PRESCRIPTION DRUG PLAN
What's Medicare Prescription Drug Plan (PDP)?
Medicare Part D prescription drug plans are also known as PDPs. These are standalone plans that can be purchased through private insurance companies. PDPs provide coverage for prescription drugs and medications and may also cover some vaccines too.
Original Medicare (Parts A & B) doesn't provide prescription drug coverage. If you have Original Medicare and need prescription drug coverage, you’ll want to sign up for a Part D prescription drug plan.
What Does a PDP Cover?
Plans will vary by location and provider in terms of costs and specific drugs covered. Each plan will have a list of specific drugs it covers, known as a formulary, but all PDPs are required by law to cover certain common types of drugs.
Medicare Part D plans are required to cover the Shingles vaccine, but they may also cover other vaccines such as Tdap, for the flu and pneumonia. What vaccines are covered outside of Shingles will depend on your plan. You can learn more about Medicare and vaccine coverage from the Center for Medicaid and Medicare Services (CMS) and by talking directly with the plan’s provider.
Enrolling in a Part D Prescription Drug Plan
To get a PDP plan, you will have to enroll directly with the plan provider. Unless you qualify for a Special Enrollment Period due to working past 65, it’s best to enroll in Part D when you’re first eligible for Medicare. This will be during your Initial Enrollment Period.
If you do not enroll in Part D when first eligible and do not qualify for a Special Enrollment Period, you could face financial penalties. You can learn about financial penalties in this blog.
Can I Combine a PDP Plan with Other Medicare Coverage?
Yes, you can combine Medicare coverage parts with a Part D plan. A stand-alone PDP can work with Original Medicare (Parts A & B) and certain types of Medicare Advantage plans such as Medicare Medical Savings Account plans without drug coverage or Private Fee-for-Service plans.
You can have a stand-alone prescription drug plan with certain types of Medicare Advantage plans so long as the plan:
Can’t offer coverage for prescription drugs
Chooses not to offer coverage for prescription drugs
If after the first time you enroll you decide to change your PDP, you can do so each year during the Medicare Annual Enrollment Period, which begins October 15 and ends December 7.
Part D prescription drug coverage is important to ensuring you can get all the medications you need to live your healthiest life.
Costs in the coverage gap or Donut Hole
Most Medicare drug plans have a coverage gap (also called the "donut hole"). This means there's a temporary limit on what the drug plan will cover for drugs.
Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. Once you and your plan have spent $4,430 on covered drugs in 2022 ($4,660 in 2023), you're in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap. Beginning 2025 the max out of pocket cost for consumers will be $2,000 annually making Rx cost more affordable to seniors.
Insulin copay monthly cap of $35
As of January 1, 2023, cost-sharing for insulin products is limited to no more than $35 per month for people with Medicare insurance, including insulin covered under both Part D and Part B. No deductibles apply. Medicare has also started a special enrollment period that will allow people who use a covered insulin product to add, drop, or change their Part D coverage one time between now and December 31, 2023.
All Medicare Part D plans, both stand-alone plans and Medicare Advantage drug plans, cannot charge more than $35 per month for the insulin products they cover. Please note: plans are not required to cover all brands and types of insulin.
Medicare Part D covers:
Injectable insulin that isn’t used with a traditional insulin pump
Insulin used with a disposable insulin pump
Certain medical supplies used to inject insulin, like syringes, gauze, and alcohol swabs.
Expansion Low-Income Subsidy (LIS) or Extra Help program
Beginning in 2024, there will no longer be a partial program in the Low-Income Subsidy program. Full benefits will be offered to people with Medicare with limited resources and incomes up to 150 percent of the federal poverty level, which in 2023 is $21,870 per year for an individual. With full benefits, the majority, if not all out-of-pocket costs for prescription medications will be covered. People who qualify for Extra Help will pay:
Fixed lower copays for certain medications
If your income for 2023 is below $21,870 ($29,580 for married couples), you may qualify for lower prescription drug costs. Many people qualify for “Extra Help” with Medicare Part D (drug coverage) and don’t even know it.
Medicare.gov has a resource to help you quickly see if you qualify for Extra Help.
You can visit PAN’s Extra Help education hub to learn more about this program and see if you qualify.
You can enroll in the Extra Help program by visiting SSA online at ssa.gov/extrahelp or call 1-800-772-1213.
2024 level if Single $21,870
2024 level if Married $29,580
2023 Federal Poverty Levels
Published Federal Poverty Levels
Eliminat 5% coinsurance for PDP catastrophic coverage
Beginning in 2024, the five percent prescription cost-sharing obligation for Part D will be removed. Currently, when someone on Medicare has spent around $3,100, they will enter what’s called the catastrophic phase of their benefit. In this phase, they will have to pay five percent of prescription costs for the rest of the year, without a maximum limit. According to a 2022 Kaiser Family Foundation brief, the changes will be like having a cap of about $3,250 for the calendar year.
Annual limit of $2,000 for prescription drug costs in Part D
Beginning in 2025, there will be a hard cap or annual limit of $2,000 for prescription medications. No one with Medicare insurance will spend more than $2000 a year for their prescription medications that are covered under Part D. In the years that follow, the cap amount will be adjusted based on inflation.
