Prescription drug plans are plans that are offered by private insurance companies that have annual contracts with Medicare and have been around since 2006. They offer a list of covered drugs called a formulary (which is approved by Medicare) and require you to use specific network pharmacies. Most plans have extensive networks which you can use throughout the country. They typically partner with large chains, like discount stores and grocery stores, as well as local Mom & Pop pharmacies.
These plans have a monthly premium and can be purchased along with Original Medicare with or without a Supplement/Medigap plan.The National average plan cost in 2020 is $32.74/month, but plans can cost up to $150/month. Most people will choose a plan based on the prescriptions they take and the pharmacy they use. Because these plans can & do change on an annual basis, it is a good idea to review your plan during Medicare’s Annual Enrollment Period, which occurs between October 15th to December 7th each year. There are no health questions on the applications, so it’s very easy to change plans.
Plans must follow specific rules set by Medicare. The 4 plan stages are: Annual Deductible, Initial Coverage Stage, Coverage Gap Stage and Catastrophic Stage. What does all this mean? If your plan has a deductible ($445 maximum in 2021), you will pay the full cost of the prescription at the pharmacy until the deductible is satisfied. Then, in the Initial Coverage Stage you will pay a predetermined copay (flat fee) or coinsurance (%) for your medications until (if) the full cost (what you pay + what the plan pays) exceeds the Initial Coverage Limit of $4130 (in 2021). You then enter the Coverage Gap Stage and pay 25% of the full cost. Should you reach the Catastrophic Stage which occurs at $6550 (in 2021) you will pay the greater of $3.70 for generics, $9.20 for brand-name or 5% of the cost, until the end of the calendar year. The process then starts over again. Good news? Most people won’t exceed the Initial Coverage Stage. Choose generic medications whenever possible.
Have trouble paying for your medications? Beginning in 2021, Medicare has a new program called the Part D Senior Savings Model, requiring participating plans to cap insulin costs to no more than $35 per month. Not all plans will include the new program, so be sure to review your plan benefits. Another program is the federal Extra Help program, also known as Low Income Subsidy. If your income & assets are below the program requirements, you may qualify for help in paying for your prescriptions.You can apply directly with Social Security. Should you qualify, your currently plan will be notified. No plan? You will be automatically enrolled in a plan.
One more thing – Late Enrollment Penalty. This comes as a surprise to many people, but if you don’t sign up for a prescription plan (either as a stand-alone plan or within an Advantage plan) when you are first eligible to do so, you may incur a penalty when you do enroll in a plan later on.
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