Medicare Part D
(Prescription Drugs Plans)

Part D is Prescription Drug coverage. Part D offers prescription drug plans from private companies approved by Medicare. Prescription drug coverage is recommended, as beneficiaries who do not sign up for part D will incur a lifetime late enrollment penalty.



Medicare Part D Highlights

How it Works

Medicare Part D, or prescription drug plan (PDP), was created in 2006 Medicare Part D and it is the part of Medicare that provides you with retail or mail-order prescription coverage.

Eligibility

You must be enrolled in Medicare Part A and/or Part B meaning that you can enroll in Part D with being enrolled in both Part A and B.




Benefits

Medicare Part D plans cover your prescription drugs that are purchased from retail or mail-order pharmacy. Part D Prescription Drug Plans usually have a formulary list of covered prescription drug and 5 Tiers Rx classification system.

Premium Cost

Prescription Drug Plans (Part D) has a monthly premium which is set by the insurance carrier.



Enrollment

You can enroll in Part D plans only during specific enrollment periods such as Annual Enrollment Period (AEP) or other enrollment periods under special circumstances.

Cost-Sharing

Prescription Drug Plans (Part D) has cost-share including deductibles and copays you pay at the pharmacy.



How does Medicare Part D Work!

How does Medicare Part D Work?

Medicare Part D, or prescription drug plan (PDP), was created in 2006 Medicare Part D and it is the part of Medicare that provides you with retail or mail-order prescription coverage.

Part D plans are monitored by CMS but sold by private insurance companies. You can only enroll or disenroll in Part during certain enrollment periods. Although enrollment is voluntary, the federal government penalizes those Medicare beneficiaries who do not enroll in Part D.

Part D plans have monthly premiums that range from as low as $7 and as high as $120 per month. Most Part D plans have an annual deductible that you may have to pay before the plan covering the cost of your prescription drugs. After your deductible is met, you will have copays and co-insurance when you get your prescriptions.

Medicare Part D Eligibility

Medicare Part D Eligibility

To enroll in a Medicare Part D Prescription Drug Plan (PDP), you have to be enrolled in either Medicare Part A or B

Anyone who is enrolled in Original Medicare Parts A and/or B is eligible for Medicare Part D Prescription Drug Plan (PDP). The requirements to enroll are really simple and they are as follows:

Medicare Card

Original Medicare Status

You must be enrolled in Medicare Part A and/or B to be able to enroll in Part D.

Service Area

Your Residence

You must live in the service are where the Part D plan is offered. Your zip code is used to determine if the Part D plan is offered in your area.

Enrollment and Disenrollment

Enrollment Period

You can only enroll in or disenroll from Part D Prescription Drug Plan during allowed enrollment period. Refer to the Medicare Part D Enrollment and Disenrollment section later on this page

Medicare Part D Benefits

Medicare Part D Benefits

Part D Prescription Drug Plans offer retail and mail order prescription drug coverage. Part D plan will not cover any medication and drugs give to you at hospitals, doctors offices or other facilities. Medications given at the hospital is covered under Medicare Part A and medications given to you at doctors office such as injections are covered under Part B.

With Part B, insurance carriers and CMS work together to approve Part D plans details in terms of what drugs are covered by the plan, or what is also called Drug Formulary list. Plans have a schedule called Drug Tiers which outline how much you will pay for drugs. In addition, Part D plans insurance carriers may also have pharmacy networks meaning that the insurance carrier may contract with specific pharmacies to provide you with lower cost for your prescription. 

Drug Formulary Explained!

A formulary is a list of generic and brand name prescription drugs covered by your Part D, Prescription Drug Plan (PDP). Insurance companies create or update this list year to include a wide range of effective medication at an affordable cost to you. Keep in mind, the insurance company will only pay for those medications listed in their formulary list.

According to the cost of the medications, insurance carriers divide Rx medications into categories called tiers. Usually, there are 5 tiers in Part D plan that help you figure out what you will pay at the pharmacy.

