Medicare Part D

Parts of Medicare Part D can be complex and confusing, even for people who have experience dealing with benefits. These sections will simplify and explain what Part D is, how to enroll, how much it will cost, and other topics.

What is Medicare Part D?

Medicare is a federal program that provides health insurance for people over 65 and many people under 65 who have a disability. It used to only help people pay for hospital care, doctor visits, and some other medical costs. In December of 2003, Congress passed the Medicare Modernization Act, which created Medicare Part D. This new program went into effect in 2006 and added prescription drug coverage to Medicare. It’s also known as Medicare Prescription Drug Coverage or Medicare Rx.

In the Part D program, private companies offer prescription drug coverage to people on Medicare. You must enroll in one of these private plans to get prescription drug coverage through Medicare. These plans have a list of drugs that they will help pay for if you sign up with their plan. Unless you qualify for help, you will generally have to pay a certain amount each month to be on the plan, a certain amount before the plan will help you pay for your drugs, and a certain percentage of the rest of the costs of your drugs. If you pay these costs, the plan will help pay for your prescription drugs when you buy drugs that are on the list. People who cannot afford these costs may get help paying for them through Low Income Subsidies. Every plan has to follow rules laid out by the Center for Medicare and Medicaid Services (CMS), but there’s a great deal of variety among the specifics of each plan.

People who are eligible for both Medi-Cal and Medicare have special rules for signing up, switching plans, and paying for costs.

What's Covered

Each prescription drug plan will have a list of drugs that they will help pay for if you sign up for that plan. This list is called a formulary. There are rules for types of drugs that must be on every plan’s formulary. CMS reviews formularies to make sure they have drugs to treat a wide range of conditions. Plans organize their formularies by categories of drugs, and they have to have at least two drugs from each category. They must include the majority of antidepressants, antipsychotics, anticonvulsants, antiretrovirals (HIV drugs), immunosuppressants, and antineoplastics (cancer drugs). They generally do not cover over-the-counter drugs, barbiturates, benzodiazepines, Valium, Xanax, non-prescription drugs, weight regulation drugs, or hair loss drugs. The prescription drug plans will not cover drugs that are covered under Medicare Parts A and B. An organization called the U.S. Pharmacopoeia has a set of guidelines that meet CMS’ formulary requirements, and many plans use these guidelines to construct their formularies.

Cost

Unless you qualify for the Low Income Subsidy you will still have to pay part of the costs of your prescription drugs in this program.

Medicare has created guidelines for what it calls a basic plan. Under the basic plan, you have to pay a certain amount of money to be enrolled in a Prescription Drug Plan. This is your premium, which you have to pay every month, even if you do not buy any drugs.

When you do buy prescription drugs you first have to spend a $400 annual deductible. After you’ve spent that $400, the plan will pay for 75% of your drug costs until your total drug cost reaches $3,700.

You then reach a period in your drug coverage known as the "donut hole". In the past, Medicare would not help you pay for your drug costs during this period, unless you qualified for the Low income Subsidy. This gap in coverage is where the term "donut hole" comes from. Today, because of changes to Medicare law as a result of the Affordable Care Act of 2010, people who fall within the donut hole get a discount on the cost of their prescription drugs.

Prescription Drug Discounts for People who Fall into the Donut Hole

  • People on Medicare who fall within the “donut hole” get a discount on their prescription drugs. In 2017, the discount is 60% on brand name prescription drugs and 49% on generics.
  • The full cost of brand-name drugs (rather than the discounted amount) still counts towards the person’s out-of-pocket maximum, the amount at which Medicare starts to cover some prescription drug costs again. With generic drugs, only the discounted amount counts towards the out-of-pocket maximum.
  • This discount will continue to grow until 2020, when the donut hole coverage gap is closed completely. From then on, you will just pay 25% of your drug costs until you reach the catastrophic coverage phase.

Once the total cost of your prescriptions reaches $7,425, you will either pay a copayment for each prescription or 5% of the cost of the drug, whichever is greater.

Note: Companies that sponsor Part D plans might offer a number of different plans. Each company has to offer at least one plan that either meets the above guidelines for a basic plan or works out to costing the same amount of money. Many plans do not structure their cost-sharing as described above.

Help Paying for Part D: Low Income Subsidy

There is help available for people who cannot afford the costs of a Part D Prescription Drug Plan. This help is called the Low Income Subsidy or simply “Extra Help.” There are two levels of the Low Income Subsidy available: a full subsidy and a partial subsidy.

