Original Medicare benefits do not cover prescription drug costs unless the drugs are part of inpatient hospital care or are certain drugs that your health care provider administers in a medical facility.

Today, prescriptions drugs that you take at home are not inexpensive, but there are more prescription drugs are available now to treat conditions and illnesses than ever before.

If you are considering getting a Medicare Part D plan to help with the expense of prescription drugs, you may want to know how these plans work. Here are some of the important details that may help you choose coverage that will be right for you.

What is Medicare Part D?

The Medicare prescription drug benefit is an optional program that the U.S. federal government created to assist Medicare beneficiaries with costs of prescription drugs that they take at home. Because prescription drug coverage is optional, plans are sold by private insurance companies that are licensed and registered to sell plans associated with Medicare.

People may enroll in a standalone Prescription Drug Plan that works together with Original Medicare insurance, or they can enroll in a Medicare Advantage plan that includes prescription drug coverage.

Medicare standalone drug policies may cover a prescription drug if it meets the following requirements:

• The drug is only available by prescription, not over-the-counter.
• The drug has been approved by the FDA.
• The drug is sold and used in the U.S.
• The drug is used for medically acceptable reasons according to the SSA standard.
• The drug is not covered by Original Medicare Part A or Part B.
• It is included on the formulary of the policy.

How do Prescription Drug Plans work?

If you have Original Medicare benefits, you are eligible to enroll in a Prescription Drug Plan. If you enroll in a standalone plan, you pay a monthly premium that is independent of your Part B monthly premium. The monthly premiums generally being at approximately $15.00, but the cost varies depending on the plan, the provider, and where you live.

If you enroll in a Medicare Advantage plan that includes prescription drug coverage, you only pay the premium for the entire plan.

In the case of a standalone plan, you also pay a set annual deductible. As of 2020, the amount can be no more than $435.00 per year. Depending on your provider’s policy, you may have the full deductible, partial deductible, or the provider may waive the entire amount.

When your coverage begins you pay a discounted price for medications purchased within your network. This price is set by the network, and you pay this amount until you reach the point when you satisfy your deductible.

The next phase of your coverage is called your initial coverage phase. This is when you begin paying a set copayment for each prescription. The amount you pay depends on the formulary of your plan and the tier on which your drug is categorized.

Tier one includes generic brands of permitted drugs and they have the lowest copayment. Tier two includes brand-name, preferred drugs and carry a higher copayment than tier one. Tier three includes non-preferred, brand-name drugs with a higher copayment than tier two.

The initial coverage phase has a limit of $4,020.00 as of 2020. If you reach this amount you move into the next phase.

The coverage gap phase begins when you reach the dollar limit set in your initial coverage phase as mentioned above. At this point you pay 25 percent of the retail price of your drug. The maximum amount of spending allowed at this phase is $6,350.00 (as of 2020).

The next phase is catastrophic coverage. At this point you begin to pay 95 percent of the cost of your prescription drugs until the end of the year.

If you decide to stop your prescription drug plan or enroll in a different plan, you can do so without penalty during the Medicare Annual Election Period between October 15 and December 7 each year.

Because Part D plans are relatively inexpensive in comparison to the high cost of prescription drugs, it may be worthwhile to enroll in a policy of this type. You should compare plan formularies, tier categorizations, whether they charge a copayment or coinsurance, and the cost of deductibles and premiums before making your final decision.

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