Understanding Medicare Part D Out of Pocket Costs
Nearly 70% of Americans take at least one prescription drug, according to the Mayo Clinic. Twenty percent of patients take five or more prescriptions, according to the same findings. If you take multiple prescriptions daily, or even just one costly prescription, you might want prescription drug coverage. Medicare Part D can help you pay for prescription drugs since Original Medicare (Part A and Part B) don’t cover most prescription drugs you take at home.
You can get Medicare Part D coverage through a stand-alone plan if you have Original Medicare, or through a Medicare Advantage plan that includes prescription drug coverage. Both types of Medicare plans are available through private insurance companies that contract with Medicare.
As you probably know, having health insurance doesn’t mean that your coverage is free to you. Medicare Part D Prescription Drug Plans come with various Medicare out of pocket costs, including premiums, copayments/coinsurance and deductibles. Costs may vary from Medicare Part D plan to plan.
What is a Medicare Part D premium?
A Medicare Part D premium is the amount you pay monthly to have prescription drug coverage, whether or not you fill prescriptions. This amount could be $32.90 monthly or $394.80 annually, for example. Premiums vary from plan to plan.
If you have Medicare Part D through a Medicare Advantage plan, you will only pay one premium for both medical/hospital and prescription drug coverage. Some Medicare Advantage plans have monthly premiums as low as $0. However, you must continue to pay your Medicare Part B premium in addition to the premium for your Medicare Advantage plan.
What is a Medicare Part D copayment/coinsurance?
A copayment is a dollar amount you pay every time you fill a prescription, for example $15. Coinsurance is a percentage amount you pay every time you fill a prescription, for example 33%. You usually pay either a copayment or coinsurance, not both.
Medicare Part D plans typically place covered medications into cost tiers, with different cost sharing for the drugs on each tier. Prescription drugs that fall on higher tiers generally have higher copayments and coinsurance costs than medications on lower tiers. Tiers are typically:
- Tier 1: Preferred generics
- Tier 2: Generics
- Tier 3: Preferred brand
- Tier 4: Non-preferred
- Tier 5: Specialty tier
- Tier 6: Select care
Tier 6 prescription drugs are an exception from the rule that medications on higher tiers have higher copayments/coinsurance. Tier 6 select care drugs may have a $0 copayment.
What is the Medicare Part D deductible?
A Medicare Part D deductible is the amount you must pay every year before your plan begins to pay. Medicare requires that Medicare Part D deductibles cannot exceed $415 in 2019, but Medicare Part D plans may have deductibles lower than this. Some Medicare Part D plans don’t have deductibles.
If you have Medicare Advantage, you may pay a separate medical deductible and prescription drug deductible. Some Medicare Advantage plans have both $0 medical deductibles and $0 prescription drug deductibles.
What are other Medicare Part D costs I should know about?
Medicare Part D late-enrollment penalty: One Medicare Part D cost you might be able to avoid paying is the late-enrollment penalty. You might be subjected to the Medicare Part D late-enrollment penalty if you go for 63 or more days in a row without “creditable” prescription drug coverage before enrolling in a Part D plan after your Initial Enrollment Period is over. Creditable prescription drug coverage is expected to pay on average as much as the standard Part D benefit.
In general, you’ll have to pay this penalty for as long as you have the Medicare Part D drug plan. You can avoid paying the late-enrollment penalty by signing up for Medicare Part D when you are first eligible or by having credible coverage from another source.
Medicare Part D IRMAA: “IRMAA” stands for “income-related monthly adjustment amount.” You may have to pay the Medicare Part D IRMAA if your adjusted gross income as reported on your income tax returns from two years ago is above a certain amount. The IRMAA surcharge is added to your monthly plan premium. Social Security will notify you if you need to pay the Medicare Part D IRMAA based on your income.
Medicare Part D coverage gap or “donut hole”: You enter the Medicare Part D coverage gap once you and your Medicare plan have spent a certain amount on covered prescription drugs. Once you’re in the coverage gap, you’re responsible for a higher percentage of the costs of your prescription medications. The coverage gap will be eliminated entirely in 2020.
Medicare Part D catastrophic coverage: Catastrophic coverage kicks in once you’ve spent a certain amount in the coverage gap. With catastrophic coverage, you’ll only be responsible for a small coinsurance or copayment for covered prescription drugs for the rest of the calendar year.
Do you have more questions about Medicare Part D plans? Feel free to enter your zip code on this page to browse Medicare plan options in your location.