Medicare Part D helps pay for the prescription drugs you use. Medicare Part D coverage is not automatic. You decide whether to enroll in a Medicare Part D plan. If you delay signing up after you are first eligible, though, you may pay a penalty on your premium, unless you qualify for an exception.
Prescription drug coverage is an insurance policy you buy from private companies. You can buy a separate policy just for drugs, called a prescription drug plan (PDP). Or you can buy some types of Medicare Advantage plans that include drug coverage. The federal government has created guidelines for the types of drugs that must be covered by drug plans and set minimum standards of benefits.
Insurance companies that offer Medicare Part D plans must meet these standards. But all plans are not the same. They vary by cost and by their formulary, or list of specific drugs covered.
Each drug plan decides which pharmacies plan members may use. Plans may also limit your choice of pharmacies by geographic area, such as a state. Other plans offer nationwide coverage. If you travel often, you may want to consider a plan that allows you to access pharmacies wherever you go. Some plans also offer mail order services, so you can have drugs mailed to your home. Each Medicare Part D plan has a service area, or area where it operates. You must live in a plan’s service area to join it.
Plans vary in which specific drugs they cover, and you won’t get help with the cost of a drug that is not covered by a plan. For example, a plan may cover only certain cholesterol-reducing drugs. If the specific cholesterol-reducing drug you take isn’t covered by a plan, the plan won’t help you with the cost of that drug.
The federal government also requires plans to exclude certain types of drugs from the plan entirely. Weight-loss drugs are one example. Some plans, called enhanced plans, do cover some of these types of drugs.
In most plans, there is a stage of cost sharing called the “coverage gap,” or the “doughnut hole.” In this stage you must pay most of the plan’s price for the medications you take. (Note: The Affordable Care Act includes benefits aimed at closing the donut hole.)
Medicare Part D coverage has different levels of cost sharing until you have spent $4,550 (2014) out-of-pocket in a single year for drugs that are covered by the plan.
Your True Out-of-Pocket (TrOOP) costs include the amount you pay or others pay on your behalf toward the cost of your prescription drugs, including deductible, copays, coinsurance and payments made in the coverage gap. Premiums do not count toward True Out-of-Pocket costs.
Once you have passed this spending cap, you are eligible for what Medicare Part D calls “catastrophic coverage.” You pay only a small coinsurance or copay for a covered drug and your plan pays the rest for the remainder of the year. The terms of these plans vary. Look at the details of the plan to see limits on coverage.