Choosing the Right Prescription Drug Plan

Senior man holding a blue prescription drug organizer

Medicare recipients seeking drug coverage must enroll in a Medicare-approved drug plan. Numerous options exist, each with its own set of benefits and, of course, varying costs. When making your choice, perform a careful comparison of these costs and benefits, as you usually must remain on this plan for the entire calendar year. Before open enrollment arrives again, conduct another careful review of your options to determine if your current plan adequately serves your needs or if you require a new plan – especially if new medical issues arose during the year.

Determining Eligibility

People eligible for Medicare Part A and Part B are also eligible for Medicare Part D. Enrollment is voluntary, but a penalty applies to beneficiaries who join at a later date. In general, you may enroll in Medicare at age 65, and you have a three-month window before and after your 65th birthday in which to do so. Additionally, certain SSDI beneficiaries qualify for Medicare after receiving SSDI benefits for 24 months.

Types of Prescription Drug Plans

Medicare Part D includes two basic plan types: Prescription Drug Plans and Advantage Plans with Prescription Coverage.

The Prescription Drug Plan (PDP) is a stand-alone program focused solely on prescription drugs, rather than overall healthcare. It is a popular choice with those on traditional Medicare Part A and B, as well as those on Medicare Private Fee-For-Service plans. In contrast, Medicare Advantage Plans with Prescription Coverage (MA-PD) are general healthcare plans that include prescription coverage, such as a traditional HMO. This managed care plan locks you into receiving care from specific doctors and hospitals, but typically at a lower cost than a PDP.

Comparing PDP with MA-PD

When comparing these two plan types, there are many variables at play. Consider your full healthcare needs as well as the aspects of each option.

Traditional Medicare (Parts A and B) does not include prescription drug coverage. If you opt for traditional Medicare, and you wish to receive drug coverage, you must enroll in a PDP. However, simply choosing a Medicare Advantage plan does not guarantee prescription drug coverage. Though most MA plans include drug coverage, some do not. Review a plan’s details carefully, or speak to your agent.

Traditional Medicare lets recipients choose treatment from any healthcare provider who accepts Medicare, anywhere in the country. Most MA plans are either HMO or PPO, requiring you to choose in-network doctors and hospitals for guaranteed coverage or else pay higher out-of-pocket costs. Private Fee for Service and Medicare Medical Savings Accounts offer different terms, but are not available everywhere.

If you enroll in a Medicare Advantage HMO or PPO plan that does not include drug coverage, you cannot enroll in a standalone PDP at the same time. MA Private Fee for Service and Medical Savings Account plans do allow enrollment in a PDP.

If you currently have a PDP but enroll in Medicare Advantage during open enrollment, that change automatically cancels your PDP. Likewise, if you currently have an MA plan and then join a PDP, this automatically cancels your Medicare Advantage and re-enrolls you in Medicare Parts A and B.
Finally, consider whether you currently have healthcare coverage through a former employer or union; joining a Medicare Advantage plan may cancel that coverage. This is especially important if you have any dependents on a plan through a former employer. Do not join an MA plan without understanding the consequences it may have on your current healthcare coverage.

Understand the Cost of the Coverage Gap

Sometimes called the “donut hole,” most Medicare PDPs have a coverage gap, which places a temporary limit on your plan’s drug coverage. The coverage gap begins once you reach a certain amount in spending on covered prescription drugs. The amount changes yearly; for 2016 the amount is $3,310. This total includes your out-of-pocket costs plus the amount your drug plan spends. Extra Help beneficiaries never reach the coverage gap.

What happens after you reach the gap may also change each year? In 2016, you pay 45 percent of your plan’s cost on brand name prescription drugs. Ninety-five percent of the full price counts toward your out-of-pocket costs. For generic prescription drugs, you pay 58 percent of the plan’s cost (this amount decreases each year until it hits 25 percent in 2020). Unlike name brand drugs, only the amount you pay counts toward your out-of-pocket costs to get you out of the coverage gap.

Comparing Medicare plans involves looking at more than the cost of getting out of the coverage gap, though. You must also consider the costs of premiums, co-pays, and any
applicable deductibles.

Do Your Research

Luckily, online resources provide detailed information on Medicare Part D and Medicare Advantage (Medicare Part C). Compare the different types of plans, read up on the Donut Hole, and become an informed consumer to ensure you make the best choice for you. You can also browse Medicare for up-to-the-minute information on yearly changes to Medicare Part D costs and coverage.

GET FREE MEDICARE PLAN QUOTES!