How does medicare part d work

Medicare law allows plans to offer actuarially equivalent or even enhanced plans. Actuarially Equivalent AE plans can modify the deductible and have different cost-sharing than the standard benefit.

Almost all plans use a tiered cost-sharing structure where beneficiaries have a lower copayment for generic drugs and a higher copayment for more expensive brand name drugs. Medicare Part D beneficiaries with higher incomes pay higher Medicare Part D premiums based on their income, similar to higher Part B premiums already paid by this group. Income-Related Adjustments — [98]. Cost sharing in various tiers may take the form of co-pays a flat dollar amount , or co-insurance a percentage of costs.

When Part D began in , drug tiers were fairly straightforward. For example, cost sharing might appear as follows:. Since , however, plans have taken advantage of their ability to define their own tiers. Some plans have four tiers while others now have five or even six. The placement of drugs within tiers also varies among plans. For example, the same generic may be a Tier 1 drug in one plan, a Tier 2 drug in another plan, and a Tier 3 drug in yet another plan. While the Plan Finder is relatively easy to use, Medicare beneficiaries who lack confidence in their computer skills should ask family, friends, their local pharmacy, or their area State Health Insurance Assistance Program SHIP agency to help them compare plans on the Plan Finder.

While a few plans offer coverage of drugs during the Donut Hole, such coverage is generally limited to generics. Few plans cover brand name drugs during this period. Further, co-pays for drugs covered during the Donut Hole may be higher than they are in the Initial Coverage Period. Payments for premiums, non-formulary drugs unless approved by exception or appeal , drugs purchased outside the US, and drugs paid for by other insurance do not count toward TrOOP.

Therefore, in order to get credit for their drug costs during the Donut Hole, it is imperative that members use plan network pharmacies and show the pharmacy their plan membership card. Plans are required to send their members an Explanation of Benefits EOB for every month that the member uses plan services. For some individuals, drug costs during the Donut Hole present an extreme financial hardship.

In some cases, a single medication may costs hundreds, even thousands, of dollars. Paying for such an expensive drug during the Donut Hole will help move the member toward eligibility for Catastrophic Coverage. However, coming up with this amount of money all at once — even for a critical medication — may be impossible for some people.

This not-uncommon scenario means that some people simply do not take their medications during the Donut Hole. There are programs to help people with their Part D costs, including some that provide coverage during the Donut Hole. Other sources of help include pharmacy discount cards, drug manufacturer Patient Assistance Programs PAPs , and insurance company discount programs. The Donut Hole was gradually phased out between and In subsequent years, gradually increasing discounts were applied to brand name and generic drugs.

Donut Hole Drug Discounts by Year, []. The discounts will be given right at the pharmacy — members will not have to fill out forms or do anything to get the discount.

Members will have to pay a small dispensing fee cost to the pharmacy for filling the drug , which will not be discounted. The full amount negotiated price of brand name drugs not the discounted amount paid by the member , will count toward TrOOP. For generic drugs, only the actual amount paid for the drug will be applied toward TrOOP.

Drugs sold by manufacturers who do not sign an agreement will not be covered under Part D and cannot be requested by exception. The discount is only available if Medicare Part D is the primary payer. If the prescription crosses Part D stages of coverage, i. Beneficiaries experience different cost sharing as they move through these stages. Calculating what the beneficiary owes is complicated and is even trickier when the plan has tiered co-pays instead of the standard benefit. For most people, enrollment in Part D is voluntary.

Most people need to select and enroll in a plan in order to have coverage. There are several Part D enrollment periods. The notice period begins when the plan notifies the member that payment is due. Enrollment in Part D is generally voluntary, however, some people are required to enrolled, and others should not enroll.

Non-LIS eligibles who do not have creditable coverage, and who do not enroll in Part D when they are first eligible to do so, may have a Late Enrollment Penalty and may have to wait up to 12 months to enroll in a plan.

Creditable coverage is prescription drug coverage that is as actuarially as good as, or better than, Part D coverage. Individuals with Medigap policies should check with their plans. Individuals who have creditable coverage are not required to enroll in Part D and may not find it to their advantage to do so.

Individuals who involuntarily lose creditable coverage are entitled to a Special Enrollment Period. They have 63 days in which to enroll in a Part D plan.

