Will Medicare Cover Prescription Drugs?
When Original Medicare, Parts A and B, were first established in the 1960s, prescription drug coverage was not included in the benefits. It wasn’t until 2006 when Medicare Part D was created, that Medicare beneficiaries had access to prescription drug coverage. Although Medicare Part D is designed to cover prescription drugs, various parts of Medicare cover prescription drugs depending on the situation.
Medicare Part D prescription drug coverage
Unlike Original Medicare, Medicare Part D plans are sold by private insurance carriers. Most beneficiaries have access to at least ten standalone Part D plans in their area. Although insurance carriers provide the plans, they are regulated by Medicare, and there are specific rules each Part D plan must follow.
For example, all Part D plans must cover at least two drug options from each drug class. There are, however, a few drug classes in which most Part D plans generally cover all medications. Part D plans also all have the same four payment stages, and the limits for those stages are set by Medicare each year. For example, the first stage, the deductible stage, in 2021, is limited to $445. This means the deductible for a Part D plan in 2021 can be lower than $445 but cannot be higher.
As long as the Part D plan follows Medicare’s regulations, the rest is up to the insurance carrier. For example, the carrier gets to decide which drugs the plan covers on its formulary. They also determine what tier of drug to classify each drug under and which copays and coinsurance to charge for each tier. Again, all of these details come with regulations every Part D plan must follow.
Part D plan stages
The four stages a Part D plan has are the deductible, initial coverage, coverage gap, and catastrophic coverage. You will pay full price for your covered drugs up to the plan’s deductible during the deductible stage. However, some plans don’t apply the deductible to all tiers. For example, if you take a tier-one drug, your plan may not apply the deductible to it, in which case, you’d skip the deductible stage for that drug and immediately start the initial coverage stage.
During the initial coverage stage, you will pay the predetermined copay or coinsurance for your covered drug. Once you and your plan have spent a specific amount for the year, you will move to the third stage, the coverage gap, also called the donut hole. During the coverage gap, you’ll pay no more than 25% of your covered drugs, regardless of the tier. This 25% coinsurance could be more or less than what you paid during the initial coverage stage.
After you and your plan have spent up to the coverage gap limit for the year, you’ll transition to the catastrophic coverage stage, where you’ll pay either a small copay or a 5% coinsurance for your covered drugs.
Medicare Part B prescription drug coverage
While you’ll generally get your prescription drugs under Medicare Part D, some medications may be subject to Part B coverage instead. Part B covers approved medicines that are administered by medical professionals, such as osteoporosis injections given in the doctor’s office. However, specific rules may apply for these Part B drugs to be covered.
Medicare Part B also has a durable medical equipment benefit that covers certain supplies when medically necessary. For example, if you are prescribed an insulin pump, Medicare Part B may cover it. If Part B covers it, it will also cover your insulin needed for the pump. If you don’t use a pump and instead administered your insulin yourself by injection, you will still get your insulin under Part D.
Choosing the right Part D plan
You likely have many Part D plan options available in your area. To find the most cost-effective plan, you can use Medicare’s Plan Finder tool to compare plans by premiums, drug costs, and deductibles. To determine which plan is most cost-effective, enter all your medications into the Plan Finder tool and sort the plan results by “lowest premiums and drug costs.”
Once you’ve enrolled in a plan, you are locked into that plan for the calendar year. Then, each fall, during the Annual Election Period, you’ll be able to compare plans again and change to the most cost-effective plan for the new year. Plans can change their costs, formularies, and other details each year, so you should shop your plan every year to make sure you’re always enrolled in the most cost-effective option.