Choosing a Medicare Part D Prescription Plan
Understanding and choosing the right Medicare Part D prescription plan can seem like a daunting task. With bureaucratic names like Part A, B and D, and complicated lists and formularies (charts that outline insurance coverage), it's easy to get overwhelmed. However, if you take the time to get familiar with Medicare, how it works and what it covers, it's not as bad as it seems. Here's a guide to choosing Part D plans, laid out in an easy to follow, step-by-step process.
Eligibility for Medicare Part D Prescription Plans
If you are eligible for Medicare Part A or Part B, then you are eligible for Medicare Part D. You do not have to be screened to be eligible, and joining Part D is completely voluntary. However, if you are eligible and do not join, and wish to at a later date, you will pay a penalty for joining late. Note that usage of some parts of Medicare preclude usage of other parts, so explore all parts of Medicare before deciding which parts will best suit you.
General eligibility for Medicare begins when you are 65, but you can join three months before or after your 65th birthday. To determine your eligibility and find out when coverage would start, visit www.medicare.gov.
Current Medications and Current Coverage
If the drugs you take now are currently covered under your existing plan, or you do not take any prescription drugs, you should still consider a Medicare Part D prescription plan. In many cases Medicare will let you keep your existing prescription drug plan, or will offer you alternatives. As previously mentioned, if you decide to enroll at a later date, you may be penalized, so it pays to explore your eligibility for Part D even if you are currently covered or don't have any need.
Costs of Medicare Part D Prescription Plans
There are three primary costs associated with Part D coverage:
- Monthly premiums: you will pay a monthly premium unless you qualify for extra assistance.
- Yearly deductibles: you will pay a yearly deductible, if any is due, unless you qualify for extra assistance.
- Co-payments: you will owe a co-payment or co-insurance for each prescription, unless you qualify for extra assistance.
As noted, each of these payments can be offset if you qualify for extra assistance, visit the Medicare website to see if you are eligible for additional compensation.
The general goal when choosing a plan is to look for the plan that provides the overall lowest cost per year. To calculate the cost per year, you can approximate it by simply adding up your premiums, deductibles and co-payments for your drugs. Finally, add in the costs associated for purchasing drugs during any gap in coverage (see gap coverage below).
The first thing to understand when considering Part D is what is known as the "coverage gap". If your total drug costs (what you pay, plus what the plan pays) are greater than $2,830 (as of 2010), then you will have to pay 100% of any further drug costs until your out-of-pocket expenses reach $4,550 (as of 2010 - the amounts increase a hundred dollars or so every year). Once you pass this amount, you move into what is known as "catastrophic coverage", and Medicare will cover you again, typically resulting in you paying 5% of additional costs, your plan's formulary, or a set co-pay amount.
This coverage gap doesn't apply to low-income Medicare recipients.
Medication Coverage and the Formulary
Each Part D plan will have a list of different drugs that it covers in the plan's formulary. The formulary will let you know the name of the drug it covers (generic and brand-name), how much you would co-pay, and what limitations there are on that drug's coverage.
If the drug you need is not on the list, you will have to pay full price for that medication or use a similar drug that the plan covers. You can also apply to the plan for an exception to its coverage, but don't rely on this working out, it's better to start with a program that covers your existing medication.
Types of Plans
There are two basic types of Medicare Part D prescription plans, they are:
- Prescription Drug Plans (PDPs): PDPs are stand-alone programs, that focus on and cover prescription drugs only, as opposed to health care needs generally. People who already have general Medicare (Part A or B) and people who have a Medicare Private Fee-For-Service (PFFS) plan typically choose PDPs.
- Advantage Plans with Prescription Coverage (MA-PDs): MA-PDs are general health care plans that also cover prescription drugs and come in 4 flavors, HMOs, PPOs, PFFS and Special Needs Plans (which are only for very specific groups of people). These are managed care programs that will lock you in to certain hospitals and doctors, but generally cost less money.
Which type of plan you choose will largely be based on the amount of money you can spend and the type of coverage you need.
Pick a Plan
Picking a plan can seem like a monumental task, but it really boils down to the basics. You should choose a plan based on:
- How much the plan costs
- What drugs the plan covers
- Your existing health
- Your existing insurance coverage
- Whether you have specific hospitals, doctors or pharmacies you wish to use
The Medicare website has a wealth of additional information on how to choose the right Medicare Part D prescription plan for you at www.medicare.gov.