing the best possible option for your needs.

⌚ Convenience

  • In Network doctors and hospitals: In some plans you may need to visit only in network doctors and hospitals to get covered services.
  • Preferred pharmacies: Drug plans work with some but not necessarily all pharmacies in an area. These are called in-network pharmacies. Within the network, your drug plan may have a list of preferred pharmacies where you can get the best discount.
  • Mail order options for prescription drugs: most drug plans include this option, but each drug plan differs slightly. 

👍 Customer Service

  • Quality ratings / reviews: Customer reviews for each plan can be helpful in determining the best rated plans. You can always ask us about the ratings for the plans.

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How does other government insurance work with Medicare drug coverage (Part D)?

The types of insurance listed below are all considered creditable prescription drug coverage. In most cases, it is to your advantage to keep this coverage if you have it.

Federal Employee Health Benefits Program (FEHB)

This health coverage for current and retired federal employees and covered family members. These plans usually include creditable prescription drug coverage, so you don not need to get Medicare drug coverage (Part D). However, if you decide to get Medicare drug coverage, you can keep your FEHB plan, and in most cases, the Medicare plan will pay first.

Veterans' Benefits

This is health coverage for veterans and people who have served in the U.S. military. You may be able to get drug coverage through the U.S. Department of Veterans Affairs (VA) program. You may join a separate Medicare drug plan, but if you do, you can not use both types of coverage for the same drug at the same time.

CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs)

This is a comprehensive health care program in which the Department of Veterans Affairs shares the cost of covered health care services and supplies with eligible beneficiaries. You may join a separate Medicare drug plan, but if you do, you won’t be able to use the Meds by Mail program which can give your maintenance drugs to you at no charge (no premiums, deductibles and copayments).

TRICARE (military health benefits)

This is a health care plan for active-duty service members, military retires, and their families. most people with TRICARE entitled to Part A must have Part B to keep TRICARE drug benefits. If you have TRICARE, you do not need to join a separate Medicare drug plan. However, if you do, your Medicare drug plan pays first, and TRICARE pays second.

If you join a Medicare Advantage Plan with drug coverage, your Medicare Advantage Plan and TRICARE may coordinate their benefits if your Medicare Advantage Plan network pharmacy is also a TRICARE network pharmacy. Otherwise, you can file your own claim to get paid back for your out-of-pocket costs.

Indian Health Service

The IHS is the primary health care provider to the American Indian/Alaska Native Medicare population. The Indian health care system, consisting of tribal, urban, and federally operated IHS health programs, delivers a spectrum of clinical and preventive health services through a network of hospitals, clinics, and other entities. Many Indian health facilities participate in the Medicare drug program (part D). If you get drugs though an Indian health facility, you will continue to get drugs at no cost to you, and your coverage won’t be interrupted. Joining a Medicare drug plan or Medicare Advantage Plan with drug coverage may help your Indian health facility because the plan pays the Indian health facility the cost of your drugs.

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