Until 2006, Medicare beneficiaries had no prescription drug coverage. Medicare Part D was introduced in 2006, providing millions of beneficiaries with much-needed prescription drug coverage. Although Medicare Part A and Part B cover prescription meds in certain circumstances, Part D is the primary source of prescription drug coverage for Medicare beneficiaries
Medicare Part D requirements
Medicare Part A and Part B are administered by the federal government. Medicare Part D, however, is provided by private insurance carriers. Most people have access to 20 or more different Part D plans.
Although Part D plans vary, there are specific requirements they must meet. For example, Medicare sets a maximum allowable Part D deductible each year; plans can charge a lower deductible, but it can’t exceed the maximum deductible. Another requirement involves the types of drugs all Part D plans must cover.
Medicare requires every Part D plan to cover at least two drugs from each drug class. Additionally, many Part D plans cover nearly all medications in these six drug classes: antidepressants, anticonvulsants, antipsychotics, immunosuppressants, anti-cancer, and HIV/AIDS medications.
Medicare does not, however, require Part D plans to cover any drugs used to treat any of the following:
- Anorexia
- Benzodiazepines – usually prescribed for anxiety and/or insomnia
- Cold symptoms
- Erectile dysfunction
- Infertility
- Hair loss
- Insomnia
- Weight loss/gain
Medicare Part D plans are also not required to cover sedatives or compounded medications. With that said, Medicare Part D plans may cover the types of medications mentioned above, but they aren’t required to.
Medicare Part D payment stages
Medicare also regulates the coverage limits of each payment stage under Part D plans. Part D plans all have four payment stages: deductible, initial coverage, coverage gap, and catastrophic coverage. As discussed above, the deductible cannot be any higher than the maximum set by Medicare, which as of 2021, is $445.
Once you have paid the deductible, you will move into stage two: initial coverage. During this stage, you will pay a copay or coinsurance determined by the plan carrier. The copays and coinsurance vary by drug tier. For example, you might pay a $10 copay for a tier one drug but a 25% coinsurance for a tier three drug.
After you and your plan have spent a specific amount of covered drugs for the calendar year, you will move into stage three: coverage gap. While in the coverage gap, you will pay a 25% coinsurance for all covered drugs.
Once you and your plan have spent a certain amount for the year, you will move into stage four: catastrophic coverage. During this stage, you will pay around 5% for your medications. Only about 10% of Part D beneficiaries reach stages three or four.
Finding the most cost-effective Part D plan
There are specific enrollment periods for Part D. The first time you may enroll in a Part D plan is during your Initial Enrollment Period (IEP). You can then change Part D plans once a year during the Annual Election Period (AEP).
To find the most cost-effective Part D plan, you should create a MyMedicare account and enter every prescription drug you take. Your account will save this list of medications for you, so each year when you shop for Part D plans, you can simply update the list instead of re-adding all your medications. Once you have created your account, you will use Medicare’s Plan Finder Tool to compare all the Part D plans in your ZIP code.
The Medicare Plan Finder Tool is a robust tool that allows you to review each plan’s covered drugs, preferred pharmacies, drug costs, and much more. Since Part D plans can change from year to year, checking this tool each year ensures that you are always enrolled in the most cost-effective plan.