The Full Subsidy

You are eligible for the full subsidy if you are on Medi-Cal without a share of cost or are enrolled in a Medicare Savings Program.

People who aren’t part of these programs, but have yearly countable income less than $16,281 and assets less than $7,390 can also qualify for the full subsidy. For couples, the income limit is $21,924 and the asset limit is $11,090.

With the full subsidy:

  • You will not have to pay any premiums as long as you are enrolled in a benchmark plan.
  • You will not have to pay a deductible before you get help paying for drugs.
  • There will not be any gap in which Medicare won’t help pay for your prescription drugs.
  • Depending on your income, you will pay between $1.20 – $3.30 as a copayment for every generic drug prescription and between $3.70 – $8.25 for every brand name prescription you purchase.

The full subsidy will pay costs for basic plans that have a premium below a certain level. For California in 2017, this level is $36.28. These plans are called benchmark plans. In 2017, there are 6 benchmark plans offered in California.

Companies may also offer plans that have higher costs and offer more comprehensive coverage. If you are eligible for one of the subsidies, but choose to enroll in a plan with costs above the benchmark plan’s costs, you will have to pay the difference. The Low Income Subsidy will not pay for drugs that are not on your plan’s formulary, but you can always request an exception or pursue an appeal. It may be well worth your time to request an exception.

The Partial Subsidy

If you aren’t eligible for the full subsidy but you have less than $18,090 in annual countable income and less than $12,320 in assets, you may be eligible for a partial subsidy. For married couples who are living together, the countable income limit is $24,360 and the asset limit is $24,600. If you apply and qualify for the partial subsidy:

  • You will pay 0%, 25%, 50%, or 75% of the premium to be enrolled in your Prescription Drug Plan. The percentage that you pay depends on your income.
  • You will have to pay a $82 deductible before you get help paying for drugs.
  • You will have to pay 15% of your drug costs after you’ve paid the deductible until you have spent $4,950 on prescription drugs covered by your plan.
  • You will have to pay $1.20 – $3.30 for every generic drug prescription and $3.70 – $8.25 for every brand name prescription you purchase after you’ve spent $4,950 on prescription drugs covered by your plan.

Keep in mind that not all of your income is counted when your Low Income Subsidy eligibility is evaluated. Social Security has a summary of income and assets that don’t count. The income limits are based on the Federal Poverty Level and change each year. If your family size is greater than two, your income limits will be higher.

Applying for the Low Income Subsidy

The following groups of people are automatically signed up for the Low Income Subsidy:

  • People with Medi-Cal without a share of cost
  • People on a Medicare Savings Program
  • People with Medi-Cal with a share of cost that they have met. Meeting your share of cost between January and June makes you eligible for the rest of that calendar year. Meeting your share of cost between July and December makes you eligible for the rest of that calendar year and the following calendar year.

Everyone else has to apply for the subsidy. This includes:

  • People who haven't met their Medi-Cal share of cost and
  • People not on Medi-Cal who might be eligible for the subsidy because they have low income and assets.

These groups apply by filling out the online application, the form that Social Security mailed, or by visiting your local Social Security office.

Choosing a Plan

There are two types of Part D coverage. One is through plans that only offer drug coverage. These are called Prescription Drug Plans (PDP) or stand-alone plans. You have to be enrolled in either Medicare Part A, Part B, or both to enroll in a PDP. There are dozens of PDPs in California, and they are available throughout the state.

The other way to get Part D coverage is through Medicare Advantage plans. These are Medicare plans that are run by private insurance companies. Some of these plans now offer prescription drug coverage as part of their benefit. These are known as Medicare Advantage – Prescription Drug (MA-PD) plans. Be aware that some MA-PDs allow you to have a separate stand-alone plan, while others don’t. Check the details of your plan before enrolling in a stand-alone plan. You have to be eligible for Medicare Part A and enrolled in Part B to be eligible for an MA-PD. There are numerous MA-PD plans in California. The number offered varies by county.