Non-payment of premium is NOT considered involuntary loss. Unless exempt, there is a penalty for not enrolling in Part D when first eligible to do so. The LEP cannot go back farther than June CMS calculates the penalty amount, which is collected by the Part D plan. There is a process to request reconsideration if a late enrollment penalty appears to be imposed in error.

The penalty must be paid during the time the penalty is being reconsidered, which can take many months. If reconsideration is granted, the beneficiary will be reimbursed for erroneous penalty charges assessed. The most commonly available are listed here. Premiums may be paid directly to the plan, deducted from Social Security, or deduction from a bank account EFT. Individuals may not belong to more than one Part D plan at a time.

In fact, enrollment in one plan automatically cancels out enrollment in the previous plan. For this reason, beneficiaries who want to switch plans need only enroll in their desired plan.

Medicare will cancel out their enrollment in their old plan. Note that individuals who wish to remain with their existing plan from one year to the next need do nothing. Shortly after enrolling in a plan, new members should receive a member card and a contract called the Evidence of Coverage EOC. People should not assume that their existing plan will meet their needs or remain an appropriate choice in subsequent years. This is because plans make changes to their costs and coverage every year.

It is not unexpected for costs to increase, but people may not realize that plans can also remove drugs from their formularies, or change the pricing of certain drugs, or impose utilization management restrictions such as prior authorization, quantity limits and step therapy on their drugs in the next year. For example, some states have raised or eliminated the asset test and have significantly increased unearned income disregards as a means of effectively raising program income limits.

Interested individuals should contact their state Medicaid agency for more information and applications. Some people automatically qualify for the LIS and do not have to apply for the program, regardless of their income or asset levels. Calculation of income and assets follow SSI rules. Individuals deemed eligible for the LIS between January 1 and June 30 are deemed eligible for the rest of the year. Notices of eligibility if the subsidy is reduced or terminated go out in the fall.

Dual eligibles and all other LIS-eligibles have a continuous SEP that allows them to enroll in more compatible plans at any time. Enrollment in the new plan is effective the first day of the month following the month of enrollment. Newly granted duals are created when Medicaid recipients become eligible for Medicare. To ensure that newly granted dual eligibles have Part D coverage, states forward twice monthly electronic data files to CMS.

CMS then enrolls these individuals to the temporary NET plan, pending their ultimate prospective random assignment to a benchmark plan in about two months time. The process of enrolling full dual eligibles in a Part D plan is called auto-enrollment. Newly granted duals are also created if a Medicare beneficiary becomes eligible for Medicaid.

Unlike full duals who are enrolled in a temporary plan NET and then are randomly assigned to benchmark plans , other LIS eligibles are enrolled directly into a benchmark plan through the random assignment process. Once this amount has been spent, you are, at least on paper, responsible for the full cost of your prescription drugs.

But that isn't quite how it works in practice. The rules are different for brand-name and generic prescription drugs. According to Medicare. Of the remaining 75 percent, 70 percent will be covered by the manufacturer of the drug, and 5 percent will be covered by your insurance, even though you are in the coverage gap.

Although you are only paying 25 percent of the cost of the drug, everything other than what your insurance company pays will count as an out-of-pocket expense, even though you did not actually pay more than 25 percent. Because your insurance company pays only 5 percent, 95 percent of the cost of the drug will count as an out-of-pocket expense, meaning you will be able to reach your annual out-of-pocket limit much more quickly.

This is why the coverage gap is referred to as a donut hole — you will lose coverage, then gain coverage again once you reach your out-of-pocket limit. When you buy generic drugs in the coverage gap, you will still only pay 25 percent of the cost. Medicare will pay the remaining 75 percent directly. This means that only the amount you actually paid, 25 percent, will count as an out-of-pocket expense.

In this case, you pay the same amount, but reach your annual out-of-pocket limit more slowly. In this case, you may not reach your out-of-pocket limit for the year at all, even though you are paying the same amount of money out of pocket.

Because Part D is offered by private insurance companies, the cost is not uniform for everyone, nor is it standard across different parts of the country. Medicare Part D is your prescription drug coverage.

So, how does Medicare Part D work? Well, there are four Part D stages, and each stage is like a stepping stone throughout the year. First, is the deductible stage. Most Medicare part D plans have a deductible, or a certain amount of money before the plan kicks in. In this stage, your Medicare Part D plan helps to cover some of those costs.

So, you typically pay a copay a set amount of money or coinsurance a certain percentage of the cost for your meds.