This provision does not relate to drugs covered under the Medicare Part B program. Medicare Part B covers drugs that are administered by a doctor, nurse, or other healthcare provider in an outpatient setting such as a doctor’s office. For example, some cancer drugs and injectable drugs are covered under Part B. Read more about the Part D cap below. The $2,000 cap only applies to Medicare Part D plans and Medicare Advantage programs with prescription drug plans and does not apply to drugs covered under Medicare Part B. The patient’s Part D plan or Medicare Advantage drug plan will be tracking costs and will determine when the cap has been met. Anyone with a Medicare Part D plan or who is enrolled in a Medicare Advantage program with a prescription drug plan will automatically have a Medicare Part D cap in 2025. There are no eligibility requirements, including income.
Enrolling in smoothing
Smoothing only applies to out-of-pocket costs for prescription medications and do not include premiums. It is not income-based. All Medicare prescription drug plans must offer enrollees the option to pay out-of-pocket costs in monthly installments.
Once a patient is enrolled, their monthly payment will be determined based on their out-of-pocket costs and the remaining months in the year. Remember, the annual cap will begin at the same time as smoothing, so the maximum amount a person with Medicare will pay is $2,000 per year.
Below is an example of what smoothing will look like in 2025 when the $2,000 annual cap is in place. In this example, the patient had $12,000 of out-of-pocket costs, but they are only responsible for $2,000 because of the annual cap. The chart below shows that if the patient enrolled in smoothing in January, they would be responsible for monthly payments of $166.
Prescription drug costs in monthly installments
Beginning in 2025, each Medicare prescription drug plan, including Medicare Advantage plans with drug prescription programs, must give patients the option to pay for their out-of-pocket prescription costs in monthly installments, with a monthly limit on spending. We have called this provision smoothing, as it more evenly distributes costs throughout the year.
As of January 1, 2023, Medicare Part D plans and Medicare Advantage plans no longer require a deductible, coinsurance, or other cost-sharing requirements for adult vaccines that are recommended by the Centers for Disease Control and Prevention (CDC)’s Advisory Committee on Immunization Practices. This includes the shingles vaccine.
For a complete list of vaccines covered, see the CDC’s vaccine recommendation webpage.
Vaccines currently administered in doctors’ offices and paid for by Part B do not have cost-sharing obligations.
Brand-name prescription drugs
Once you reach the coverage gap, you'll pay no more than 25% of the cost for your plan's covered brand-name prescription drugs. You'll pay this discounted rate if you buy your prescriptions at a pharmacy or order them through the mail. Some plans may offer you even lower costs in the coverage gap. The discount will come off of the price that your plan has set with the pharmacy for that specific drug.
Although you'll pay no more than 25% of the price for the brand-name drug, almost the full price of the drug will count as
out-of-pocket costs to help you get out of the coverage gap. What you pay and what the manufacturer pays (95% of the cost of the drug) will count toward your out-out-pocket spending. Here's a breakdown:
Of the total cost of the drug, the manufacturer pays 70% to discount the price for you. Then your plan pays 5% of the cost. Together, the manufacturer and plan cover 75% of the cost. You pay 25% of the cost of the drug. Beginning 2024 the 5% will be eliminated
There’s also a dispensing fee. Your plan pays 75% of the fee, and you pay 25% of the fee.
What the drug plan pays toward the drug cost (5% of the cost) and dispensing fee (75% of the fee) aren't counted toward your out-of-pocket spending.
Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60, and there's a $2 dispensing fee that gets added to the cost, making the total price $62. Mrs. Anderson pays 25% of the total cost ($62 x .25 = $15.50). The amount Mrs. Anderson pays ($15.50) plus the manufacturer discount payment of $42 ($60 x .70 = $42) count as out-of-pocket spending. So, $57.50 counts as out-of-pocket spending and helps Mrs. Anderson get out of the coverage gap. The remaining $4.50, which is 5% of the drug cost ($3) and 75% of the dispensing fee ($1.50) paid by the drug plan, doesn't count toward Mrs. Anderson's out-of-pocket spending.
If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan's coverage has been applied to the drug's price. The discount for brand-name drugs will apply to the remaining amount that you owe.
Medicare will pay 75% of the price for generic drugs during the coverage gap. You'll pay the remaining 25% of the price. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.
Mr. Evans reaches the coverage gap in his Medicare drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20, and there's a $2 dispensing fee that gets added to the cost. Mr. Evans will pay 25% of the plan’s cost for the drug and dispensing fee ($22 x .25 = $5.50). The $5.50 he pays will be counted as out-of-pocket spending to help him get out of the coverage gap.
If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan's coverage has been applied to the drug's price.
Items that count towards the coverage gap
Your yearly deductible , coinsurance, and copayments
The discount you get on brand-name drugs in the coverage gap
What you pay in the coverage gap
Items NOT counted towards the coverage gap
The drug plan premium
Pharmacy dispensing fee
What you pay for drugs that aren’t covered
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