Because of the number of plans offered and the complexity of the rules, it can be difficult to choose the plan that is right for you. There are a number of things to keep in mind when deciding whether to sign up for a Part D plan:

  • If you are eligible for both Medi-Cal and Medicare, you can choose a plan when you are first eligible. If you don’t, you will be automatically assigned one. This plan might not have the drugs you need.
  • If you are not on both Medi-Cal and Medicare and you receive the Low Income Subsidy, you have two months after you become eligible for the Subsidy to sign up for a plan, otherwise you will be automatically enrolled after those two months. This is known as facilitated enrollment.
  • For others, Medicare Part D is voluntary, which means that you don’t have to sign up.
  • You may already have drug coverage through your own private health coverage plan. You may be better off staying on that policy rather than switching to Part D.
  • If you have other coverage that is at least as good the basic coverage offered under Medicare Part D, it’s what is called creditable coverage. If you don’t have creditable coverage and don’t sign up during your initial enrollment period, there is a penalty. In some cases, it is worthwhile to sign up for an inexpensive plan so that you can avoid these penalties.
  • If you have creditable coverage, you can switch to Part D after the initial enrollment period without paying any penalties.
  • Each plan is different. You can see which plan best meets your needs by figuring out what drugs you are currently on. It can be helpful to make a list of the brand name, generic name, dosage amount, dosage schedule, cost, and possible substitutes for each drug you take.
  • One place where you can compare drug plans is on the CMS website’s Prescription Drug Plan Finder.

Signing Up for a Plan and Switching Coverage

Once you choose a plan, you can sign up on the CMS website, by calling 1-800-MEDICARE, or by contacting the plan directly. For those who are not on Medi-Cal, you can sign up in the three months before, the month of, or the three months after you become eligible for Medicare. This is called your initial enrollment period. If you don't have creditable coverage, and sign up after this period, you may have to pay a penalty. You will have to pay an extra 10% of your premiums for every month past your initial enrollment period that you didn’t sign up for Part D. You can switch (or sign up) for plans every October 15 to December 7. This is called the annual election period.

If you are on both Medi-Cal and Medicare, the rules are different, and depend on which Medi-Cal category you’re enrolled in.

  • For those on most types of Medi-Cal, you will be automatically enrolled in a PDP in the month that you become dually eligible. You will be enrolled in a benchmark plan without regard to what medications you are taking. You can, however, switch drug plans at any time, and that switch will become active in the following month.
  • If you are on Medi-Cal with a share of cost, you will be automatically enrolled in the month following the first month you meet your share of cost. You can only switch plans during months when you meet your share of cost. If you lose your Medi-Cal because you don’t meet your share of cost, you have a special three month enrollment period when you can switch plans.
  • If you are participating in a Medicare Savings Program, you will be automatically enrolled, but you will first have a two month window when you can choose your plan. This is known as facilitated enrollment.

There may also be certain situations in which you are entitled to a special enrollment period. You would be allowed to change plans outside of the periods outlined above under such circumstances.

Getting the Drugs You Need

The drug plans can change the drugs that are on their formulary as long as they give 60 days notice. If you and your doctor think that you need a drug that’s been taken off of your formulary, or need a drug that isn’t currently on your formulary, you have a few options. You can ask the plan to cover the drug for you. This is called an exception. Your doctor will have to prove to the plan that you need that particular drug. If the plan denies your application for an exception, you can appeal that decision.

  • Your appeal will first be heard by another person within the health plan.
  • If they deny your appeal, you can take it to an Independent Review Entity, which is a person outside of the plan.
  • If they deny your appeal, you can appeal that decision to an Administrative Law Judge.
  • If the Judge denies your appeal, you appeal that decision to the Medicare Appeals Council.
  • If they deny your appeal, you can appeal that decision to Federal Court. Under certain circumstances, you may ask for an expedited (faster) review. The plan you are enrolled in is required to give you details about the appeals process.

Another option is to switch to a plan that has the drug you need on its formulary. If you are on Medi-Cal and Medicare or on a Medicare Savings Program, you are allowed to change plans every month. If you are not on Medi-Cal and Medicare, you can usually only switch drug plans from October 15 to December 7 of each year.

Even if a drug is on a formulary, you may not be able to use it right away. Drug plans have rules for how you can get drugs so that they can keep costs down. These rules are called utilization controls. Some examples include:

  • Prior Authorization Requirements: The plan has to approve a certain drug before they will pay for it.
  • Tiered drug levels: It may be cheaper to buy certain drugs than others.
  • Rules on dosages and quantities: They may limit how much of a certain drug you can buy.
  • Fail-First Rules: You may have to try a less expensive version of a certain type of drug before trying more expensive options.

Sources

The following links are provided for those who want detailed information on Medicare Part D. For those looking for more general information, please go to DB101’s Medicare Resources page.

The National Health Law Program (NHelp) publishes an excellent Medicare Part D and Dual Eligibles: A Guide for California Advocates. It includes a page that refers to where to find the laws that govern Part D.

California Health Advocates is a website that gives detailed information for both consumers and advocates on all aspects of the Medicare program. Their Part D Low Income Subsidy fact sheet gives detailed information on eligibility and cost sharing.