What is a Medicare Prescription Drug Plan (Part D) ?
A Medicare Prescription Drug Plan (Part D) is a prescription drug plan offered by private insurance companies that follow specific rules and guidelines set by Medicare in order to offer their plan(s). They must meet the stringent requirements set by Medicare to offer their particular plan or line of drug plans they’re offering each calendar year.
All plans must cover a range of prescriptions in each therapeutic category. They must cover at least two in each category, but usually offer more. The therapeutic categories are set by Medicare and each drug plan offered that year then offers to cover a certain number of those drugs and classifies them into levels or “tiers”. Each plan will then list its covered drugs in its formulary to reflect what is covered in that specific plan. This can be reviewed under the formulary list of each plan or searched by using Medicare.gov’s plan finder to organize your prescriptions and shop them among all the plans available that year to find you the best combination of premium + copays.
Drug plans do not have to offer all drugs in a therapeutic category. This is why you’ll find certain drugs covered by some plans and not others– usually brand name drugs. The most useful tool to review Medicare Prescription Drug Plans is Medicare.gov’s Plan Finder. We use this to give our clients an objective review of what is plans are available to them as well as other resources for shopping drug plans. We can help you navigate this search tool if you would like someone to direct you through all of Medicare.gov’s “noise” and straight to the drug plan tool. Let us know!
Part D Prescription Drug Plans can be obtained the following ways:
Stand-alone Prescription Drug Plan
This plan is called “stand-alone” because it a prescription drug plan a Medicare beneficiary can enroll in specifically for drug coverage that is not connected any other other product. It’s the most common type of Medicare Prescription Drug Plan Medicare beneficiaries enroll in for their Medicare drug coverage. This Part D plan is most commonly added to a Medicare beneficiaries Original Medicare (Part A & B) along with a Medicare Supplement Plan.
Again, a stand-alone Medicare Prescription Drug Plan is the type of drug plan that is most commonly used in conjunction with a Medicare Supplement Plan. Although they work independently of each other and must be enrolled in separately with each insurance carrier, they are part of a Medicare beneficiary having comprehensive medical and prescription drug coverage. This is why I refer to this plan design as “customizable”. You are able to pick and choose the specific drug plan to add to your Medicare Supplement plan. For example:
Medicare + Medicare Supplement + stand-alone Medicare Prescription Drug Plan.
For more information on how to compare Medicare Prescription Drug Plans (Part D).
The best practices and process of changing a Medicare Prescription Drug Plan.
Shop & Compare Part D Plans
22 CA Rx Plans in 2024
Prescription Drug Plan with a Medicare Advantage Plan
Prescription Drug Plan with a Medicare Advantage Plan – This particular Prescription Drug Plan is included with a Medicare Advantage Plan and cannot be selected independently of their Medicare Advantage Plan by the Medicare beneficiary (There are exceptions, but it is rare). These bundled Part D Plans are built into the Medicare health plan and cannot be changed unless the entire Medicare Advantage plan is changed. When you enroll in the Medicare Advantage Plan (sign over your Medicare to that specific Medicare Advantage Plan) the drug plan is packaged, or “bundled” into the Part C Plan. There are exceptions, but most contain a Part D plan, hence the term, MAPD– Medicare Prescription Drug Plan.
One application for the Medicare Advantage Plan will include the Part D plan enrollment with the insurance company’s plan. There are not separate enrollments like the stand-alone Part D with a Medicare Supplement Plan. In fact, if you were to try to add a separate stand-alone Prescription Drug Plan to a Medicare Advantage Plan that included a Prescription Drug Plan, it would cancel the entire Medicare Advantage Plan. So, if you go this route, just remember you get the drug plan that comes with it and do not look to add additional drug coverage.
Signed Medicare over to Part C plan = Medicare Advantage Plan with Prescription Drug Plan included (“bundled”).
View how both types of Medicare Drug Plans fall under each Medicare Plan path below on the Medicare Plan Map.
Mentor One Insight
Not all plans will cover all drugs in each category– this is why it is important to search all the drug plans to find the plan that covers your drugs covers in the lowest cost of combined “tiers” as possible to keep your copays (out-of-pocket costs in the pharmacy) as low as possible.
