Medicare Part D
(Prescription Drugs Plans)

What is Medicare Part D?

Medicare Part D, also known as the prescription drug plan (PDP), was introduced in 2006 as a vital component of the Medicare program. Its primary objective is to provide coverage for retail or mail-order prescription medications. Part D plans are overseen by the Centers for Medicare & Medicaid Services (CMS), a federal agency responsible for administering Medicare and Medicaid programs, but they are offered by private insurance companies.

Enrollment in Medicare Part D is restricted to specific enrollment periods. These enrollment periods include the Initial Enrollment Period (IEP), which is typically when an individual first becomes eligible for Medicare, the Annual Enrollment Period (AEP), which takes place from October 15th to December 7th each year, and Special Enrollment Periods (SEPs) that may be triggered by certain qualifying events, such as losing other prescription drug coverage. It's important to be aware of these enrollment periods and sign up for Part D in a timely manner. Failure to enroll in Part D when eligible can result in late enrollment penalties imposed by the federal government.

Obtaining prescription drug coverage through Medicare Part D is highly advised, as beneficiaries who don't enroll during their initial enrollment period or when they first become eligible may face a late enrollment penalty. This penalty is calculated based on the number of months the individual went without Part D coverage, and it can be a permanent addition to the monthly premium for as long as they have Part D coverage. Therefore, it is crucial to consider enrolling in a Part D plan as soon as you become eligible to avoid incurring these penalties.

Medicare Part D prescription drug plans are offered by private insurance companies that are approved by Medicare. These companies develop their own plans, establish formularies (lists of covered drugs), and set premiums, copayments, and other cost-sharing arrangements. It's important to compare the different Part D plans available in your area to find one that best meets your specific medication needs and budget.

Overall, Medicare Part D plays a critical role in providing prescription drug coverage to Medicare beneficiaries, helping them access the medications they need to manage their health conditions. By enrolling in Part D during the appropriate enrollment periods, individuals can avoid late enrollment penalties and gain access to affordable prescription medications through private insurance companies approved by Medicare.

How does Medicare
Part D Work?

Part D Prescription Drug Plans provide coverage for retail and mail-order prescription drugs. It's important to note that these plans do not cover medications administered to you at hospitals, doctors' offices, or other healthcare facilities. Medications received during a hospital stay are covered under Medicare Part A, while drugs administered at doctors' offices, such as injections, are covered under Part B.

For Part D plans, collaboration between insurance carriers and CMS is required to determine the specific details of the plan, including the drugs covered, also known as the Drug Formulary list. These plans typically have a structure called Drug Tiers, which outline the cost you will be responsible for paying for different medications. Additionally, Part D plans may have Pharmacy Networks, which means that the insurance carrier has contracted with specific pharmacies to offer you lower costs for your prescriptions.

Drug Formulary Explained!

A formulary refers to a comprehensive list of generic and brand-name prescription drugs covered by your Part D Prescription Drug Plan (PDP). Insurance companies regularly create or update this list to include a wide range of effective medications at affordable costs for beneficiaries. It's important to note that the insurance company will only provide coverage for medications that are included in their formulary.

Based on the cost of medications, insurance carriers categorize prescription drugs into different tiers. Typically, a Part D plan consists of five tiers, which help determine the amount you will need to pay at the pharmacy for each medication.

The table presented below provides a sample of a drug formulary and its associated tiers for Medicare Part D Plan XYZ Rx Express:

Drug Name	Drug Tier	Requirements/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) utilize a formulary list that organizes medications into five distinct categories, known as Drug Tiers. These tiers are determined based on the type and cost of the drugs, and they are as follows:

Tier 1: Generics - This tier includes generic drugs, which are typically the most affordable option. These medications have the same active ingredients as their brand-name counterparts but are available at a lower cost.

Tier 2: Preferred Brand Name Drugs - The second tier consists of preferred brand-name drugs. These medications are selected by the insurance company as preferred options within their formulary, offering a balance between cost and effectiveness.

