People new to Medicare are often bewildered when trying to understand how Medicare Part D works. While an optional pharmacy card seems like it should be fairly simple, it isn't.
Medicare Part D has four stages: the deductible, initial coverage, the coverage gap (or donut hole) and catastrophic coverage. Medicare has a standard model which all Part D plans must follow, but within that model, they can set some their own premiums, copays and deductibles.
This means that plans vary. One plan might have no deductible, while another might have a $100 deductible and another might have a $415 deductible, up to whatever limit that Medicare allows for that year.
You will pay out of pocket for your medications up until you have reached that deductible, and that's when your plan will kick in and begin to pay some benefits toward your medications costs. This is called the Initial Coverage Level and during this stage, you will pay just a copay or coinsurance toward the cost of your covered medications.
Each drug plan will have its own formulary (list of covered drugs) and usually there are 5 tiers: preferred generics, non-preferred generics, preferred brands, non-preferred brands and specialty medications.
Each tier will have a set copay or coinsurance percentage that you pay whenever you will fill a prescription for one of the drugs in that tier. Medicare tracks your spending and the insurance plan's spending.
When the total drug spending between you and the insurance company together reaches $3820 in 2019, then you will enter the coverage gap. During the gap, your plan can charge you up to 25% of the cost of your brand-name drugs and up to 37% of the cost of your generics.
So you may find that during the Initial Coverage level you pay one copay for your brand name drugs and then during the gap, you will pay as much as 25%. This may increase or decrease what you pay out of pocket depending on the retail cost of the drug.
While you are filling medications in the gap, or donut hole, Medicare continues to track all Part D spending. When that spending plus insurance company discounts reaches $5100 for the year, you then enter catastrophic coverage.
At this state, the Part D insurance company must pay 95% of the cost of your drugs for the rest of the year. This protects you from catastrophic drug spending on very expensive medications. In my opinion, the catastrophic coverage is the most important reason for buying a Part D drug plan. We never know when we might fall ill, and this coverage can protect you.
Boomer Benefits provides free claims support for life for all of our Medigap and Medicare Advantage policyholders so that you are never alone in dealing with Medicare. We also hand the annual Part D analysis for our policyholders for free as long as they have their Medigap or Medicare Advantage plan.
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