Technically, shopping individual prescription plans is only possible with the stand-alone Drug Plan model since it’s separate from the Medicare Supplement Plan. You can review each Part D plan included within the Medicare Advantage Plans, however, you are more or less reviewing the coverage in the plan that is offered as a “bundle” as opposed to shopping the plans since they are attached to the medical portion of the plan and are not interchangeable.
Prescription Drug Tiers
Tiers are typically outlined from lowest to highest (ranking them, say 1-4 as an example) which then dictates the cost of that particular drug in that specific plan for that specific year. For example, A drug in lower tier (say, tier 1) is likely to be the cheapest (likely generic) and this will correspond with the tiered copay of that drug for a particular plan. As you climb up the ladder of tiers with most drug plans, you will find that the drugs in the higher tiers will generally be classified as “brand name” or “specialty” drugs. The tier of a certain drug in one specific plan may not be in the same “tiered” category of drug plans that you are comparing (so keep an eye out).
Each drug plan can organize these “tiers” differently and can price them differently. With that said, regardless of the tier, it comes down to what they charge for those tiers- meaning what you’ll pay in the pharmacy, right? All these factors change annually, and therefore, it’s important to review your prescription list each fall during the Annual Enrollment Period (AEP) October 15th- December 7th. You do not need to change each fall, just know, you have the option to change. Understanding the system is the key to navigating Medicare. Mentor One Insurance Solutions is here to help you each year if you choose to work with us as your independent Medicare planning broker.
Prescription Drug Restrictions
Drug plans may also classify drugs with additional labels such as, Prior Authorization, Step Therapy and/or Quantity Limits. Prior Authorization means that the drug needs further authorization or approval from the physician for the drug to be dispensed under the plan. For example, this Prior Authorization tends to happen with brand name drugs that are expensive and/or have certain controls on them for patients (such as opioids, etc). This is typically easy to get around with assistance from your physician’s staff. They encounter this often and know exactly how to handle to procedure with dedicated lines to call to authorize the prescriptions with the insurance company. If you know it could cause an issue with getting your prescription dispensed, (after we checked on your plan during enrollment), let the physician and pharmacist know ahead of time, so you aren’t surprised at the pharmacy counter when they say, “prior authorization is needed” to dispense the drug.
As for Step Therapy, this is generally a situation when there are generic drugs for a particular diagnosis and a brand name drug is prescribed. In this scenario, the drug plan may want the patient to start at a “lower step” such as the tier 1 generic in that therapeutic category before moving up to the brand name drug. However, if the physician justifies cause for the brand name over the generic (possible drug interactions/already tried the generic) then the Step Therapy restriction can usually be passed over for you to receive the drug that has been prescribed. It’s typically easy to do, it’s just one more Medicare hoop to jump through. Some companies and their drug plans tend to have more restrictions than others (it’s different each year and subject to change each year).
The last common restriction is Quantity Limits, however, this is usually not an issue since the prescribed amount of the medication sent by your physician typically fits into the Quantity Limit stated. If the drug plan finder days there is a quantity limit, this just means there is one on the drug, not that your medication that was input into the system is “over the limit.” For example, the prescription may say 50mg twice a day for a total of 60 per month. The quantity limits on the plan finder may indicate the limit is 60, so this has no effect on getting your medication covered or dispensed as usual.
Also, a certain plan may not have have these “hoops” to jump through with your list of drugs where as another plan will in the same price range (premium + copay) does have restrictions or these potential “hoops” to jump through. In this scenario, we can then select the drug plan with the least restrictions- prior authorization, quantity limits, and/or step therapy. Go with the lowest cost and least restrictive plan to use for the year.
How do you know if you have a prior authorization or step therapy on a drug? Well, we can see this when we shop your prescription list to find the plan that has the least restrictions (it will note these on the output generated in the plan finder). This will allow you to have a smoother transition to the new year’s plan when knowing what to expect. Contact us to review your list and explain these restrictions if you would like assistance shopping plans and enrolling into a Part D plan.
Note: Most of these strategies for finding the best drug plan can only be applied to stand-alone Medicare Prescription Drug Plans. If you go with a Medicare Advantage Plan that includes these restrictions, you wont be able to change the drug plan. However, there are tools your physician can use to bypass the same step therapy and prior authorization drug restrictions in the Part D drug plan included in your Medicare Advantage Plan if they need to do so.
