Does Medicare cover prescription drugs?
You might be surprised to learn that Original Medicare doesn’t
cover most prescriptions. Original Medicare provides coverage
for services at hospitals (Medicare Part A) and the doctor’s
office (Medicare Part B). Notably missing is coverage for most
prescription drugs. That’s where Part D comes in.
Part D plans help cover some, but not all,
prescription drug costs. These plans are provided by private
companies (primarily insurance providers) and are approved by
the federal government.
Medicare Part D enrollment periods
Part D IEP
The Initial Enrollment Period (IEP) for Part D is usually the
same period as the Initial Enrollment Period for Medicare Part
B. The IEP for Part D is typically the seven-month window
starting three months before you're eligible for Medicare,
typically three months before your 65th birthday month. During
this time you can sign up for a Medicare prescription drug plan
that suits your needs.
Medicare's Annual Election Period Runs from October 15 through
December 7 annually and, among other things, allows Medicare
beneficiaries to join, switch or drop a Medicare Part D plan.
Each September, people with a Medicare Prescription Drug Plan
will receive a document from their plan, called the "Annual
Notice of Change", which details the changes it will make to
your prescription coverage for the following year. This gives
you the opportunity to use the Annual Election Period (Oct. 15
to Dec. 7) to review your current coverage and switch to a
different Part D plan if you want to. You can join or switch to
a Medicare Advantage Plan with prescription drug coverage or
switch to Original Medicare, enroll in and purchase Medicare
Supplement Insurance and/or a stand-alone prescription drug
plan. This is an important time to review your options and
choose the Part D Plan that is right for you.
The late enrollment penalty
One of the most important things to know about Part D
enrollment is the Part D late enrollment penalty. If you don't
join a Medicare drug plan when you're first eligible (or have
other creditable prescription drug coverage or receive Extra
Help) you'll have to pay a Part D late enrollment penalty. The
penalty amount is currently 1% of the national base beneficiary
premium multiplied by the number of full, uncovered months that
you were eligible but didn’t join a Part D plan.
What are formularies?
The cost of prescription drugs on a Part D plan are identified
on the plan’s "drug formulary," or a list of prescription drugs,
including brand name and generic, that help you identify which
prescriptions are covered and at what costs, which may change
Formularies typically group drugs into
different tiers according to cost. The tier that your medication
is in determines your portion of the drug cost.
Overview of drug tiers:
Tier 1 typically includes preferred cost-sharing generic
Tier 2 typically includes non-preferred cost-sharing generic
Tier 3 typically includes preferred cost-sharing brand-name
Tier 4 typically includes non-preferred cost-sharing
- Tier 5 includes specialty medications and biosimilars.
Brand name vs. generic
Medicare Part D plans cover both brand name and generic drugs,
but generic alternatives may help you save substantially, and
are typically considered just as effective as brand name drugs.
Generic drugs must contain the same active ingredient as the
brand-name version and must also meet the same quality,
strength, purity, and stability standards.
How does Part D work with Medicare Supplement Insurance?
Having a Medicare Supplement Insurance Plan in addition to
Original Medicare helps pay some of the costs of certain covered
services and supplies that Original Medicare does not. However,
Medicare Supplement Insurance plans can no longer be sold with
prescription drug coverage. Accordingly, to have prescription
drug coverage with Original Medicare, you will need to enroll in
a stand-alone Part D plan, regardless of whether you have
Medicare Supplement Insurance.