10 Things You Should Know about Medicare Part D

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1. What is Medicare Part D?

Medicare Part D is optional, prescription drug coverage. It helps pay for out-patient prescribed medications. Part D is sold by private companies that are approved by Medicare.

2. Am I eligible for Part D Coverage?

If you have Medicare Part A and Medicare Part B, you are eligible to get prescription drug coverage through an individual policy or as part of a Medicare Advantage plan.

3. Do I need prescription drug coverage?

If you have original Medicare (Part A and Part B) or a Medicare Advantage plan that does not include drug coverage, you should get a Part D prescription drug coverage policy when you are first eligible - even if you don't take a lot of medications.

Unfortunately, our health is not guaranteed. As we age, it's likely that we will have an increased need for prescription medications. Prescriptions are very expensive - expensive enough that prescription drug coverage probably makes sense.

Again, don't wait. If you wait to get coverage, you will have to pay a penalty, which results in a permanent increase in your monthly premium.

4. How much will I pay?

The amount you will pay for your premiums and your medications will vary, oftentimes dramatically, from plan to plan. Here's a look at the typical expenses you will have:

  • Monthly Premium: Nationally, the average Part D premium is $31.92 per month, but varies from company to company and plan to plan. Part D prescription drug coverage is not standardized. There are plans that offer significantly more coverage with fewer out-of-pocket expenses, but these plans will have a higher premium. Others will offer less coverage for a lower premium. You choose which plan makes sense for you.
  • Deductible: Some Part D plans have a yearly deductible, which is currently limited to $310.
  • Copayments/Coinsurance: Most plans include some form of cost-sharing through copayments or coinsurance for each prescription you have filled. Typically, copayments are a flat rate and coinsurance is a percentage of the prescription's cost. You will most likely pay less for generic drugs and significantly more for brand-name and specialty medications.

5. What is the Donut Hole?

Most Part D plans have a coverage gap, which is referred to as the donut hole. After you've spent a certain amount ($2,830 in 2010), you must pay all of your own drug costs until you hit the catastrophic limit ($4,550 in 2010). Once you reach the catastrophic limit, most plans will cover the majority of the drug costs you incur within that calendar year. There are some plans that offer some sort of coverage in the donut hole. However, these plans are more expensive.

Your deductible, coinsurance and copayments count towards the $4,550 limit, but your monthly premiums do not. In 2010, if you have expenses in the donut hole, Medicare will send you a one-time tax-free $250 rebate if you're not already receiving Medicare Extra Help. In 2011, you will receive a 50 percent discount on brand name prescription drugs once you hit the donut hole (if you're not receiving Extra Help ).

6. What pharmacies will I be able to use?

Typically, each prescription drug plan will have a network of pharmacies that you will be required to use. Making sure that you can use a pharmacy that is convenient for you is an important consideration when you're evaluating Medicare Part D plans.

7. Will my prescriptions be covered?

Each plan has its own formulary , which is a list of prescription drugs it covers. You can use the Formulary Finder to find plans that will match the medications you are currently taking.

Many plans will categorize drugs into tiers with a different price points. For example, generic drugs may be categorized as Tier 1, while non-preferred brand name drugs may be considered Tier 3. The tiers are not standardized, so a particular drug may be considered a Tier 2 drug on one plan and Tier 3 on another plan. If a plan you're considering uses a tier system, it's important that you know which tier your prescriptions are in so you can effectively evaluate your potential expenses.

Your plan could also include Step Therapy . If it does, you may initially be prescribed a similar, but cheaper medication. If that medication doesn't work effectively, you will be "stepped up" to the more expensive drug. There may also be quantity limits on how much medication you can receive at one time.

Some categories of drugs are excluded. These drugs include prescription taken to gain or lose weight, promote fertility, increase hair growth, or for cosmetic purposes. In-patient drugs, Barbiturates (sleeping pills), Benzodiazepines (central nervous system depressants), drugs for the symptomatic relief of cough and colds, prescription vitamins and drugs (except pre-natal vitamins and fluoride preparations) are also excluded.

8. What if I have coverage through an employer or union?

If you have coverage that is at least as good as or better than Medicare's standard prescription drug coverage, it may count as creditable prescription drug coverage . If it does, you should be able to enroll in Medicare Part D plan at a later date without incurring a penalty. Your best bet is to contact your benefit administrator before you make any changes to your coverage.

9. When should I join a Part D Plan?

Your seven-month Initial Enrollment Period is the best time to sign-up. If you don't join when you're first eligible, you can enroll in the Part D Open Enrollment Period , which is from November 15th to December 31st each year. Unless you have had other creditable prescription drug coverage, you may have to pay a late penalty if you fail to sign-up when you're first eligible. This penalty is typically a permanent increase in your premium.

10. Will I be able to switch plans?

You will be able to switch plans between November 15th and December 31st of each year. You do not have to notify your current drug plan that you are switching plans; your old coverage will end when your new coverage begins.

No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice unless specifically stated as such. All investments involve risk including possible loss of principal.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Insurance

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