Medicare Prescription Drug Premiums
Monthly premiums vary based on which plan you choose to enroll in. Stand-alone Prescription Drug Plan premiums range from ($4.50-$100+ in 2023 in California). The premium is the cost you will pay monthly for the insurance product to cover you for drugs you currently take or may end up being prescribed that year. You then need to look at the copays to figure out what you’ll be paying in the pharmacy or mail order service for the drugs you are prescribed. This will then give us an estimate of your total out of pocket for drug costs for the year (premium + copays). If you happen to not take any prescriptions, but want a Part D plan to be covered and avoid the Part D late enrollment penalty, you’ll likely want to go with the lowest premium plan. You can always upgrade your plan and/or shop plans every fall during AEP from October 15th -December 7th. This is the ideal time for most of our clients to change Medicare Prescription Drug plans, if needed.
Of course, we can only predict costs based on what you are currently taking, so I recommend going with the best plan for what you currently know at the time of enrollment. If other drugs are prescribed during the year, you will have see if and how they are covered at that time. Remember, Part D plans cover a certain number of drugs in each therapeutic category, so you will have a drug that will be available to treat your diagnosis. If you want to get better coverage the following year, shop plans during AEP to upgrade to the plan that does.
If you find that your drug is not covered and the physician wants you to take that specific drug, you can request for a formulary exception that will go through a review, and many times this will be approved for the plan to cover that drug on your plan for that year. However, you will likely not know what tier they are going to categorize that drug at (aka your copayment) until it has been approved. Regardless, it is comforting to know you have some options to try to get it covered if it’s not on your plans formulary that year. We can make sure to get a plan that covers that drug the following year during AEP at lower tier/copay.
Mentor One Insight
Now that we have outlined the costs associated with Medicare Prescription Drug Plans (premiums + copays) and have reviewed some of the finer details of how they function, lets review a few more topics on Part D Medicare Prescription Drug Plans to give you more insight before enrolling in your plan.
Enrolling in a Prescription Drug Plan (Part D)
Part D Medicare prescription plan enrollment is similar to Medicare Supplement Plans as in it is an application you will fill out with that particular insurance carrier’s product. This may be an online form we email you or something we do for you over the phone and get signatures through the mail. You have options. We will want to be sure that we enroll you before you transition from your prior health coverage so we can avoid a lapse in coverage and avoid the Part D late enrollment penalty –see details below.
To do so, be sure to enroll in a Part D Medicare Prescription Drug plan within 63 days of leaving credible coverage with your individual health plan or employer group plan if using an SEP enrollment. I recommend enrolling in a Part D Plan when you enroll into a Medicare Supplement Plan. This ensures you get both plan enrollments completed and have both plan’s coverage begin on the 1st of the month along with your Original Medicare Part A & B.
Assuming you’ve just enrolled with us, you should receive plan material from the insurance company’s Part D plan within approx. 7-10 days with hard copies of your plan information as well as formulary information, summary of benefits, etc. You should also receive your Part D Medicare Prescription Drug plan card as well.
Let’s count your insurance cards. If you chose to keep Original Medicare A & B active, add a Medicare Supplement Plan of your choice, and a Part D Medicare Prescription Drug Plan for your complete Medicare health plan, you would have the 3 cards needed for any of your medical and prescription needs for the year. If you chose to go with the Medicare Advantage route, you would only be using 1 card as the Medicare is signed over to that plan and the Part D is built into the “bundled plan”.
Does my Drug Plan link to my Medicare Supplement Plan?
Should I have the same company for both my Medicare Supplement and Part D Medicare prescription drug plans? It’s possible. If so, is there any benefit to doing so? No, it’s typical to have a different insurance company with your Part D Medicare Prescription Drug Plan and your Medicare Supplement Plan. Can you? Yes, however, it’s likely just a coincidence since there are 22 Drug plans in 2024. Your drug plan will likely change every few years, if not every year, if your goal is to have the lowest out of pocket costs for your medications each year.
