Prescription drug coverage, or Medicare Part D, is a relatively new feature of Medicare, but millions of seniors take advantage of the program to help lower their prescription drug costs. Here’s what you need to know about Medicare Part D and the costs for 2018.
Unlike Medicare Part A and Part B, Part D does not have premiums set by the government, so costs can vary based on the plan you choose and where you live. This is partially due to the fact that private insurance companies provide Part D benefits and can set their own prices according to what their customers need in coverage, but the average nationwide monthly premium for 2018 is $34. Premiums under Part D are fixed, but higher income earners may be required to pay surcharges in addition to their premiums. Below is a chart that explains how the Part D tax brackets work.
Additional costs include an annual deductible, or money paid out-of-pocket, before the plan’s benefits kick in. Some Part D plans have no deductible at all, but no plan can charge more than $405 for a deductible in 2018.
Copayments and coinsurance
Copays and coinsurance are also typical under Part D plans. Some plans require you to pay a certain percentage of prescription drug costs (coinsurance), while others charge a fixed dollar amount (copayment). Prescription drug costs also depend on whether the drug is name brand or generic.
Once your out-of-pocket drug costs have reached $3,750, you fall into the coverage gap, also known as the donut hole. This means your plan stops paying for your prescription drugs until you reach catastrophic coverage. For 2018, catastrophic coverage begins once your out-of-pocket expenses have reached $5,000. Until you reach that, there are coverage gap discounts available to you: in 2018, name brand drugs will be discounted 65% and generic drugs will be discounted 56%. All payments (including discounts) will count toward your out-of-pocket costs and help you reach catastrophic coverage.
Part D late enrollment penalty
If you want to enroll in Part D coverage, make sure you do it at the right time: the seven-month period around your 65th birthday month, including the three months leading up to it. If not, you could be penalized for signing up 63 days or more after your Initial Enrollment Period is over. If you don’t sign up during your Initial Enrollment Period, you will have to wait for the Fall Open Enrollment Period, which is October 15 – December 7, and you could be penalized.