Medicare Part D Premium is time sensitive and may include penalties
Medicare Part D (Prescription Drug Coverage), is your drug coverage. Since, there is no Federal insurance program for Prescription Drug Coverage it is provided by private insurance carriers only. There is a Federal drug formulary that all of the carriers must at least follow. However, each carrier has their own drug formulary that they set every year. So, a private insurance carriers drug formulary may make changes each year, but will at least provide coverage that the Federal drug formulary sets.
Medicare Part D Plans will help pay for your Prescription Drugs and protect you from high prescription drug costs. Every plan has its own list of covered medications, called a formulary. It is important to choose a plan based on the prescriptions you take and the plans formulary of covered drugs. Before enrolling in a Prescription Drug Plan, you should review each Medicare Part D plan formulary to evaluate if your drugs will be covered and the copay associated with each of your prescriptions. The drugs you take may not be covered under every Prescription Drug Plan, or may be on a higher tier than the other plan's formulary marks it as, which can result in significantly increased Out-of-Pocket costs.
Enrollment for Medicare Part D (Prescription Drug Coverage) can be enrolled in for when you enroll in Medicare. Even if you do not actively take prescriptions drugs, you will want to consider adding a Prescription Drug Plan. Medicare Part D is a voluntary Prescription Drug Coverage provided by private insurance carriers and approved by Medicare. However, if you do not enroll in a Prescription Drug Plan when first eligible you can incur a late enrollment period.
When you are first eligible for Medicare you are able to enroll in a Prescription Drug Plan. However, if you decide to remain on an employers plan or a union plan that is expected to pay at least as much as Medicare's standard Prescription Drug Coverage, you do not have to enroll at that time. Once, you leave that plan or a plan other than Medicare Part D that provides creditable coverage you will have 63 days to get a Prescription Drug Plan to avoid the late enrollment penalty.
There are two options when enrolling for a Medicare Part D Plan: Stand Alone or built in with a Medicare Advantage Plan.
You can choose Original Medicare with a Stand Alone Prescription Drug Plan. This would require you to enroll in the Prescription Drug Plan that fits your needs and covers the prescriptions you take. This will be a separate premium from your Medicare Part B premium. This option is available for those that remain Original Medicare, those that enroll in a Medicare Supplement Plan, those that enroll in a Medicare Advantage Plan that does not include a drug plan such as a PFFS (Private-Fee-For-Service), Cost Plan, or a Medicare Savings Account.
Not sure what those types of Medicare Plans are? Learn more by clicking below.
The Late Enrollment Penalty is the penalty that you receive for not enrolling in a Medicare Part D (Prescription Drug Plan) when first eligible. You are able to avoid getting the Late Enrollment Penalty by having creditable coverage, if you are Veteran accessing prescription drugs through the Veterans Administration, or if you qualify for Extra Help.
The Late Enrollment Penalty is a cost that depends of how long you went without Medicare Part or Creditable Prescription Drug Coverage. Medicare calculates the penalty by multiplying 1% of the "National Base Beneficiary Premium" (this is $32.74, for 2023) for every full, uncovered months you didn't have Medicare Part D or Creditable Coverage. The monthly premium is rounded to the nearest $0.10 and added to your monthly Medicare Part D premium.
The "National Base Beneficiaries Premium" may change each year, so your penalty amount may also change each year.
The cost of Medicare Part D (Prescription Drug Coverage) has a lot of factors that go into the overall "cost." Some things to understand when considering the total cost of a Prescription Drug Plan: Monthly Premiums, the impact of your income on premiums, cost-sharing, and the donut hole coverage gap.
Every plan requires a monthly payment or premium, for the Prescription Drug Coverage itself. Since, every insurance carrier sets their own formulary, the monthly premiums vary by insurer and plan, these premiums can range significantly.
Your income may also impact the premium you pay. People whose income exceeds certain thresholds pay more for Medicare Part D plans. The extra premium amount is called the Income Monthly Adjusted Amount (IRMAA) and is determined by Federal tax returns. Those who are low-income or have limited resources may qualify for Medicare Part D extra help. This Low Income Subsidy may cover part of all of the Part D monthly premium. If, you qualify for Low Income Subsidy known as Extra Help your plan premium may be reduced or fully covered and your Prescription Drug copays will be capped at preset amounts.
In addition to a monthly premium for your Prescription Drug Plan, you will also be responsible for sharing some of the drug costs until you reach the limit on Out-of-Pocket costs for the year. These cost-sharing comes in the form of copays, co-insurance, and your plan deductible (if you have one). Deductibles can vary by plan, some plans apply all drug tiers to the deductible and others will only apply to the deductible only to higher tiers for brand name drugs.
After, you meet the Annual Out-of-Pocket limits, you have reached the coverage gap known as the Medicare Part D, Donut hole. At this stage you will be responsible for 25% of the costs for generic and brand name drugs until your Out-of-Pocket costs reach $6,550. Once, that amount is reached you are in the Catastrophic Coverage stage, which requires a small copay or coinsurance amount for the remainder of the year. However, if you qualify for the Medicare Part D Extra Help, the Medicare Part D Donut hole does not apply to you. Extra Help can significantly reduce the costs of prescription drug copays during all phases of drug coverage.