Medicare stand-alone drug policies and those that are part of an Advantage plan vary in premiums, copays, and in the drugs they cover. It is vital that you make sure you are buying the best plan for you.
If you have a late-enrollment penalty, your premium will be greater. There is a mathematical formula used to determine the amount of your late penalty which depends on how many months you went without drug coverage.
Each insurance company uses the same 5-tier formulary: preferred generic, general, preferred brand, non-preferred drug, and specialty tier.
Although Medicare allows you to forgo purchasing a drug plan during the Initial Enrollment Period, a big problem that arises later for those who do not enroll during that time, and who later purchase a plan, include stiff penalties added to the premium and sometimes, that penalty lasts a lifetime. Part D premiums, deductibles, co-payments, and coinsurance amounts change every year. Costs depend on the plan, the beneficiary’s income, the geographical location, and whether you have to pay a penalty for late enrollment.
Definitions to Help You Understand Medicare Part D Benefits and Costs
To understand how much your prescription drugs will cost, there are some key definitions provided by Medicare. They are provided here exactly as on the Medicare website.
Coverage gap also called the donut hole: “A period in which you pay higher cost sharing for prescription drugs until you spend enough to qualify for catastrophic coverage. The coverage gap (also called the “donut hole”) starts when you and your plan have paid a set dollar amount for prescription drugs during that year.”
Deductible: “The amount you must pay for health care or prescriptions before Original Medicare, your Medicare Advantage Plan, your Medicare drug plan, or your other insurance begins to pay.”
Extra Help: “A Medicare program to help people with limited income and resources pay Medicare prescription drug program costs, like premiums, deductibles, and coinsurance.”
Formulary: “A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Also called a drug list.”
Penalty: “An amount added to your monthly premium for Part B or a Medicare drug plan (Part D) if you don’t join when you’re first eligible. You pay this higher amount as long as you have Medicare. There are some exceptions.”
Tier: “Groups of drugs that have a different cost for each group. Generally, a drug in a lower tier will cost you less than a drug in a higher tier.”
What Part D Costs and Premiums Can I Expect to Pay in 2022?
You need to be aware that Medicare stand-alone drug policies and those that are part of an Advantage plan vary in premiums, copays, and in the drugs they cover. It is vital that you make sure you are buying the best plan for you that is available in your location and that covers your medications.
In general, Part D Medicare Costs depend on:
- The medications you take and the frequency that they are prescribed.
- Whether your preferred pharmacy is within your plan’s network.
- Whether your medications are listed on your plan’s formulary.
- Whether you are purchasing a stand-alone Part D Prescription Drug Policy or whether Part D coverage is provided in your Medicare Advantage Plan.
Premium costs: The average Medicare Part D monthly premium is $40. Premiums vary by the plan and geographical location. Your income is also a factor in determining your monthly premium for Plan D coverage.
- Initial Coverage Limit: $4,430.
- Part D deductible: The maximum deductible for 2022 is $480.
- Out-of-pocket threshold: $7,500.
- Coverage gap (donut hole):This clicks in when you have paid the coverage limit of $4,430 but have not yet met the out-of-pocket threshold of $7,500. You will pay 25% of the retail cost of the drug. You will be given 75% credit for brand-name drugs that will credit towards your way out of the donut hole. When you have paid $7,500 out-of-pocket, you will have reached the catastrophic coverage phase of the plan.
- Catastrophic coverage: For all plans, once you have paid $7,500, you will pay only 5% of the retail cost or $3.95 for a generic drug, whichever is greater. For a brand-name drug, you will pay 5% of the retail price or $9.85, whichever is greater.
Medicare Part D Formulary for all Plans
The formulary for each plan is different. However, each plan has the same coverage for some prescriptions.
- Insulin and equipment like syringes and needles, gauze and alcohol wipes.
- Prenatal vitamins.
Prescriptions That Are Not Covered:
- Cold and cough medications.
- Cosmetic drugs.
- Erectile dysfunction drugs.
- Fertility drugs.
- Minerals or vitamins unless included in the formulary.
- Over-the-counter medications.
- Weight loss, weight gain, anorexia drugs, etc.
Costs Depend on the Formulary Tier
Each insurance company uses the same 5-tier formulary, the plans differ according to which medications they put into which tier. Which tier the medication in affects the cost of the drug.
The tiers are:
- Preferred generic.
- Preferred brand.
- Non-preferred drug.
- Specialty tier.
If your drug has been moved to a different tier, contact your insurance company, and ask if they can move it to a lower-cost tier.
If your income is below a certain threshold, or are on Medicaid in your state, you may qualify for Extra-Help through Medicare.