Medicare Prescription Drug Coverage
Paying for Coverage
Coverage and Costs Vary
The coverage and costs are different for each Medicare drug plan, but all plans must provide at least a standard level of coverage set by Medicare. Costs and coverage for particular drugs will vary depending on which drugs the person uses, which Medicare drug plan he or she chooses, whether they go to a pharmacy in the plan's network, and whether they qualify for "extra help" from Medicare to pay for prescription drug costs. ("Extra help" is a program to help people with limited income and resources pay prescription drug costs.)
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Payments a person may make in a Medicare drug plan include monthly premiums, yearly deductibles, co-payments, co-insurance, the coverage gap, and catastrophic coverage.
Premiums
Most drug plans charge a monthly fee, or premium, that varies by plan. A person pays this in addition to the Part B premium. If someone belongs to a Medicare Advantage Plan (like an HMO or PPO) or a Medicare Cost Plan that includes Medicare prescription drug coverage, the monthly premium may include an amount for prescription drug coverage. The amount of the monthly premium is not affected by a person's health status or by how many prescriptions are used.
If you reported a modified adjusted gross income of more than $85,000 (individuals and married individuals filing separately) or $170,000 (married individuals filing jointly) on your IRS tax return 2 years ago (the most recent tax return information provided to Social Security by the IRS), you will have to pay an extra amount for your Medicare prescription drug coverage, called the income-related monthly adjustment amount. You pay this extra amount in addition to your monthly Part D plan premium.
The amount of the Income Related Monthly Adjusted Amount (IRMAA) is adjusted each year, as it is calculated from the annual beneficiary base premium.
Yearly Deductible
The yearly deductible is the amount a person pays for prescriptions before the plan begins to pay. Some drug plans charge no deductible.
Co-payments
Co-payments or co-insurance are the amounts a person pays for prescriptions after the deductible is paid. The person pays his or her share, and the plan pays its share for covered drugs. In some plans, a person pays the same co-payment or co-insurance for any prescription. In other plans, there might be different levels or "tiers," with different costs. For example, a person might have to pay less for generic drugs than brand names. Or, some brand names might have a lower co-payment than other brand names. Also, in some plans, a person's share of the cost can increase when the prescription drug costs reach a certain limit.
The Coverage Gap
Most Medicare Prescription Drug Plans (Part D) have a temporary limit on what they cover for prescription drugs. This limit is called the “coverage gap” (also known as the “donut hole”). The coverage gap starts after you and your plan have spent a certain amount of money for covered drugs. All Medicare drug plans are different, so call your plan if you have questions about how the coverage gap will work for you.
You won’t need to pay out of pocket for all costs while you are in the coverage gap. Once you are in the coverage gap, your plan will cover a percentage of the cost of generic drugs. You will also get a percentage manufacturer-paid discount on covered brand-name drugs. Although you will only pay a percentage of the price for that brand-name drug, the entire price will count as out-of-pocket spending, which will help you get out of the coverage gap. There will be increasing savings for you in the coverage gap each year until 2020, when you will pay approximately 25% for both covered generic and brand-name drugs when in the gap. (See an example in the image on the right.)
If you have extremely high drug costs and pay the limit (or pay through the coverage gap), all Medicare drug plans provide “catastrophic” coverage. Catastrophic coverage means that once you pay a certain amount out-of-pocket for drug costs in a calendar year, the plan will cover almost all your drug costs above that amount.
If you qualify for Extra Help paying for Medicare prescription drug coverage the coverage gap doesn’t apply to you. Even if your Medicare drug plan has a coverage gap, you will still pay your regular copayment or coinsurance amount.
Four Ways to Pay
In general, there are 4 ways to pay for Medicare drug plan premiums.
- Have the premium deducted from a checking or savings account.
- Have the premium charged to a credit or debit card.
- Be billed each month directly by the plan. (Some plans bill in advance for coverage the next month.)
- Have the premium deducted from a Social Security payment. Contact the person's plan (not Social Security) to ask for this payment option.
In most cases, the prescription drugs provided in an outpatient setting like an emergency room aren't covered by Part B. A person's Medicare drug plan may cover these drugs under certain circumstances. The person will likely need to pay out-of-pocket for these drugs and submit a claim. Call the plan for more information.
Help With Drug Costs
People with Medicare who have limited income and resources may get "extra help" to cover prescription drugs for little or no cost. If you think the person may qualify for extra help, call Social Security at 1-800-772-1213, visit http://www.ssa.gov, or contact your State Medical Assistance (Medicaid) office. TTY users should call 1-800-325-0778.
Several states have State Pharmacy Assistance Programs (SPAPs) that help certain people pay for prescription drugs. In general, each SPAP makes its own rules about how to provide drug coverage to its members. Depending on the state, the SPAP will have different ways of helping a person pay for prescription drug costs. To find out about the SPAPs in your state, call 1-800-Medicare (1-800-633-4227). TTY users should call 1-877-486-2048.
