Medicare Part D Coverage


Prescription Drug Coverage with Medicare Part D

If you are concerned about the cost of prescription drugs, you are not alone. Many people on Medicare, or who are about to become eligible for Medicare, worry about the bite prescription drug costs will take from their budget.

There are two ways for most Medicare recipients to get prescription drug coverage: standalone Medicare Part D plans or a Medicare Advantage plans. Veterans may obtain prescription drug coverage through the Veterans Administration.

Since 2019, 48.7 million of the nation’s 62.2 million Medicare enrollees use Part D plans to make prescription medications more affordable. Medicare Part D coverage can help you keep medication costs under control. Our agents can help you choose the right plan for your needs.

Standard Part D Plans: What Is and Is not Covered

Part D standalone plans offer coverage for the most commonly prescribed drugs among Medicare patients, plus many other brand-name and generic drugs. However, Part D does NOT cover the following: 
  • Vaccines
  • Prescription vitamins & minerals
  • Over-the-counter medications
  • Drugs treating hair loss or cosmetic problems
  • Drugs treating erectile dysfunction

Part D plans do not cover every prescription drug. When comparing plans, you can see exactly which drugs are covered and which are not. 

Know Your Medicare Part D Formularies

A drug formulary is a list of generic and brand-name drugs that a particular insurance plan covers. Insurers develop these lists with the goal of helping people obtain the least costly medicine that is effective for their illness.

If you are interested in Part D coverage, you should read through the formularies of plans you are considering to ensure the drugs you take are covered. Formularies may change from year to year, so it’s important that you learn if certain drugs will be added to or deleted from their plan’s formulary each year.

Our agents are experts in Medicare coverage and familiar with how formularies work. We’ll help you navigate the plan options available to you and choose the right Part D coverage. 
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Are You Required to Get Part D Coverage?

Medicare recipients do not have to enroll in Part D coverage. People who don’t take medications may choose to skip signing up when they qualify for Medicare. However, most seniors will eventually need medications, so choosing Part D coverage is smart in the long term.

You should strongly consider enrolling in Part D coverage if:
  • You take medications for a chronic condition
  • You use insulin to control diabetes
  • Your family history indicates healthcare problems in old age
  • You currently rely on prescription drug coverage through your work-based insurance

How Your Part D Coverage Works

There are four “coverage stages” in Part D plans:
  • Deductible Stage: This stage refers to the amount you pay out-of-pocket for your prescriptions until your plan goes into effect.
  • Initial Coverage Stage: This stage refers to the portion of your prescription drug costs paid by your insurer. 
  • “Donut Hole” or Coverage Gap: This stage begins after your total drug costs reach $4,430 (in 2022). “Total drug costs” is the sum of what you spend out of pocket AND the portion of the cost that the insurer pays. Since it is based on total costs, people may reach the donut hole sooner than they expect. At this point, you must pay 25% of the cost of all your prescription drugs until you reach a designated limit.
  • Catastrophic Stage: You enter this stage after reaching the $7,050 out-of-pocket limit. Drug costs in the catastrophic stage are significantly lower.
Know your formularies

Avoiding the Medicare Part D Donut Hole

As explained above, when your total drug costs reach $4,430 (in 2022) you are required to pay 25% of your drug costs until reaching the catastrophis stage ($7,050 out-of-pocket). If you don’t plan accordingly, this “donut hole” in coverage can be surprising and detrimental to your budget.
You can avoid the Part D donut hole by: 
  • Understanding your plan’s formulary
  • Choosing plans that participate in the Part D Senior Savings Model (which, for example, caps insulin costs at $35 per month)
  • Using mail-order pharmacies associated with your plan
  • Ordering 90-day supplies of drugs, which are often cheaper
  • Always using in-network pharmacies
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Is life insurance taxable?

Life insurance payouts to your beneficiaries after your death are tax-free.

However, you do have to consider taxes if you are planning to withdraw from the cash value of your permanent life insurance policy. For example, capital gains on a variable universal life policy would be taxable, but the premiums you paid into it would not be.

If you plan to withdraw funds or borrow against your cash value, it is wise to contact your insurance provider and understand which amounts are taxable and which are not.
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Part D Plans vs Medicare Advantage

Medicare Advantage policies have coverage similar to Part D plans. However, some Medicare Advantage policies help pay for over-the-counter drugs too. Typically, these plans provide a pre-paid card that people can use to buy over-the-counter medicines. The insurer then reloads the card with a specified credit every month.

Enrollment in Medicare Advantage plans has increased in recent years, and enrollment in standalone Part D policies has decreased. This is because most Medicare Advantage plans include prescription coverage as well as coverage for services that original Medicare does not include. 

Formulary and Pharmacy Network Restrictions

Many plans (both standalone Part D and Medicare Advantage) include restrictions in their formularies. For example, they may require pre-authorization for covering certain drugs. They may limit the quantities of certain drugs, or they may require patients to try lower-priced drugs before trying more expensive drugs.

Finally, since many plans are designed for geographic service areas and particular pharmacy networks, people must make sure they live in the correct region specified by the plan they choose
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Choosing the Best Medicare Part D Plan

Taking the time to explore several Medicare options can be tiresome, but it can produce significant savings in out-of-pocket costs over the years. Working with a qualified insurance agency is another way people make informed decisions about their Part D coverage.

Our knowledgeable agents can make the process of choosing a plan easier. The amount of information available online can feel overwhelming, but it’s essential to explore many options. If you are interested in expert help with your Medicare decision, contact us to learn how we can help.

Have more questions about Medicare Part D?

Let us answer them.