Tier 3: Non-Preferred Brand Name Drugs - Non-preferred brand-name drugs are placed in the third tier. These medications may have higher costs compared to the preferred brand-name drugs, but they are still covered by the Part D plan.

Tier 4: High-Cost Generics and Specialty Drugs - This tier includes high-cost generics and specialty drugs. High-cost generics are generic medications that may have a higher price tag, while specialty drugs are typically used for complex or chronic conditions and can be quite expensive.

Tier 5: Preferred Specialty Drugs - The final tier comprises preferred specialty drugs. These are specialty medications that are preferred by the insurance company due to their cost-effectiveness and clinical benefits.

The Drug Tiers in the Part D formulary list provide a framework for determining the coverage and cost-sharing requirements for each medication. It's important to review the formulary list of your specific Part D plan to understand how different drugs are categorized and what expenses you may incur for each tier.

Tier	Tier Name	Description
Tier 1 $	Preferred Generic	This tier includes commonly prescribed drugs with lowest cost-share
Tier 2 $	Generic	This 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!

Part D Prescription Drug Plans (PDPs) often establish contracts with retail or mail-order pharmacies, which are referred to as Preferred Pharmacy Networks. These networks enable beneficiaries to access lower cost-sharing options for their medications. Pharmacies outside of the Preferred Pharmacy Network are referred to as non-preferred, standard, or out-of-network pharmacies.

The primary advantage of using a Preferred Pharmacy is that you may have lower copayments and coinsurance for your drugs compared to standard pharmacies.

Typically, Part D members utilize out-of-network pharmacies when they are traveling and there are no Preferred Pharmacies available nearby.

The table provided below offers a sample of drug copayments and coinsurance for different tiers, indicating the costs associated with both Preferred and Standard pharmacies:

Tier	30 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%

Eligibility for Medicare
Part D

To enroll in a Medicare Part D Prescription Drug Plan (PDP), it is necessary to already be enrolled in Medicare Part A and/or Part B. Additionally, you must reside in the service area where the specific Part D plan is being offered. Your zip code plays a crucial role in determining whether the Part D plan is available in your area.

If your yearly income in 2022 was:

File individual tax return	File joint tax return	File married & separate tax return	You pay (in 2024)
$103,000 or less	$206,000 or less	$103,000 or less	Your plan premium
above $103,000 up to $129,000	above $206,000 up to $258,000	not applicable	$12.90 + your plan premium
above $129,000 up to $161,000	above $258,000 up to $322,000	not applicable	$33.30 + your plan premium
above $161,000 up to $193,000	above $322,000 up to $386,000	not applicable	$53.80 + your plan premium
above $193,000 and less than $500,000	above $386,000 and less than $750,000	above $103,000 and less than $397,000	$74.20 + your plan premium
$500,000 or above	$750,000 or above	$397,000 or above	$81.00 + your plan premium

Medicare
Part D Late Enrollment Penalty

The Medicare Part D late enrollment penalty is a fee that can be permanently added to an individual's monthly payment for Part D, which is Medicare's prescription drug coverage. If an individual delays enrolling in Medicare Part D or any other creditable coverage for prescription drugs for a period of 63 days or more after their Initial Enrollment Period, they may be subject to this late enrollment penalty.

Even if an individual later switches to a Medicare plan that includes prescription drug coverage, the Part D late enrollment penalty will still be added to their monthly plan cost as long as they have drug coverage. This means that the penalty continues even if they enroll in a plan with a $0 monthly premium. The amount of the late enrollment penalty varies each year and is calculated by Medicare.

The penalty amount is determined as one percent of the national base beneficiary premium (which is $34.70 for 2024), multiplied by the number of full, uncovered months during which the individual did not have Part D or creditable coverage.

