Part D Costs
The Cost of Medicare Part D
Since Part D plans are offered by private insurance carriers, there is no one standard premium. Instead, the premium will depend on the plan’s carrier and coverage. Some Medicare Advantage plans also offer prescription drug coverage as part of the plan, so individuals enrolled in one of those plans will not have a separate premium for Part D.
The total cost for Part D will depend on the following factors:
- The plan’s specific monthly premium and deductible
- If the prescription drug coverage is a stand-alone Part D plan or as part of a Medicare Advantage Drug Plan (MAPD)
- If the individual receives financial assistance from the Extra Help program
- The medications each individual takes and how often they are refilled
- The pharmacy used
- If the medication is covered under the plan’s drug formulary
Part D Premiums
Like Part B premiums, Part D premiums are increased if the member is a high-income earner. Single people earning over $85,000 or married people making over $170,000 will have their premiums increased.
If Part D enrollment was delayed without other creditable prescription coverage, a penalty would also be added to the premium. The penalty is calculated by multiplying 1% by the national base beneficiary premium, which is currently $33.06. That number is then multiplied by the number of months the individual went without Part D coverage. This penalty remains in effect as long as the Part D plan is in effect.
Even if an individual gets their prescription drug coverage as part of a Medicare Advantage Drug Plan, the penalty will still apply and must be paid to receive benefits.
Premiums will vary by plan and then will be subject to any penalties and high-income adjustments. There is no one set premium for all Part D plans, but the average plan costs $40 each month. Individuals who take very few or even no medications will have a lower premium.
Premium Income Brackets
Individuals earning less than $85,00 and couples earning less than $170,000 will not have an additional amount added to their premium. Individuals earning between $85,001 and $107,000 and couples earning between $170,001 and $214,000 will pay an additional $12.40 for their Part D plans. The brackets continue to increase, with the very top earners paying an additional $77.90 each month.
Part D Deductibles
The maximum deductible any Part D plan can have is $505 in 2023. The deductible may not apply to all medications. If it does apply, the member will pay the full amount for the prescription until the deductible has been met. After that, the member will pay only the copay or coinsurance amount, which is based on which tier the drug is categorized in.
Initial Coverage Limit for 2023
The initial coverage limit for Part D plans in 2023 is $4660. When the total cost of prescriptions reaches that amount, the individual will be in the coverage gap.
Out-of-Pocket Threshold for 2023
The out-of-pocket threshold for Part D plans in 2023 is $7400. When the member’s total out-of-pocket expenses have reached that amount, they will be out of the coverage gap and into catastrophic coverage.
The Part D Coverage Gap
The Part D coverage gap is also referred to as the donut hole. The coverage gap begins when the plan’s initial coverage limit has been met – when the total prescription costs reach $4430.
Once in the donut hole, beneficiaries will receive a 75% discount on name-brand drugs and a 63% discount on generic medications. While this seems like a significant discount, the member’s out-of-pocket portion will be much higher than before they were in the coverage gap.
The coverage gap remains in effect until the member has paid $7050 for prescription drugs. At that point, catastrophic coverage begins.
Part D Drug Formularies and Drug Tiers
Each Part D plan has its own drug list also called the formulary. This also applies to the prescription plans that are included as part of a Medicare Advantage plan. A drug formulary is the list of covered medications and the tiers they fall into. All prescription drug plans are required to cover a specified list of medications, and they also must remove any medications that do not have FDA approval.
First, let’s discuss a few examples of which drugs are typically covered and not covered by these plans.
Covered medications typically include:
- Most vaccines
- Insulin and the equipment to administer it
(gauze, syringes, needles, and alcohol swabs)
- Prenatal vitamins
Non-covered medications typically include:
- Over-the-counter medications
- Drugs to treat erectile dysfunction
- Fertility medications
- Vitamins or minerals unless otherwise noted in the plan
- Medications for common colds and coughs
- Weight loss or weight gain medications
- Medications used for cosmetic purposes
Covered drugs are then placed into tiers. Common, generic medications are placed in lower tiers and have lower costs than those in higher tiers. Often, medications in the first tier do not apply to the plan’s deductible. Specialty, name-brand medications are placed in higher tiers and have a higher coinsurance cost. The tier definitions are not standardized across all plans, but approximately 95% of Part D plans and 76% of MAPD plans use the same definitions to classify the covered medications. Drug cost will vary depending on the tier a specific drug falls into. The higher the tier, the higher the drug cost.
The five prescription drug tiers are as follows:
- Preferred generics
- Preferred brands
- Non-preferred drugs
- Specialty drugs
Make Late Part D Premium Payments
Medicare has its own rules on late and missed payments, but it is ultimately up to an individual’s plan on how to proceed with late payments.
According to the rules set by the Medicare program, if an individual is late in paying a premium, they can still receive coverage without a penalty. They are also granted a grace period along with warnings and notifications about the late or missed payments. Medicare will send the beneficiary a letter by mail instructing them to contact their plan’s carrier about the payment.
No matter the carrier, individuals must be notified before the carrier drops them from the plan. Grace periods must be allowed for a minimum of two months, but some plans offer an extended grace period. The grace period will begin on the first day after the payment is due.
Part D Disenrollment
Plans with a Single Grace Period may disenroll individuals who miss one or more premium payments during that grace period. The individual will be dropped from coverage at the end of the timeframe that was allotted.
Plans that have a Rollover Grace Period allow their members to stay enrolled if they owe more than one month’s premium but pay for at least one premium during the grace period. If this occurs, a new grace period will begin. However, if no payment is made, the carrier may disenroll the individual from the plan.
Insurance companies will send notifications to members who have failed to pay their premiums but will disenroll any member who fails to make a payment during the grace period.
Once an individual has been disenrolled from a plan, they will have to submit an application for coverage.