Most Medicare agents have spent time explaining Medicare Part D deductibles to their clients. Many part D plans have a deductible. We will go over deductibles and how they impact the cost of your client’s prescription medications.
Medicare Part D
Part D (PDP) coverage is provided by private insurance companies that are approved by Medicare. Individuals enrolled in Medicare Part A and/or Part B who do not have other creditable coverage should enroll in a Part D plan. Even if the beneficiary does not currently take any prescription medications. Delaying part D enrollment for a period of 63 or more days causes the beneficiary to pay a late enrollment penalty.
If the beneficiary is Medicare eligible but has other creditable prescription coverage, they will not incur a penalty. The penalty lasts as long as the beneficiary has Part D coverage. Once a beneficiary is eligible for Medicare coverage, it is very important to enroll in a PDP plan.
Part D Deductibles
A deductible is the amount beneficiaries pay out-of-pocket for prescriptions before their Part D plan begins to share the costs. In other words, it is a threshold that is met before plan coverage kicks in. Once the enrollee pays the deductible, they generally pay a copay or coinsurance for prescription medications, with the PDP plan covering the remaining costs.
How Part D Deductibles Work
The specifics of Medicare Part D deductibles vary depending on the plan each individual chooses. Here are the key points clients should understand:
Annual Deductible
Most Part D plans have a deductible. The deductible is an annual amount, which can change each year. In 2024, the maximum deductible allowed by Medicare is $545. Some plans have lower deductibles, and a few may not even have a deductible at all. When this is the case, the coverage starts immediately.
Meeting the Deductible
The beneficiary must pay for the full cost of prescriptions until they pay the annual deductible amount. Once this threshold is met, the plan covers its portion of the prescription drug costs. The exact amount enrollees pay after meeting the deductible depends on each plan’s structure. Each plan has a specific co-pay or coinsurance amount depending on the plan’s formulary.
Formulary Tiers
Medicare Part D plans categorize drugs into different tiers. Each tier has a different cost associated with it, and generally, drugs on lower tiers (like generic medications) cost less than those on higher tiers (like brand-name or specialty drugs). The deductible may apply differently depending on the tier, and some plans might waive the deductible for drugs in certain tiers (usually tier 1 and sometimes tier 2 as well).
Changes in Part D coverage
It’s important to review PDP plan options each year during the Medicare Open Enrollment Period (October 15 to December 7). PDP plans can change their deductibles, drug formularies, and coverage, therefore it is imperative to ensure your client’s plan still meets their needs.
How deductibles impact plan cost
The deductible is one part of the overall cost of any Medicare Part D plan. Here are the ways it can impact the enrollees’ expenses:
Higher Deductibles
In most cases, plans with higher deductibles have lower monthly premiums. These plans may be a good choice for individuals who do not have prescription medications of whose medications are inexpensive (tier 1 or 2).
Lower Deductibles
Generally, plans with a low or no deductible have higher premiums. These plans can actually be more cost-effective for enrollees who require regular, expensive medications.
Managing the deductible
- Compare plans: Our agents should use either Connecture or Sunfire to enter the client’s medication information and compare the costs of the Part D plans that are avialable. There are several things that contribute to the plan costs; deductibles, premiums, copays and coinsurance for each specific medication. Click here to watch a Sunfire demo on our YouTube channel.
- Review all medications: Check the client’s current medications are covered by the plan’s formulary and what tier they are on. This can significantly affect out-of-pocket costs.
- Apply for Extra Help: If the beneficiary has limited income and resources, they may qualify for Extra Help. This is also referred to as a Low-Income Subsidy, which helps pay for Medicare Part D premiums, deductibles, and co-pays.
Understanding Medicare Part D deductibles is an important part of managing prescription drug costs effectively. Agents should explain this to every PDP client and help them choose a plan that fits their healthcare coverage needs as well as their budget. An annual review of plan coverage allows clients to make any neccessary adjustments to their coverage and optimize coverage and minimize costs.
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