Medicare open enrollment starts October 15th, and everyone who receives Medicare is encouraged to review their current supplemental insurance plans to ensure that they have the coverage they need for the upcoming year. Original Medicare does not cover the cost of prescription drugs, so recipients need to choose drug coverage from either a drug plan (part D) or Advantage plan (part C).
Prescription drug coverage varies by cost, coverage, convenience, and quality. Each person has a unique situation and must carefully consider personal needs when choosing a plan. Insurance providers are required to send out information about plan changes each year in the fall. It is important to review these changes to determine the best personal coverage solution. When you get drug coverage, you pay part of the costs, and Medicare pays part of the costs. Your costs will vary depending on which drug plan you choose and whether you get Extra Help. Extra Help is based on income and may provide relief from premiums and help lower the cost of prescriptions. What you pay for Medicare prescription drug coverage could be higher based on your income.
Most drug plans charge a monthly fee that varies by plan. You pay this fee in addition to the Medicare Part B (Medical Insurance) premium. If you have the type of Medicare Advantage Plan or Medicare Cost Plan that includes Medicare prescription drug coverage, the monthly premium you pay to your plan may include an amount for drug coverage. You can also have your monthly premium deducted from you Social Security payment. This can be helpful because you never have to worry about missing a payment or having a paper bill (a bonus for the environment!). Automatic deductions need to be set up through your plan administrator, NOT Social Security. You should also be aware that your first deduction can take up to take 3 months to start, and 3 months of premiums will likely be deducted at once. After that, only one premium will be deducted each month.
If the plan you choose has a yearly deductible, this is the amount you must pay before your drug plan begins to pay its share of your covered drugs. Some drug plans don’t have a deductible. Most plans require you to make a copayment on prescriptions once you have met your annual deductible. Some drug plans have different levels or “tiers” of coinsurance or copayments, with different costs for different types of drugs. Coinsurance means you pay a percentage (25%, for example) of the cost of the drug. With a copayment, you pay a set amount ($10, for example) for all drugs on a tier. For example, you might have to pay a lower copayment for generic drugs than brand-name drugs, or lower coinsurance for some brand-name drugs than for others.
Unfortunately, many drug plans have a coverage gap (also called the “donut hole”). The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. Once you and your plan have spent $4,130 (in 2021), you’re in the coverage gap (this amount may change each year). You’ll pay 25% of the plan’s cost for covered brand-name drugs and for covered generic drugs until you reach the end of the coverage gap. Not everyone will enter the coverage gap; it depends on the overall cost of your medications. People with more expensive medications are more likely to find themselves in the donut hole. Once you’ve spent $6,550, you’re out of the coverage gap and you automatically get “catastrophic coverage.” Catastrophic coverage means that you only pay a small coinsurance amount or copayment for covered drugs for the rest of the year.
Finally, you should be aware that you could pay a Part D late enrollment penalty if you don’t join a Medicare drug plan when you’re first eligible, and you don’t have other creditable prescription drug coverage or get Extra Help. Creditable prescription drug coverage is coverage (for example, from an employer or union) that’s expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. If you’re subject to the penalty, you may have to pay it each month for as long as you have Medicare drug coverage. For more information about the late enrollment penalty, visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227). TTY users can call 1-877-486-2048. To apply for Extra Help online, visit socialsecurity.gov/i1020 or call Social Security at 1-800-772-1213 to apply by phone or to get a paper application. TTY users can call 1-800-325-0778.
Visit Medicare.gov for more information and resources.