To determine the specific amount of the Part D late enrollment penalty for 2024, you can use the Medicare Part D Late Enrollment Penalty Calculator. This calculator will help you estimate the penalty that will be added to your Medicare Advantage plan with prescription drug coverage (MAPD) or your stand-alone Prescription Drug Plan (PDP). It's important to note that you will not incur the Part D late enrollment penalty if you enroll in a plan that does not provide prescription drug coverage.

2024 Medicare Part D Late Enrollment Penalty Calculator

Your Part D Late Enrollment Penalty (US$):

This additional monthly amount is the dollar figure
that you will be required to pay on top of the premium
for the Medicare Part D Prescription Drug Plan
that you select to enroll in.

How Part D Late Enrollment Penalty is calculated?

Let's use the example of Mr. Adam Johnson to illustrate the calculation of the Part D Late Enrollment Penalty:

Mr. Adam Johnson turned 65 in March 2018 and initially chose not to enroll in a Part D Prescription Drug Plan because he was in good health and didn't require any medication. However, during the Annual Enrollment Period (AEP) in 2022, he decided to enroll in a Part D plan to have drug coverage starting from January 2022. Since Mr. Johnson never enrolled in a Part D plan before, he missed a total of 46 months without Part D prescription drug coverage (10 months in 2018, 12 months in 2019, 12 months in 2020, and 12 months in 2021). The penalty for late enrollment is calculated using the following formula:

Part D Late Enrollment Penalty (rounded to the nearest $0.10) = No. of months missed x 1% x the national base beneficiary premium for Part D

For 2022, the national base beneficiary premium for Part D is $33.57.

Let's calculate Mr. Johnson's Part D Late Enrollment Penalty:

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

Therefore, if Mr. Johnson enrolls in a Part D plan, such as XYZ plan, with a monthly premium of $30 during the 2022 Annual Enrollment Period (AEP), he will have to pay an additional $15.40 per month as the Part D Late Enrollment Penalty for the remainder of his life. It's important to note that this penalty is paid directly to Medicare and not to the insurance carrier.

Medicare
Part D Cost

Medicare Part D Prescription Drug Plans (PDPs) in the state of Michigan can have monthly premiums ranging from $7 to $120 or more. Each insurance carrier designs its plans with its own formulary and sets the monthly premium accordingly. It's important to note that Medicare beneficiaries with higher income may be subject to an additional premium known as the Income-Related Monthly Adjusted Amount (IRMAA).

Enrollment in a Medicare Part D plan is voluntary, but it's crucial to consider the potential consequences of not enrolling. Failure to enroll can result in a Part D Late Enrollment Penalty, which would be added to your monthly premium for the rest of your life.

Choosing the right Medicare Part D Prescription Drug Plan can be a complex task. Opting for the most expensive plan does not guarantee comprehensive coverage for all your drugs, and selecting the plan with the lowest monthly premium may not necessarily be the best choice either.

The Income-Related Monthly Adjustment Amount (IRMAA) applies to individuals with higher income. Depending on your adjusted gross income, you may have to pay a higher monthly premium for your Part D coverage. The Social Security Administration (SSA) establishes six income brackets to determine the IRMAA for you (or you and your spouse).

The determination of whether you owe an IRMAA is based on your reported income to the Internal Revenue Service (IRS). The SSA considers your adjusted gross income and any other tax-exempt income, using your IRS tax return from two years prior to the current year (two years prior to the year in which you are paying the IRMAA).

