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Who Needs Medicare Part D

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What Is Not Covered By Medicare Part D Plans

Medicare Part D Penalty (What They Aren’t Telling You)

The drugs you take may not be covered by every Part D plan. You need to review each plans drug list, or formulary, to see if your drugs are covered. The following will not be covered:

  • Drugs not listed on a plan’s formulary
  • Drugs prescribed for anorexia, weight loss or weight gain
  • Drugs prescribed for fertility, erectile dysfunction, cosmetic purposes or hair growth
  • Prescription vitamins and minerals
  • Non-prescription drugs
  • Drugs that are already covered by Medicare Part A and Part B

The Part D Standard Benefit

At a minimum, plan sponsors must offer a standard benefit package mandated by law. The standard benefit includes an annual deductible and a gap in coverage, previously referred to as the Donut Hole. Sponsors may also offer plans that differ from but are actuarially equivalent to the standard benefit. Finally, they may also offer enhanced plans that provide benefits in addition to the standard benefit. Typically, the enhanced plans offer some coverage during the Donut Hole.

The Standard Benefit is defined in terms of the financial structure of the cost-sharing, not the drugs that must be covered under the plan.

Medicare does not establish premium amounts for plans. Instead, premiums are established through an annual competitive bidding process and evaluated by CMS. Premiums vary from plan to plan and from region to region. Medicare does establish the maximum deductible amount, the Initial Coverage Limit, the TrOOP threshold, and Catastrophic Coverage levels every year. The table below shows the standard benefit for this year .

Standard Part D Benefit 2020-2021

Alternatives to the Standard Benefit

Income-Related Monthly Adjustment Amount Part D

Income-Related Adjustments 2021

Greater than or equal to $500,000 Greater than or equal to $750,000 $77.10

Drug Tiers

Tier 1
$65 33%

The Donut Hole


Once beneficiaries reach their out-of-pocket threshold costs), they move out of the Donut Hole and into Catastrophic Coverage.


The Donut Hole Discount

63% 75%

Original Medicare With Part D

If you have Original Medicare, then you can sign up for a Medicare drug plan. You can even add drug plans to some Medicare Cost plans, Private Fee for Service plans, and Medical Savings account plans. You can useMedicares plan finder tool to look for available plans in your area. Once you find a plan that meets your needs, you will contact the insurance company that administers the plan to get signed up. They will provide you with your coverage details and a prescription drug card to use at the pharmacy when you purchase medications.

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What Does Medicare Part A And Part B Cover

Original Medicare

  • Hospice care
  • Some home health care

You can enroll in Part A once you turn 65. If youre already collecting Social Security disability benefits, youll be automatically enrolled in Part A.

Part B

  • Some preventive services

Medicare pays 80 percent of approved charges and you pay about 20 percent.

Part B is optional because you have to pay a monthly premium and meet a deductible before Medicare will pay benefits.

Beware The Medicare Part D Late

Do I need Medicare Part D if I have supplemental insurance ...

Every month you delay, you will owe an additional 1% of the base monthly premium rate tracked by Medicare. The 2021 base rate is $31.47. Granted thats a penalty of less than 33 cents a month, but it can add up fast.

Lets say someone who became eligible in 2016 waited until 2021 to sign up for Part D, for example. Thats a 60-month lag. This someone would owe a late-sign up penalty equal to 60% of the base rate. In 2021, that works out to a monthly penalty of $18.88 on top of any premium . The penalty percentage stays with you for life and is recalculated each year according to that years base rate.

If you have creditable coverage , you wont be subject to the penalty at the point you decide to switch to Medicare Part D. But timing is crucial here. Your special enrollment period for Part D lasts for just two months after your creditable coverage ends. After that, you have to wait for the annual enrollment period, and a penalty fee will be levied for each month youre late.

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How Does Original Medicare Work

Original Medicare is a federal health care program made up of both Medicare Part A and Part B . Its a fee-for-service plan, which means you can go to any doctor, hospital, or other facility thats enrolled in and accepts Medicare, and is taking new patients.

Medicare was set up to help people 65 and older. In 1972, Medicare became available to people with disabilities and End-Stage Renal Disease/kidney failure.

Medicare Part B And Va Benefits

Medicare Part B can provide you with medical coverage and services outside of the VA health system. Therefore, it is recommended that you enroll in Medicare Part B in addition to your VA benefits. If you wait to enroll in Part B when you are first eligible, you will likely experience gaps in coverage and incur a penalty for each 12-month period you were without Medicare Part B coverage. Learn more about Medicare Part B.

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When To Sign Up For Medicare Part D

If you dont have prescription drug coverage through an employer or former employer, you should sign up for Medicare Part D right when you sign up for Medicare Part B during your initial enrollment period .

If you dont sign up for Part D during your initial enrollment period, you can sign up during the annual enrollment period for coverage that starts the next year. But keep in mind, theres a penalty for missing your IEP.

