Is Medicare Part D mandatory and other answers to your most important
Medicare Part D questions.
Many Medicare beneficiaries are unaware that they are required to have creditable drug coverage. When folks first enroll in their Medicare Part A and Part B they are often not made aware of the requirements that can come back to haunt them later on.
It seems counter-intuitive: When you qualify for Medicare, you receive Medicare Part A and Part B – coverage for hospitals and medical care – but not prescription drug coverage. However, all Medicare beneficiaries are required to have coverage for medications through a Part D drug plan or other equivalent coverage.
Signing up late for Part D drug coverage could result in increased prices. The penalty tacked on to drug plan premiums is avoidable. Let’s discuss why drug coverage is important and how to avoid unnecessary penalties.
Why Is Drug Coverage Needed?
People get sick; people have illnesses that need to be managed.
Whatever your personal health situation is, Medicare requires that you obtain drug coverage in order to avoid penalties. Even if you’re not currently prescribed any medications, it’s important to have adequate coverage. You never know when your health care needs may change! Furthermore, Medicare requires that all beneficiaries have drug coverage, even if they are not prescribed any drugs.
If you are currently taking medications, you clearly understand the importance of drug coverage: it helps keep out of pocket costs lower and allows you access to medications that otherwise may be too cost-prohibitive to get.
If a particular medication is not covered by a plan, My Medicare Partners offers as part of our Concierge Member Services assistance finding programs that you may qualify for to cover drug costs. Our Members also receive complimentary drug discount cards which can reduce medication costs.
Medicare aims to keep seniors as healthy as possible, and accessing prescribed medications is an important aspect to preserving your health.
When Do I Have to Sign Up For Drug Coverage?
You are encouraged to sign up for drug coverage when you first become eligible for Medicare; otherwise, you could face penalties.
The best time to enroll in medication insurance coverage is during your Initial Enrollment Period, which includes the three months prior to you turning 65, the month of your 65th birthday, and the three months following your 65th birthday.
During this time period, you may sign up for Part D of Medicare which is the drug portion of Medicare. Remember, you are not automatically enrolled in drug coverage when you become eligible for Medicare.
If you miss your Initial Enrollment Period, you may sign up for a Part D plan during the Annual Election Period. Sometimes called the Open Enrollment Period, the Annual Election Period takes place each year from October 15 through December 7. If you enroll or change plans during the Annual Election Period, your coverage would begin on January 1 of the immediate following year.
Unless you have otherwise creditable coverage, you must have prescription medication coverage that meet certain requirements. Some people have drug coverage through an employer or retiree plan, and it’s important to ensure these plans meet the minimum essential requirements. Under the Medicare Modernization Act, all Medicare enrollees must have drug coverage that covers at least as much as the standard Medicare drug coverage. Medicare beneficiaries with non-Part D coverage, such as coverage through their employer or union, must provide documentation of their creditable coverage.
Cobra and Part D Penalty
Please note that COBRA benefits do not count as creditable coverage. People with COBRA coverage who are otherwise Medicare eligible may face a penalty if they do not obtain additional drug coverage.
How Much Will My Drug Coverage Cost?
As is the case with most insurance plans, several personal factors affect the cost of Medicare drug plans. Drug plan prices may vary based on a person’s location and age. However, pricing of drug plans is not affected by preexisting conditions or gender.
The Part D premium, or monthly cost to enroll in the plan, is often the first thing people look for when choosing a Medicare drug plan. “Premium cost is the most important thing!” many people will tell you.
I feel otherwise.
When choosing a Medicare drug plan, it’s important to look at other factors in addition to just the monthly premium. Out of pocket drug costs can quickly cause a strain on your budget, and the plan with the lowest premium may not have the lowest out of pocket drug costs.
When considering a drug plan, take into consideration the following items:
The price you pay simply to have coverage. Premiums are normally charged on a monthly basis. Premium differences between plans may be due to the coverage area, the included network of pharmacies, and the drugs covered. The lowest premium is not always the best plan!
The dollar amount you must spend out of pocket before the plan provides coverage. In many drug plans, the deductible may only apply to certain types of drugs.
The list of medications covered by a particular plan. While there are requirements of what medications all plans must cover, there are many other medications that a plan may choose to exclude from its drug formulary. Drug Formularies may also contain information about exclusions on a particular medication, such as prior authorization or drug limits.
Drug formularies categorize drugs into Tiers, or levels of coverage. Lower-tiered drugs are less costly than higher-tiered drugs. The flat dollar amount you pay out of your pocket to obtain a medication you are prescribed is known as your co-pay. Many Brand Name drugs are considered Tier 4 and 5 drugs, as opposed to Generic Drugs, which are usually Tier 1 and 2 drugs.
Your Medical Needs
Medical needs can change in the blink of an eye so it’s important to be prepared for the worst. If a person has missed their Initial Election Period, they may have a higher price when they do enroll late on due to penalties and increases in age.
A quality insurance agent will take the time to evaluate all of these factors for you – at no cost! – and will help determine which plan will offer the lowest out of pocket costs throughout the year.
Remember, it’s important to consider factors in addition to the premium and a trained agent can help provide you with your yearly estimated drug costs.
If you would like a free Rx Checkup from My Medicare Partners’ licensed, experienced Medicare Agents, just click here!
What Happens If I Don’t Have Drug Coverage?
Medicare beneficiaries who forego drug coverage, either through a Part D plan or through employer coverage, may be subject to penalties.
The subsidy is determined by a formula: First, 1% of the average national cost of a Part D plan, which in 2016 is $34.10, is determined. That amount ($0.34) is multiplied by the amount of months you did not have creditable drug coverage. Then that figure is rounded to the nearest ten cents. That final total is the penalty, which will be added each month to your Part D premium, once you do enroll in a plan.
Keep in mind that the national average cost of a Part D plan rises every year, and therefore, so does the penalty.
For example, Mrs. Lucy Late procrastinated and did not enroll in her Part D coverage when she first became eligible for it, when she turned 65 in May of 2015. Lucy called My Medicare Partners in August of 2016 and was made aware of her lack of credible coverage! Since Lucy missed her Initial Election Period, she now has to wait until the Annual Election Period in the Fall to enroll in a Part D plan – but that plan won’t become effective till January 1, 2017! Lucy has been qualified for, but without, drug coverage for 19 months (May 2015 – January 2017)!
1% x $34.10 = $0.34
$0.34 x 19 = $6.46
Rounded to the nearest $0.10 = $6.50 per month
Mrs. Lucy Late will pay a penalty of $6.50 each month, in addition to her Part D premium, due to her procrastination! That means that by age 75, she will have paid over $700 in penalties alone! Had she not procrastinated, she could have an extra few hundred bucks in her pocket – enough to buy a plane ticket to visit her grandkids for the summer.
While the penalties may be small, they can add up over time!
Don’t be like Lucy: enroll in a Part D plan on time. Take advantage of the coverage and cost savings – and avoid the penalty!