The table below shows a sample of drug formulary and their tiers for Medicare Part D Plan XYX Rx Express:

Drug NameDrug TierRequirements/Limitations
Atorvastatin oral tablet 10 mg,
20 mg, 40 mg, 80mg		Tier 1
Hydrocodone-Ibuprofen oral
tablet 10-200mg,5-200mg,
7.5-200mg		Tier 2
Quantity Limit (150 per 30 days),
Opioid Drug
Lantus Solostar U-100
Subcutaneous Insulin Pen
100 Unit/ml (3 ml)		Tier 3
Esomeprazole Magnesium oral
capsule,delayed release(dr/ec)
20 mg, 40 mg		Tier 4
Quantity Limit (30 per 30 days)
AbilIfy Maintena Intramuscular
Suspension, Extended Release
Recon 300mg, 400mg		Tier 5
Prior Authorization

Drug Tiers Explained!

Part D Prescription Drug Plans (PDPs) formulary list divides medications into five categories from Generics to Specialty Drugs. These categories are called Drug Tiers. Drugs are placed in tiers based on the type and the cost of drug as shown below:

TierTier NameDescription
Tier 1
$		Preferred
Generic		This tier includes commonly prescribed drugs
with lowest cost-share
Tier 2
$		GenericThis tier includes generic drugs that have
higher cost than Tier 1 Preferred Generic.
Some brand-name drugs may also be in this tier
Tier 3
$$		Preferred
Brand		This tier mostly includes brand-name drugs
but it may also include high cost generic drugs
Tier 4
$$		Non Preferred
Brand		This tier includes brand-name or generic
drugs that have alternative options
in one of the lower cost-share tiers (Tiers 1-3)
Tier 5
$$$		Specialty
Drugs		This tier includes those unique specialty drugs
and usually are very expensive

Pharmacy Networks Explained!

Usually Part D Prescription Drug Plans (PDPs) insurance carriers have contracts with retail or mail-order pharmacies that could offer lower cost-share for drugs. These retail or mail-order-pharmacies called Preferred Pharmacy Network. Pharmacies that are not in the Preferred Network, are called non-preferred, standard or out-of-network pharmacies.

The biggest advantage of using Preferred pharmacy, you may pay lower copays and co-insurance for drugs in comparison to standard pharmacies.

Typically, Part D members use out-of-network pharmacy when they are travelling and there is no Preferred pharmacy within reach.

The table below shows a sample of drug copays and co-insurance for different tiers and with Preferred
and Standard pharmacies.

Tier30 day
Preferred
Pharmacy		90 day
Preferred
Pharmacy		30 day
Standard
Pharmacy		90 day
Standard
Pharmacy
Tier 1
Preferred Generic		$0$0$10$30
Tier 2
Generic		$12$36$25$75
Tier 3
Preferred Brand		$35$105$42$126
Tier 4
Non-Preferred Brand		48%48%50%50%
Tier 5
Specialty Drugs		33%33%33%33%

Medicare Part D Premium Cost

Medicare Part D Premium Cost

Medicare Part D Prescription Drug Plans (PDPs) have premiums that could range from $7 and $100+ per month in the state of Michigan. Each insurance carrier design their plans with their own formularies and therefore, they also
determine the monthly premium for their Part D plans. Medicare beneficiaries with higher income may have to pay higher premium for Part D. This is called the Income Monthly Adjusted Amount or IRMAA.

Enrollment in Medicare Part D plan is voluntary, yet keep in mind that if you don't enroll, you will incur a Part D Late Enrollment Penalty that you have to pay on top of your Part D plan monthly premium for the rest of your life.

Selecting the right Medicare Part D Prescription Drug Plan can be a intricate task. Selecting he most expensive plan does not insure that it covers all your drugs. Also, selecting the one with the lowest monthly premium may not be the right choice as well.

some people with higher income may have to pay higher premium for Part D. This is called the Income Monthly Adjusted Amount or IRMAA.

Per the Income-Related Monthly Adjustment Amount (IRMAA), if your adjusted gross income is above a certain level, you may have to pay higher monthly premium for your Part D. There are six different income brackets set by the Social Security Administration (SSA)
to determine your (or you and your spouse’s) IRMAA.