When And How Do I Enroll In Medicare Part D

Medicare Part D

The first opportunity for Medicare Part D enrollment is when youre initially eligible for Medicare during the seven-month period beginning three months before the month you turn 65.

If you enroll prior to the month you turn 65, your prescription drug coverage will begin the first of the month you turn 65. If you enroll during the month you turn 65 or one of the three following months, your prescription coverage effective date will be delayed it will not be retroactive to the month you turned 65.

If you enrolled in Medicare due to a disability, you may enroll during a seven-month window beginning three months prior to your 25th month of disability. If you enroll in the three months prior to your 25th month of disability, your coverage will begin the first day of the 25th month. If you enroll during the 25th, 26th, 27th, or 28th month of disability, your coverage will begin the first of the month after you enroll .

Heres more information on how to pick a prescription drug plan.

In both of these cases whether youre turning 65 or are eligible for Medicare because of a disability you have the option of selecting a Medicare Advantage plan that includes prescription drug coverage, and using that in place of Medicare A, B, and D. The enrollment periods and rules are the same as those described above for stand-alone Medicare Part D plans.

After youve chosen from the various PDP offerings, you can enroll by:

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Do I Need Medicare Part B If Im A Veteran

Some people have 2 different coverages that they can choose independent of one another. Federal employees who can opt to use their FEHB instead of Medicare are one group. The most common situation though is with Veterans.

Not all veterans qualify for VA coverage. Your length of military service and your discharge characterization affect your eligibility. If you plan to use VA healthcare coverage as your only coverage, be sure that you apply for VA coverage before your initial enrollment window for Medicare expires. That window runs 3 months before and after your birth month.

Once enrolled in VA coverage, you can choose to skip Medicare and get all of your care at VA clinics and hospitals only. However, I do not advise this. The VA system has been the subject of considerably negative press for years over long waiting times. I have seen many people personally experience this.

Enrolling in Medicare Parts A and B gives you a civilian option. Medicare will pay for Medicare-covered services or items, and Veterans Affairs will pay for VA-authorized services or items.

Be aware that if you opt out of Part B and then later decide to join, you will pay a Part B late penalty. Youll also need to wait until the next General Enrollment Period to enroll, which means there could be a delay before your coverage becomes active.

In my opinion, most Veterans should sign up for Part B. You can read more about VA coverage and Medicare here.

The Medicare Catastrophic Coverage Act Of 1988

The Medicare Catastrophic Coverage Act of 1988 began with the 1984 report of the Social Security Advisory Council chaired by Otis Bowen, a physician and former Republican governor of Indiana. The council’s report did not focus on prescription drugs but on the limited hospital coverage provided by Medicare and the out-of-pocket expenses for both hospital and physician services. After Bowen was appointed as secretary of HHS by President Ronald Reagan in November 1985, he urged the White House to support the council’s reform proposals and successfully lobbied for an initial proposal in the 1986 State of the Union address. The combination of Bowen’s interest and changes in the political climatethe Iran/contra scandal in the White House and Democrats regain of control of the Senate after the 1986 election, along with their continuing control of the House of Representativessoon created the opportunity for new Medicare benefits, among them prescription drug coverage .

In the spring of 1988 the chairman of the Senate Finance Committee, Lloyd Bentsen , proved to be the final arbiter when he accepted a drug benefit scaled back to catastrophic coverage and not a routine benefit. Medicare would cover 80 percent of drug costs once the beneficiary met a $600 deductible. The administration, weakened by scandal, did not have the will to fight over prescription drugs, and it ultimately supported the final package .

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What Is Creditable Prescription Drug Coverage

If you have health insurance in addition to Medicare, this might include creditable prescription drug coverage. The plan must tell you each year whether or not the prescription drug coverage is creditable, meaning it covers at least as much, on average, as Medicareâs standard prescription drug coverage does. Some common examples of creditable coverage include health insurance from:

  • Employer group coverage or union plans
  • United States Department of Veterans Affairs
  • Indian Health Service

You can continue to use this prescription drug coverage alongside your Medicare benefits without penalty, as long as itâs creditable.

How Does Part D Work With Other Insurance

You Need to Know About Medicare Part D

Since Medicare Part D is offered by private insurers, you may be wondering how it functions with other insurance you have. Some separate, non-Medicare insurance may already offer you drug coverage, so it is important to know how Medicare Part D works with this and if any other plans you might have can be used in conjunction with Part D or can be used to keep you fully covered.

Medicare Part D is able to coordinate benefits with your separate insurance provider. Your primary insurance, whether that be Medicare or another company, will typically offer first coverage for prescription drugs. The second insurance company will then step in and provide additional coverage up to the limit of that plan.

Whether or not Medicare is your primary or secondary insurance depends on your plan. An insurance agent will be able to help you sort out these specifics until then, you can rest easy knowing that Part D does work with other insurance.

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Is Medicare Part D Mandatory

It is not mandatory to enroll into a Medicare Part D Prescription Drug Plan. However, if you go without creditable prescription drug coverage for 63 or more days in a row after youâre first eligible, you may have to pay a late-enrollment penalty if you enroll into a Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan later.

