How Much Does Medicare Part D Cost?
You will pay a monthly premium for coverage
Medicare comes in three parts — Part A, Part B, and Part D. Part A is free and covers hospital, hospice, nursing home, and home health care. Part B costs most people $134 per month and covers doctor visits and the types of medical services you would receive at those visits. Part D covers prescription drug coverage.
Don’t Wait Too Long
Unlike Parts A and B, Part D prescription drug coverage comes from private insurance companies. Medicare pays a portion of the costs. Just like parts A and B, if you don’t sign up for prescription drug coverage when you’re first eligible you’ll probably pay a late enrollment penalty unless one of two conditions apply:
- You are still working or have qualifying prescription drug coverage from another source.
- You receive extra help from Medicare. Extra help assists low-income recipients pay the costs of their prescription drugs.
Two Paths to Medicare Drug Coverage
Medicare Part D coverage is available through two different paths.
First, you could add Part D coverage to your original Medicare Parts A and B. Medicare has a plan finder that helps you pick the coverage that fits your goals and budget. You can search by zip code, input the prescription drugs you take and your local pharmacy along with some other information and the plan finder will give you Part D coverage options including cost.
Second, you can receive Part D coverage through a Medicare Advantage (Part C) or other Medicare health plan that offers prescription drug coverage as part of the plan.
Although Part C coverage costs more than original Medicare, without a supplement or other coverage like Medigap insurance, original Medicare leaves a lot of coverage gaps that may leave you with medical bills that you’re unable to pay. Most people elect to enroll in Part C coverage to protect against these costly expenses.
Medicare Part D Cost
If you elect to receive Part D coverage as part of original Medicare, you will pay your portion of the monthly premium. This varies depending on the plan you choose but the nationwide average for 2018 is $34 per month.
Like Part B and most other insurance plans, plans generally come with a deductible — the amount you will pay before insurance begins paying a portion of costs. The highest annual deductible allowed by Medicare in 2018 is $405. Many plans come with a much smaller deductive and some don’t have one.
Each plan will also have a copayment and coinsurance amount. A copayment is a fixed amount that you pay for your prescriptions. The copayment on generic drugs might be $5 while brand name drugs on certain tiers might require a $25 copayment. Higher tiers might require a larger copayment.
You might pay a coinsurance amount for drugs in the highest tiers. If the prescription costs $400, you might pay coinsurance of 25 percent making your portion of the bill $100.
Some drugs could require a copayment and coinsurance.
Beware: Because Part D is administered through private insurance companies, each may place certain drugs in different tiers. You might pay higher out of pocket expenses for the same drug in different plans.
The Coverage Gap
Once you have spent $3,750 on covered prescription drugs you enter the coverage gap or donut hold as some people know it. The coverage gap is a temporary limit on what the plan will cover for drugs. If you receive extra help from Medicare you won’t enter a coverage gap but most insurance plans do not cover the gap.
In 2018, Medicare will only pay 35 percent of the price of branded drugs and 56 percent of generic drugs while you’re in the coverage gap. Your out of pocket expenses are what will eventually move you out of the coverage gap and most of what you pay while in the gap will count. Some drug companies have signed an agreement with Medicare to offer discounts on brand-name drugs to people in the coverage gap.
How to Shop for Coverage
Sometimes cheaper is better but in the case of Medicare Part D coverage, it likely is not. The most important thing to check is the plan’s coverage for the drugs you currently take. If a low-cost plan doesn’t cover your drugs, your out of pocket expenses will more than negate the money you saved on the premiums. Look at the benefits and compare to what you would pay out of pocket. Also look at the costs before, during, and after the donut hole. Once you calculate how much you would pay vs. what the plan would pay, then look at the premium. Sometimes a higher premium will cost you less because your out of pocket expenses are lower.