The SSA determines if you owe an IRMAA based on your reported income to the Internal Revenue Service (IRS). They use your IRS tax return for two years prior (two years before the year in which you are paying IRMAA). The SSA looks at your adjusted gross income in addition to any other forms of tax-exempt income.

The table below lists the 6 brackets for IRMAA and how much you owe for Part D: 

Individual Income in
Year 2021		Joint Income in
Year 2021		2023 Part D
Monthly Premium
$97,000 or less$194,000 or less$0 + Your Premium
> $97,001 – $123,000> $194,001 – $246,000$12.20 + Plan Premium
> $123,000 – $153,000> $246,001 – $306,000$31.50 + Plan Premium
> $153,001 – $183,000> $306,001 – $366,000 $50.70 + Plan Premium
> $183,001 – $500,000> $366,001 – $750,000 $70.00 + Plan Premium
Greater than $500,000Greater than $750,000$76.40 + Plan Premium

Medicare Part D Enrollment and Disenrollment

Medicare Part D Enrollment and Disenrollment

To enroll in, disenroll from, or to change Part D Prescription Drug plan you must do so during certain periods. Each period has its own limitation on what changes you can make to your plan. Below are the enrollment periods that applies to Part D Prescription Drug Plans (PDP):

Initial Enrollment Period (IEP)

You can enroll in a Part D Prescription Drug Plan (PDP) when you turn 65 and first become eligible for Medicare Part B and/or
Part B



Read More >

Annual Enrollment Period (AEP)

You can enroll in new Part D Prescription Drug Plan or change Part D Prescription Drug Plan





Read More >

Open Enrollment Period (OEP)

This period is only for those who are enrolled in a Medicare Advantage. You can change your Medicare Advantage or you can disenroll and go back to Original Medicare and then enroll in Part D Prescription Drug Plan

Read More >

Special Enrollment Period (SEP)

Medicare Special Enrollment Period (SEP) is period that is triggered by certain circumstances allowing you the chance to make changes to your Prescription Drug Plan


Read More >
Medicare Part D Cost-Sharing

Medicare Part D
Cost-Sharing

Medicare Part D Prescription Drug Plans (PDPs) have an intricate and often confusing cost-sharing structure. There are 4 stages of the Part D cost-sharing cycle, Deductible Stage, Initial Coverage Stage, Coverage Gap Stage (aka, "Donut Hole"), and Catastrophic Stage. The cycle starts from the first of January 2023 and ends on the thirty first of December 2023. Copays and co-insurance for any one drug may change from one Stage to another. The below diagram shows the 4 stages of Part D Prescription Drugs Coverage.

Part D Donut Hole

Stage 1

Deductible Stage

First, is the deductible stage. CMS has set the annual Part D drug deductible to $505 for 2022. Most Medicare part D plans have a deductible, or a certain amount of money before the plan begin to pay. In this Deductible Stage, you will pay 100% of the drug's retail cost until you reach your deductible. 

Note: Some plans may exclude Tier 1, Tier 2 or both from the Deductible Stage which means that you transition to the Initial Coverage Stage immediately when the year begins.

Stage 2

Initial Coverage Stage

Once you’ve met your deductible, you transition into the Initial Coverage Stage. In this stage, your Medicare Part D plan will begin to cover and pay for your drugs. You will start paying copays (which is a set dollar amount for drugs) or coinsurance (which is a percentage of the cost for your drug).

For 2022, you transition from the Initial Coverage Stage to the Coverage Gap Stage (Donut Hole) when your True Out-Of-Pocket (TrOOP) for your drugs reach $4,660.


Stage 3

Coverage Gap Stage

Once you leave the Intial Coverage Stage, you will enter the Coverage Gap Stage, also known as the "Donut Hole". During this stage you’re responsible for 25% of your drug costs. In this stage, the drug manufacturer pays 70% of the drug cost and your plan pays 5% toward the cost of your drugs.

In 2023, you transition from the Coverage Gap Stage "Donut Hole" to the Catastrophic Stage when you and the plan paid a total of $7,400.


