What to Consider When Choosing a Plan
Most insurers offering Medicare drug plans have their own list of what drugs are covered, called a formulary. Formularies include both brand-name and generic drugs.
One of the most important steps to take when choosing a plan is to review the drug formulary carefully to make sure your medications are on the list of covered drugs. Check what tier your drugs are on, as this will determine what copay or coinsurance you will be responsible for.
You also want to look to see if any of your medications are subject to any of the following requirements:
- Prior Authorization – You must get the plan’s approval before it will cover a particular drug. To get approval your doctor must show why this specific medication is necessary.
- Step Therapy – You must first try a generic or less expensive preferred drug to see if it works as well as the one prescribed.
- Quantity Limits – The plan will not cover more than the dosage or quantity it regards as normal to treat your condition.
In order to waive any of these restrictions, your doctor will need to show why an exception is necessary. If the plan turns down your request for an exception, you have the right to appeal.
In addition to checking the formulary, you should also review the pharmacies within the plan’s network and be sure there is a pharmacy within a convenient distance to you. If you have a preference for or against mail order, it’s important to understand your plan’s mail order requirements.
Not all drugs are covered under Part D. Some drugs are covered under Medicare Part B. These would include drugs administered in a doctor’s office such as injectable drugs, cancer drugs, infusion therapy, etc.
What Are the Costs Associated with Part D
There can be big differences in premiums and deductibles depending on the plan you choose. Copays and coinsurances can vary greatly between different plans, even for the same drugs. It’s important to carefully compare plans before making a decision.
There are also significant changes coming to Part D costs in 2025. Here is a breakdown of costs in 2024 and what is changing for 2025.
In 2024 there are three different stages to Part D drug coverage:
- Annual Deductible – the allowable Medicare Part D deductible in 2024 is $545. In 2025 it is $590. Depending on the plan you choose, you may pay the full deductible, a partial deductible, or have the deductible waived entirely. You will pay the network discounted price for your medications until you have reached the deductible amount. At that point you enter what is called the Initial Coverage stage.
- Initial Coverage – During this stage you will pay a copay or coinsurance for your medications based on the drug formulary and the tier the drug falls on. Your insurer will track both your spending and their spending, until together you have spent a total of $5,030. Once this amount is reached, you enter the Coverage Gap.
- Coverage Gap – Also known as the “Donut Hole”, in this stage you will be responsible for 25% of the retail cost of your medications. This will continue until your total out of pocket drug costs reach $8,000 at which point you will pay nothing more for covered Part D drugs for the rest of the calendar year.
In 2025 several provisions from the Inflation Reduction Act will be rolled out to help reduce prescription drug costs. This includes the following changes effective January 1, 2025:
- Eliminating the “Donut Hole,” and putting a $2,000 out of pocket annual spending cap on Part D drugs. This significantly lowers the $8,000 cap in 2024. This provision applies to all Part D plans, whether stand alone or part of a Medicare Advantage plan. Your Part D premiums do not count toward the $2,000. Any deductible, copays, and coinsurances you pay out of pocket for your covered medications will count toward the cap.
- Implementing the Medicare Prescription Payment Plan to help Medicare beneficiaries pay for their medications. This voluntary, opt-in program helps spread Part D costs out over the year in monthly installments. This will protect beneficiaries with expensive medications from incurring high prescription costs in any given month, making their prescriptions easier to afford.
When to Enroll
You must have Medicare Parts A and B to enroll in a Part D plan. You are not required to enroll in Part D, but there may be consequences, such as late enrollment penalties and delayed coverage, if you don’t sign up when you are first eligible. For most people, this occurs during the seven-month Initial Enrollment Period around their 65th birthday. If you don’t enroll during this time you will have to wait until the Medicare Annual Enrollment Period October 15 – December 7, with coverage being effective January 1.
There are some exceptions, if you have other creditable prescription coverage, from an employer or union, or you are receiving veteran’s benefits from the VA. In these cases, you can delay enrolling without a penalty. If your employment situation changes you will be eligible for a Special Enrollment Period to enroll in Part D. If you’ve gone sixty-three consecutive days without creditable prescription drug coverage, either because you didn’t enroll when you were first eligible or because you lost your creditable coverage and didn’t get new coverage in time, then you may have to pay a late-enrollment penalty when you do enroll.
Frequently Asked Questions
I am not taking any prescription medications. Can I skip Part D coverage?
Even though you are not currently taking any prescription medications, you never know when that will change. You should sign up for Part D coverage as soon as you are eligible to avoid late penalties. The penalties are permanent and continue to add up the longer you delay. You also may not be able to enroll right away, and you will have no drug coverage during this time, meaning you will pay the full retail cost for any drugs you need.
How often can I switch drug plans?
You can normally change plans only once a year during the Annual Enrollment Period (AEP), which runs from October 15 to December 7. There are some special circumstances that could qualify you for a Special Enrollment Period and would allow you to change plans outside of AEP.
Each year in September, your insurer will notify you of any changes to your plan by sending an Annual Notice of Change. This could include changes to the drug formulary, deductibles, copays, and coinsurances. If there are changes that negatively impact your coverage, AEP would be the time to look for a plan that better suits you.
If your annual notification informs you that you will be losing your Part D coverage because your insurer is no longer offering your plan, you will have a Special Enrollment Period (SEP) during which you can join a new Medicare Advantage plan or Medicare Prescription Drug Plan. This SEP extends beyond AEP. You will have from December 8 until the last day of February the following year. You should try to take action before December 31, 2024, when your current plan ends so you can enroll in the plan of your choice for January 1, 2025. If you don’t, your coverage will revert to Original Medicare which offers no prescription drug coverage. If you enroll in a new plan in January 2025, it will be effective February 1. If you wait until February, it will be effective March 1.
I can’t afford to pay for my prescriptions. What should I do?
Talk to your doctor to see if there are less expensive medications that would work for you.
If you have limited income and resources you may qualify for Extra Help paying for your monthly premiums, annual deductibles, and co-payments related to your prescription drug costs.
Check with your state to see if they offer a pharmacy assistance program to help their residents pay for prescription drugs. You can also check with the specific drug manufacturer to see if they have a discount program to help with costs.Whether you decide to enroll in a stand-alone Part D plan or a Medicare Advantage plan for your prescription coverage, you need to thoroughly review the plan’s benefits and the formulary to be sure you are getting a plan that meets your needs. Be mindful of enrollment deadlines so you don’t have to pay late penalties. If your circumstances change, be aware of the special enrollment periods that will allow you to change to a different plan during the year.If finding the right Part D coverage sounds like an overwhelming task, a local licensed Medicare agent can help. An agent can help you review your Part D coverage options to find the plan that best meets your needs based on your medications and your budget. They can help you enroll in the plan of your choice.
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