Also, you are likely to change your Medicare Supplement Plan insurance company every 2-3 years (not the plan letter/level of coverage) to keep your premiums low using the California Birthday Rule– you may simply change the insurance carrier with lower monthly premiums. There is no coordination of the two plans if you’re enrolled with the same carrier. There are also no discounts for going with the same carrier. If you heard about a discount, it’s likely a spousal discount that applies to you and your spouse going with the same Medicare Supplement Plan. We can help you set that up if your spouse already has a plan with a particular Medicare Supplement Plan carrier. Just let us know and we can coordinate your plans for the household discount.
Standard vs. Preferred Pharmacy networks.
As for implementing your Part D plan with your preferred pharmacy? Well, if we shopped the drug plans well, we should have included your preferred pharmacy when we did the comparison. Let us know when we review the plans with you. This ensures that the pricing is fairly accurate for your estimated annual drug costs. The Part D plans are not assigned to the preferred pharmacy at enrollment. Rather, it is just an estimate if you used pharmacy “x,y, or z”. When shopping drug plans, each drug plan comparison will indicate which pharmacy is preferred or standard on the print out. You’ll know which is which before enrolling in the plan.
Many times mail order is also a preferred method of receiving your prescriptions for many drug plans. To be clear, you don’t actually choose a pharmacy when you enroll. You are able to use whichever pharmacy you want (with some limitations to small specialized pharmacies with certain plans).
Again, the choice is always yours, we are just here to present you with all the information so you can decide what is best for you and help you enroll. We can iron out the details of comparing pharmacies when we talk during our appointment to get you as accurate of an estimate as we can for your annual drug costs.
Note: If your Part D Prescription Plan is obtained through coverage within a Medicare Advantage Plan, you will have the same insurance carrier drug coverage as the Medicare Advantage plan (remember, “bundled”). It will start the same day as the Medicare Advantage Plan starts and it will have its own preferred/standard pharmacies depending on the insurance company’s preferred network of pharmacies. You are likely to be able to use any pharmacy you want, but again, it will be cheaper to use the Medicare Advantage Plans preferred network of pharmacies just as it is with the stand-alone Prescription Drug Plans.
Part D Late Enrollment Penalty
What is the Part D Late Enrollment Penalty? This is a penalty that applies to anyone without creditable coverage for 63 days and then enrolls in a Part D prescription drug plan. The penalty is 1% of the national average premium for that specific year and is applied for each 12 month period you are without the Part D coverage (2024 average is $34.70). The one year penalty is then added to the premium of your Part D Medicare Prescription Drug Plan every month thereafter for life. This is not something you can erase once you have the penalty.
You can avoid this penalty by asking your employer or previous insurer for a letter of “creditable drug coverage”. You will not need this letter if you are enrolling for coverage to begin on the 1st of the month of your 65th birthday (turning 65 that month). If you did have a lapse of 63 days or longer, and the penalty does apply, it’s best to enroll as soon as you can to avoid the penalty increasing year after year. Again, you can not erase the penalty.
Note: This Part D penalty applies to both stand-alone Part D and Medicare Advantage Prescription Drug Plans. They are both considered a Part D plan whether they are “customized” or “bundled”.
Mentor One Insight
For example, let’s say the national average drug plan cost for the year is $40 to make the numbers easy. So 1% would be a $.40 penalty for each month of that year you don’t have coverage. This penalty would then be applied for each 12 month period, or $4.80 each month every year thereafter you’re enrolled in the Part D plan. If you were to have this penalty and enroll in a $30 drug plan the following year, you would be billed $34.80 for the plan the following year (premium = $30 + penalty = $4.80). The penalty is small, but does build year over year. If you enroll at 65 or later with creditable drug coverage there is no reason to be concerned about this penalty.
If you worked past 65 and are using a Special Election Period (SEP) to enroll into Medicare and your Medicare insurance products, you will likely receive a letter saying you are subject to the penalty unless you provide proof of creditable coverage from the employer group plan that shows you had coverage from 65 until the time of enrollment– the date of your transition to Medicare.
Proof of coverage is simple to obtain. Ask your benefits administrator of your last employer for the letter. They are legally obligated to provide you with this poof of coverage. All you need to do is submit the letter of creditable prescription drug coverage to the Part D application to the insurance company you enrolled with (email or faxed) and you should never need to worry about it again. If it does come up, contact us, and we will work with you to get the proper proof to eliminate any potential penalty “they say” you are subject to. It’s an easy process to update. If it happens, let us know so we can help you correct the issue.