Stage 4

Catastrophic Stage

Once you leave the dreaded Donut Hole, you will enter the Catastrophic Stage. People who spend lots of money for high cost drugs, the odds to reach this stage are really high. In this stage you drug out-of-pocket cost will dramatically decrease. In 2023, you will pay either 5% of the drug retail cost, or $4.15 for generic drugs and $10.35 for brand-name drugs which ever is greater.  The Catastrophic Stage will last until the end of the year when the Amount Resets.




Frequently Asked Questions (FAQs)

Well, its best to answer this question by an example!

Mr. Adam Johnson turned 65 in March 2018 and he enrolled in both Parts A and B on the month he turned 65. Adam decided not to enroll in Part D Prescription Drug Coverage because he was very health and did not take any drug. His agent did not advise him to enroll and did not explain the penalty for not enrolling! During 2022 AEP, Adam decide to enroll so that he can
have drug coverage starting January 2022. His agent told him that he will have to pay a Part D late enrollment penalty because he had no drug coverage for sometimes.

Adam missed 46 months of not having Part D prescription coverage (10 months in 2018, 12 months in 2019, 12 months in 2020 and 12 months in 2021.)

The penalty is calculated using the following formula:

Part D Late Enrollment Penalty (rounded to the nearest $0.10) =
No. of months missed * 1% * the national base beneficiary premium for Part D ($33.57 for 2022 and it is decided by Medicare each year)

Part D Late Enrollment Penalty = 46 * 0.01 * $33.57 = $15.40

So, if Adam enrolls in XYZ plan with a premium of $30 per month during the 2022 Annual Enrollment Period (AEP), he will have to pay an additional $15.40 per month for Part D Late Enrollment Penalty for the rest of his life. Note that this Part D Late Enrollment Penalty is not paid the insurance carrier, it is paid to Medicare.

Well, here is another question that is best to answer by an example!

Alexandra Johnson is Type 2 Diabetic and takes Toujeo®. She needs on carton (2 prefilled 3ml pens of 300 units/ml) every month. Alexandra is enrolled in XYZ Prescription Drug Plan. Toujeo® is a Tier 3 drug, her deductible is $480 and her copay after the deductible is $45 for 30 day supply. The retail cost of Toujeo® is $630 for one carton.

When Alexandra gets her first Rx refill in January, she is in the Deductible Stage and she will have to pay her $480 deductible.

In February, Alexandra is transitioned to the Initial Coverage Stage meaning that she will pay a copay of $45 and the insurance company will pay the difference between the retail cost and her copay which is $630-$45=$585. Alexandra will continue to pay like she did in February until June 2022 or so until her total Out Of Pocket (OOP) and what the insurance paid for her drugs reach $4,430. Thereafter, Alexandra will transition to the Coverage Gap Stage (Donut Hole) and then she pays 25% of the retail cost until $7,050 is paid by her and the insurance company combined. Alexandra then will transition to the Catastrophic Stage and start paying the greater of 5% or $9.20 per month.

Extra Help or also know as Low-Income Subsidy (LIS) is program provided by the Federal Government to offer help paying for Part D drug cost for those who qualify. Any Medicare beneficiaries can apply for Extra Help by contacting the Social Security Administration (SSA) office. You can either apply online, phone, or visit your local Social Security Office. Visit Social Security Administration (SSA) website for more details.

Extra Help is awarded to those who provide proof of low-income and limited resources. There are different levels of Low Income Subsidy depending on the qualification criteria set by Social Security Administration (SSA).

The current annual income threshold requirement shall fall below 150% of the of the Federal Poverty Level based on the household size to qualify with Full Extra Help or Full Low Income Subsidy.

Medicare beneficiaries who are approved for Full Extra Help, will receive tremendous help paying for their monthly Part D premium, deductibles, and also lower copays for retail drugs. They will have their Part D Prescription Drug Plan (PDP) premium paid for up to the benchmark allowed by Medicare. Example of that is if the Benchmark is $30 then your Part D premium will be paid up to the benchmark limit. In addition to the assistance of paying your Part D premium, LIS may pay your deductible, reduced copays and coinsurance for your drugs.

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