Medicare Part D
Akron Medicare Part D Lawyer
Medicare is a federal program designed to provide low-cost health insurance coverage to people over 65 and many disabled Americans. Medicare Part D is the Medicare prescription drug program (PDP). Persons enrolled in Medicare Part D must pay a monthly premium in addition to the Part B premium unless they are eligible for assistance. The premium varies in different regions of the country. The premium is likely to change on a yearly basis as well.
Depending your plan, there may be an annual deductible which must be met before coverage begins. After any deductible has been met, beneficiaries could be responsible for a co-pay of their covered prescription costs until they generally reach an initial coverage limit of $2700.00. When the beneficiary reaches this limit, he or she has a gap in coverage until reaching the total annual out-of-pocket expense of $4350.00 (in 2009). This gap in coverage is called the “doughnut hole.”
During this gap in coverage or “doughnut hole,” the beneficiary must still pay the monthly premium amount and must pay for their prescriptions until they reach the $4350.00. After the beneficiary has reached the $4350.00 total annual out-of-pocket expense, the beneficiary will pay approximately $2 for generic drugs and approximately $5 for non-preferred drugs or a 5% co-insurance amount, whichever is greater. Visit our Medicare terminology page for definitions of these insurance coverage terms.
Various insurance companies will offer Medicare Prescription Drug Plans (PDPs). These companies can offer a plan that is “actuarially equivalent” to the standard Medicare Part D benefit package. For example, a PDP may create a plan that allows for tiers of coverage rather than the 25% co-pay discussed above. A tiered plan may call for a beneficiary to pay different amounts for generic, brand name, and preferred brand name drugs instead of the 25% co-pay on all covered prescription drugs.
Only the cost of drugs included in the plan formulary will count toward the beneficiary’s deductible and out-of-pocket expenses. The federal government does not provide a list of drugs that must be included in plan formularies. If someone wants to get coverage for a drug not listed in the plan formulary, the person must apply for an “exception.” The exception process is burdensome.
Enrollment is voluntary, but everyone must enroll to receive coverage, including those who are eligible for limited income assistance.
A beneficiary who does not enroll within 63 days of his or her initial enrollment period and has no creditable coverage must pay a late penalty if he subsequently enrolls in Medicare Part D unless he or she can show he or she had creditable drug coverage under another drug plan or meet other accepted criteria.
A formulary is a list of prescription medications for which the plan will provide coverage. Medicare Part D does not offer coverage for over-the-counter drugs and some other drugs.
Often, the drugs listed in the formulary are listed in two or more groups. The difference between the lists is the amount that the beneficiary has to pay. The amount that the beneficiary must pay is called the co-pay. A typical formulary may include the following groups or tiers:
Group Drugs Co-pay size
- Level 1 generic drugs $
- Level 2 preferred drugs $$
- Level 3 non-preferred drugs $$$
The more dollar signs, the higher the co-pay amount.
If a person already has coverage for prescription drugs and it is considered to be actuarially equivalent to the Medicare Prescription Drug plans, the coverage is considered to be “creditable.” If a person has creditable coverage, he or she may choose to keep this plan rather than sign up for a Medicare Part D plan without penalty. If later the person loses coverage through the plan, he or she will have a special enrollment period to enroll in Medicare Part D without a penalty in premium. The person also can enroll in Medicare Part D while he or she still has creditable coverage and not pay a premium penalty. However, if the creditable coverage ends and the person fails to enroll during the special enrollment period, he or she will be subject to the premium penalty.
If the person’s current prescription drug plan is not creditable and the person does not sign up for Medicare Part D prior to the open enrollment period, but he or she later signs up for Medicare Part D, he or she will have a premium penalty.