What Will Medicare Prescription Drug Coverage Really Cost Me?

Posted in Medicare Part D

Coverage

If you have Original Medicare (Part A and Part B), you probably know that the cost of any medication you take now or may take in the future isn’t covered. However, prescription drug benefits are available—Part D can be purchased as a stand-alone plan or can be included as part of an all in one Medicare Advantage plan (Part C).

If you’re thinking about your options, and curious to know what Medicare prescription drug coverage will cost, here’s some information to get you started.

Out-of-Pocket Costs

While every prescription plan is different, they all share the same basic format—meaning you can expect to pay specific expenses regardless of the plan you choose. Plans include the following out-of-pocket costs:

Monthly Premium

Almost all plans charge a premium—the agreed upon payment you make each month to have coverage. Premiums vary significantly between plans, which is why it makes sense to comparison shop before choosing. Remember, the premium for prescription drug coverage is in addition to your premium for Medicare Part B. You may be able to have your premium automatically deducted from your Social Security check.

Annual Deductible

In addition to a monthly premium, you should expect to pay a yearly deductible. This amount must be paid in full before your plan pays. Deductible amounts vary by plan. However, here’s some good news: in 2019, no Medicare prescription plan can have a deductible more than $415. And, some plans have $0 deductibles. 

Copayments or Coinsurance

If your plan has a deductible, the copay or coinsurance is the amount you need to pay for each prescription you receive after your deductible has been met. It’s not unusual to see different levels or “tiers” of copays with different tiers of drugs. For example, your copay may be $10 for a generic drug, but $20 for a brand name drug.

Costs in the Coverage Gap (“Donut Hole”)

Most plans have a limit on the amount they will cover each year. If you exceed this amount, you enter what is called the coverage gap, or “donut hole”.

Once in the gap, you should expect to pay no more than 35 percent of your plan’s costs for covered brand name drugs and no more than 44 percent of your plan’s costs for covered generic drugs.

Luckily, recent changes in healthcare law made it possible to get out of the gap sooner. In addition to your deductible, coinsurance and copay counting towards what you spend in the coverage gap, you can now include the discount you receive on brand name drugs too.

For example, even though you only pay 35 percent of the price of a brand name drug, you can count the entire price (including the discount the drug company pays) as part of your spending in the coverage gap. This is important because once you reach a certain amount, you only pay a small coinsurance or copayment for the rest of the year.

Late enrollment penalty

If you do not sign up for Part D coverage when you are first eligible (during initial enrollment) you may have to pay a penalty.

If you go for a continuous period of 63 days or more without creditable prescription drug benefits after your initial enrollment period ends, you may have to pay the penalty. ‘Creditable’ prescription drug benefits include:

  1. Medicare Part D
  2. Medicare Part C
  3. Another Medicare plan that offers drug benefits
  4. Prescription drug coverage through an employer or union

The cost of the penalty is based on how long you went without drug benefits after you were eligible. Medicare multiplies 1 percent of the national average Part D premium by the number of full months you didn’t have drug benefits. The sum (your Part D late enrollment penalty) will be added to your monthly premium each month. 

In Summary

Of course, the actual amount you pay for the prescription drug coverage will vary based on how many drugs you need, the specific plan you choose, if you use a pharmacy in or out of network, if your drugs are included in the plan’s formulary and whether or not you receive extra help with your costs.

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