Medicare Part D is the latest addition to Medicare. It provides prescription drug benefits to all who enroll. Part D enrollment is not automatic. You must enroll according to Medicare’s guidelines and pay all fees as discussed below.
How Medicare Part D works. In order to receive Part D benefits you must enroll in a PDP (prescription drug plan) through a private insurance company that offers Medicare-approved plans. Anyone eligible for Medicare Part A or who is currently enrolled in Medicare Part B is eligible for Medicare Part D.
Penalty for not enrolling. If you do not enroll the immediate month that you become eligible then you will be forced to pay a penalty. You become eligible the month that you enroll in Part A or Part B Medicare. For each month then on that you do not enroll you will be penalized 1% per month. Thus, hypothetically, if you waited 32 months after enrolling in either Part A or B you would have to pay an additional 32% on top of your premium permanently.
There are ways to avoid this hefty penalty. If you have a health insurance from your employer that provides prescription drugs that are similar to what you're provided under Part D then you will not be subject to the penalty. This is called “creditable prescription drug coverage”. Another strategy to avoid the penalty is simply to enroll in a low-premium, cheap PDP. You can always change it later if need be.
Coverage. What is covered will depend on the specific PDP and the private insurance company that administers it. Insurance companies can restrict coverage in multiple ways. One way is tiered copayments. This provision allows insurance companies to charge different copayment amounts for drugs in the same class. In other words, for drugs that has the same affect. A classic example is higher copayments for brand name drugs versus generic drugs. Medicare itself also places restrictions on the insurance company’s formulary (i.e. the list of the drugs they provide).
For example, certain type of barbiturates, weight loss drugs, and tranquilizer drugs cannot be carried by PDPs. Medicare regulations also let the insurance company drop certain drugs as long as they have two types in the each class of drug treatment. The insurance company may also require prior authorization to get the drug. Prior authorization is spelled out in your PDP plan and in essence lets the insurance company have the final say on whether you can get the drug or not.
Cost of Medicare Part D. The way that Part D pays for drugs is complex. There are essentially four payment stages. First, you have to pay your deductible, which for 2011 is $310 per year. If you have a high-premium PDP (prescription drug plan) it may be waived. Second, once the deductible is met, the PDP pays about 75% of the drug cost while you pick up the remaining 25%. Once your total yearly drug costs reach $2,840 you become 100% responsible for all of your drug costs. This third stage is the notorious “doughnut hole”. If before the end of the year your prescription drug costs exceed $4,550 then Medicare Part D will pick up 95% of your remaining costs while you have to cover. This fourth payment stage is called “catastrophic coverage.
Medicare Advantage Part D. Also called MA-PDs, some Medicare Advantage plans offer a prescription drug option based on Medicare Part D’s requirements. Prices may vary with Medicare Advantage plans so be certain to talk to your plan representative and read over your summary of benefits to find out if your specific drugs will be covered.
Drug Substitutions. Medicare allows the insurance company to substitute one drug as long as they are therapeutically equivalent. This could be important for you because “equivalent” does not mean the same. For example, the insurance company could require you to take a prescription for a drug that has the same affect on your disease or condition but may have worse side effects as opposed to another drug that may have fewer side effects.
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