Part D of Medicare Insurance helps pay for prescription drugs for your health care. Prescription drugs coverage is an insurance policy you buy from private insurance companies. You can buy a standalone separate policy just for drugs, called prescription drugs plan. Alternatively, you can buy Medicare Advantage plan that includes drugs coverage. Medicare has issued guidelines for the type of drugs that must be covered by drug plans and the minimum standards of benefits. Insurance companies design different plans, which conform to or exceed minimum standards set by Part D. These plans vary by cost, and by their formulary, or list of specific drugs covered.
Drug plans have preferred and non-preferred pharmacies to choose from, and the geographical area they are offered. Medicare Advantage plans with prescription drugs coverage have network of pharmacies that go with the plan and set their own pricing structure. Note that within the same network pharmacy, prices will vary. So, shop for the pharmacy store you will hang your hat on for list of medication you are sure to take. As for non-network pharmacies, the retail prices will typically be more; however, you may find discounted prices.
Cost sharing of prescription drugs is designed based on deductible, copayment, coinsurance, and coverage gap, also called ‘donut hole’, when cumulative total of purchase expenses rise about certain levels. Typically, the annual cost share expenses work out as follows for you in a typical Medicare Advantage Plan, which includes prescription drugs coverage:
Deductible:This is what you pay upfront for medications at retail price at the pharmacy before cost share with your Plan kicks in. It depends upon the Plan you purchase. Typically, deductible varies from $250 to $415. Assume deductible of $415 for illustration purpose.
Initial Coverage Limit: (called Donut Hole) After deductible is met, your plan pitches in 75% and you pay 25% of the cost of medicines till the total retail cost of medications you purchase reaches $3,820.Your initial Out-of-Pocket expense: is $415 + 25% of ($3,820 – $415) = $1,266.25.
Out-of-Pocket Threshold: When you go past this expense of $1,266.25, you pay 100% of the costs of medication until your Out-of-Pocket expense reaches $5,100. This is painful on pocket besides medicines you have to take. Some drug companies do come to rescue to discount the cost of medications for you, so that you keep buying their brand of medication.
Catastrophic Coverage: Above ‘Out-of-Pocket’ expenditure of $5,100, you enter into what is euphemistically called as ‘catastrophic coverage’ slot, in which the plan pays 95% of costs, and the enrollee pays 5%.
"We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options."