Read below to find out more about what kinds of coverage can help you avoid this penalty, when you can enroll in a Medicare Part D Prescription Drug Plan or Medicare Advantage Prescription Drug plan, and other information regarding the late-enrollment penalty.

Tips For Choosing A Medicare Part D Plan

Remember, the plan you choose isnt set in stone. If your needs change year to year, you can switch to another plan in the next open enrollment period. Youll have to stay in the plan an entire year, so choose carefully.

When using the Medicare plan finder to choose a Part D plan, enter your medications and doses, then select your pharmacy options. Of the available drug plans, youll see the lowest monthly premium plan displayed first. Keep in mind, the lowest premium plan may not fit your needs.

Theres a drop-down selection to the right of the screen listing three options: lowest monthly premium, lowest yearly drug deductible, and lowest drug plus premium cost. Click through all the options and look at your choices before making a final decision.

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What Costs Are Involved In A Part D Prescription Drug Plan

Costs you pay out-of-pocket for a Part D prescription drug plan include the following:

  • Part D monthly premium: This is a flat fee you may have to pay to your plan for providing you with coverage.1
  • Part B premium: You must continue to pay Part B premiums as part of your Original Medicare coverage.
  • Copays and coinsurance: You and Medicare share a percentage of the costs for your prescription drugs. This means you pay part of your pharmacy drug costs and Medicare also pays part of your pharmacy drug costs.

If you choose a Medicare Advantage Plan that includes drug coverage, your monthly plan premium will include the medical and drug portion of the plan.

Note: In some cases, your premium may be higher if you didnt sign up for Part D when you first became eligible.

There are no cost breaks for married couples. Medicare requires each spouse to pay separate premiums, deductibles, copays, and coinsurance for prescription drug coverage. Each spouse will reach each level of coverage according to their own drug costs over each calendar year.

What Is The Medicare Part D Late

What to Know About Medicare Part D When Still Working

If youâve gone 63 consecutive days without creditable prescription drug coverage, either because you didnât enroll when you were first eligible or because you lost your creditable coverage and didnât get new coverage in time, then you may have to pay a late-enrollment penalty when you do enroll into Medicare Part D.

The Medicare Part D late-enrollment penalty is added to the premium of the Part D Prescription Drug Plan you enroll into. Your Medicare Prescription Drug Plan determines this penalty by first calculating the number of uncovered months you were eligible for Medicare Part D, but didnât enroll under Part D or have creditable coverage. Your Medicare Prescription Drug Plan will then ask you if you had creditable prescription drug coverage during this time. If you didnât have creditable prescription drug coverage for 63 or more days in a row after you were first eligible, the Medicare Prescription Drug Plan must report the number of uncovered months to Medicare.

For example, letâs say you disenrolled from your Medicare Prescription Drug Plan effective February 28, 2021, and then decided to enroll into another Medicare Prescription Drug Plan during the Annual Election Period, with an effective date of January 1, 2022. This means you didnât have creditable prescription drug coverage from March 2021 through December 2021, which adds up to 10 uncovered months.

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How Do Medicare Part D Plans Work

A typical Part D plan has 3 phases and works like this:

  • Deductible and Initial Coverage: The typical plan has an annual deductible. After you have paid costs equal to the deductible amount, then you have Initial Coverage. In this phase, you will only pay a copay or coinsurance on covered prescription drugs until you reach the Initial Coverage Limit, which starts the Coverage Gap.
  • Coverage Gap: Also known as the donut hole. Here you pay a discounted amount for brand and generic drugs. Once your combined drug costs reach the upper level of the Coverage Gap, you move to Catastrophic Coverage.
  • Catastrophic Coverage: You will pay a small amount for medications, typically not more than 5% of the cost. The plan pays most of the cost.

Introduction To Medicare Part D

This section constitutes an introduction to Part D. For more detailed information on any of the topics in this section, please click on the links within the topics. There, you will also find relevant legislative, statutory and CFR citation.

Prior to 2006, Medicare paid for some drugs administered during a hospital admission , or a doctors office . Medicare did not cover outpatient prescription drugs until January 1, 2006, when it implemented the Medicare Part D prescription drug benefit, authorized by Congress under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. This Act is generally known as the MMA.

The Part D drug benefit helps Medicare beneficiaries to pay for outpatient prescription drugs purchased at retail, mail order, home infusion, and long-term care pharmacies.

Unlike Parts A and B, which are administered by Medicare itself, Part D is privatized. That is, Medicare contracts with private companies that are authorized to sell Part D insurance coverage. These companies are both regulated and subsidized by Medicare, pursuant to one-year, annually renewable contracts. In order to have Part D coverage, beneficiaries must purchase a policy offered by one of these companies.

The costs associated with Medicare Part D include a monthly premium, an annual deductible , co-payments and co-insurance for specific drugs, a gap in coverage called the Donut Hole, and catastrophic coverage once a threshold amount has been met.

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