The table below illustrates the six IRMAA brackets and the corresponding amount you owe for Part D:

Medicare Part D Enrollment and Disenrollment

Enrolling in Medicare
Part D

To participate in, discontinue, or modify Prescription Drug Plans, you must adhere to specific enrollment periods. Each enrollment period has its own set of eligibility criteria regarding the changes you can make to your existing healthcare plan. Seeking advice from a Benefit Advisor from Vision Insurance can provide guidance on when to enroll, discontinue, or change your Prescription Drug Plan. Here are a few enrollment periods that are applicable to Part D Prescription Drug Plans:

Initial Enrollment Period (IEP): This is the initial opportunity for individuals to enroll in a Part D Prescription Drug Plan. It generally occurs when you are first eligible for Medicare, typically when you turn 65 or qualify for Medicare due to a disability.
Annual Enrollment Period (AEP): Also known as the Fall Open Enrollment Period, this period takes place annually from October 15th to December 7th. During this time, Medicare beneficiaries can review and make adjustments to their Part D Prescription Drug Plans for the upcoming year.
Special Enrollment Periods (SEP): These periods are available to individuals who experience specific qualifying events, such as relocating to an area outside their current plan's service region, losing creditable prescription drug coverage, or qualifying for Extra Help. SEPs allow individuals to make changes to their Part D plans outside of the standard enrollment periods.
Medicare Advantage Open Enrollment Period (MA OEP): This period occurs from January 1st to March 31st each year. It allows individuals enrolled in a Medicare Advantage plan to switch to another Medicare Advantage plan or return to Original Medicare with or without a standalone Part D plan.

Please note that the specific enrollment periods and their qualifying criteria may vary. It is recommended to consult with a Benefit Advisor or refer to official Medicare resources for accurate and up-to-date information tailored to your circumstances.

Stage 1

Deductible Stage

At the beginning of the year, you may be responsible for paying a deductible amount before your Part D plan coverage begins. The deductible can vary depending on your specific plan.

Stage 2

Initial Coverage Stage

Once you have met the deductible, you enter the Initial Coverage Stage. During this stage, you pay copayments or co-insurance for each prescription drug based on the specific cost-sharing arrangement of your plan. The amount you pay will depend on the tier or category of the drug in your plan's formulary.

Stage 3

Coverage Gap Stage
(Donut Hole)

If your total drug costs (including what you and the plan have paid) reach a certain threshold, you enter the Coverage Gap Stage or the "Donut Hole." During this stage, you may be responsible for a higher percentage of the drug costs. However, the coverage gap has been gradually closing, and you may receive a discount on brand-name and generic drugs in the coverage gap.

Stage 4

Catastrophic Stage

Once you have spent a certain amount out-of-pocket (True Out-Of-Pocket (Troop)) for covered drugs, you enter the Catastrophic Stage. During this stage, your costs are significantly reduced. You will pay either a small percentage or a small copayment for each drug, whichever is greater, for the remainder of the year.

It's important to note that the specific cost-sharing details, including copays, co-insurance, and thresholds, can vary depending on your Part D plan. It's recommended to review your plan's documents, such as the Summary of Benefits or Evidence of Coverage, to understand the specific cost-sharing structure for your Part D Prescription Drug Plan.

Low Income Subsidy (LIS) or Extra Help

Extra Help, or Low-Income Subsidy (LIS), is a government initiative designed to assist individuals in paying for their Part D prescription drug costs if they meet the eligibility criteria. Any Medicare beneficiaries can apply for Extra Help through the Social Security Administration (SSA) office, either online, by phone, or by visiting a local SSA office. For more information, you can contact the Social Security Administration (SSA) website.

Extra Help is granted to individuals who can provide proof of low income and limited resources. The level of Low-Income Subsidy provided varies depending on the qualification criteria established by the Social Security Administration (SSA).

To qualify for Full Extra Help or Full Low-Income Subsidy, the current annual income threshold must be below 150% of the Federal Poverty Level, based on the size of the household.

Medicare beneficiaries approved for Full Extra Help will receive significant assistance in paying their monthly Part D premium, deductibles, and reduced copays for retail drugs. Their Part D Prescription Drug Plan (PDP) premium will be covered up to the benchmark amount allowed by Medicare. For example, if the benchmark is $30, your Part D premium will be paid up to that limit. Additionally, the Low-Income Subsidy may cover your deductible and reduce copays and coinsurance for your medications.