Medicare Part D — Medicare Prescription Drug Coverage


Overview of Medicare Part D

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Medicare Part D helps you pay for your prescription drugs. Because Part D is a government program, the Centers for Medicare and Medicaid Services (CMS) closely oversee every aspect of the program. Every detail, from the drug list (also called the formulary) to how an insurance company sells its plans, is reviewed and approved by CMS.

Before an insurance company can sell Medicare Part D coverage, it must have its proposed benefits, premiums and the drug list approved by CMS. This makes sure the coverage follows federal guidelines and it protects you as a Medicare beneficiary.

Medicare Part D Eligibility

To be eligible for Medicare Part D, you must:

  • Be entitled to Medicare benefits under Medicare Part A and/or enrolled in Medicare Part B
  • Reside in the Part D plan's service area
  • Not be enrolled in more than one Medicare Part D plan at a time

If you are under 65 with a disability, you may also be eligible to enroll.

Medicare Part D Enrollment

There are three periods during which you may enroll:

Initial Enrollment Period for Medicare Part D

  • There is a seven month enrollment period for those who are newly eligible for Medicare because they are turning 65.
  • The seven month period consists of the three months before, the month of and the three months after your 65th birthday.
  • If you choose not to enroll during your initial enrollment period, you may be subject to a late enrollment penalty.

Annual Enrollment Period for Medicare Part D

  • Between October 15 and December 7 of each year, anyone eligible for Medicare prescription drug coverage may either enroll in a Medicare Part D plan or switch plans.

Special Enrollment Period for Medicare Part D

There are several special circumstances that would allow a Medicare-eligible recipient to enroll in a Medicare Part D plan outside of the initial or annual enrollment periods.

Some examples include, but are not limited to:

  • Moving into the service area
  • Involuntarily losing creditable coverage
  • Becoming dual eligible (qualified to receive more than one state or federal subsidy)

Medicare Part D Late Enrollment Penalty

If you choose not to enroll in a Medicare Part D plan at the same time you are eligible to enroll in Medicare Part A and/or Part B and you have not had creditable coverage for 63 continuous days or more, the federal government may impose a late enrollment penalty.

The penalty amount changes every year and you will be required to pay it as long as you have Medicare prescription drug coverage.

The penalty is calculated when you enroll in a Medicare drug plan. It is determined by multiplying 1 percent of the national base beneficiary premium for the current year by the number of full months you were eligible but didn't enroll in a plan. This number is rounded to the nearest ten cents and added each month to your Medicare drug plan premium for as long as you have a plan.

Late Enrollment Penalty (LEP) Example:

$31.08 2012 national base beneficiary premium
x 1%
x 12 Number of months eligible but not enrolled (example)
$3.72 Amount added each month to your premium

This penalty may be assessed even if you choose later to enroll in a Medicare prescription drug plan during a required enrollment period, because it applies for every month in which you could have enrolled but did not. Because the national base beneficiary premium changes each year, your monthly penalty fee will too.

The Drug List (Formulary) Under Medicare Part D

  • Every Medicare Part D plan's drug list is approved by CMS.
  • Drugs on the drug list are recommended according to scientifically based medical guidelines to promote the most beneficial and effective use of medications.
  • Currently, there are 146 types of drugs identified by the United States Pharmacopoeia (the national authority on medication standards) and Medicare requires that each Part D plan cover at least two drugs from each type.
  • CMS requires that certain classes of medications be available on the drug list. These include antidepressants, antiretrovirals, antipsychotics, antineoplastics, anticonvulsants and immunosuppressants.
  • The drug list contains both brand and generic drugs, which are placed into tiers. The tier determines your copayment.
  • If your drug is not included on the drug list or is in a higher tier, talk with your doctor about your options. Take the drug list to your doctor's appointment and discuss possible alternatives.
  • All plans must provide an exception process and allow you a transition period of 30 — 90 days. During this time, you and your doctor can discuss other medications or request an exception.

Utilization Management

Utilization management is done on an individual basis by comparing a recommended prescribed drug to established guidelines and criteria, making sure that the course of treatment is appropriate.

A few examples of how utilization management is used in Part D plans include:

  • Step Therapy — a program that requires the use of one or more specific drugs before more potent dosages or higher quantities of other drugs can be used.
  • Quantity Limits — the quantity maximum applied to a medication based on scientific and clinical reasoning. Quantity limits are applied to the number of days' supply or number of units dispensed.
  • Prior Authorization — a program that requires specific criteria be met before a drug is covered by a plan.

Can't Afford Coverage?

People with modest incomes and limited assets may qualify for extra help from various sources that can help to reduce expenses including the monthly premium, annual deductible and copayments. If you do qualify for extra help, you will not have a coverage gap, but you will have a small copayment or coinsurance. More information and forms are available on the Social Security Administration website .

You also may be eligible for Medicaid or your State Health Insurance Assistance Program (SHIP).