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Part D catastrophic coverage

In 2023, when a beneficiary’s out-of-pocket spending for prescription drugs reaches $7,400, they reach the Part D catastrophic coverage level.  If this happens, the beneficiary pays 5% co-insurance for prescriptions covered by Medicare Part D for the rest of the year.

2024 catastrophic cost change

On January 1, 2024, the 5% co-insurance payment in the catastrophic phase will end.  Beneficiaries who reach $8,000 in out-of-pocket spending on Part D prescriptions in 2024 will automatically receive catastrophic coverage.  Medicare Part D plan provider will have to pay 20% of the total drug cost instead of the 15% they paid in the past. Once beneficiaries reach this level, they no longer have to pay either copayments or co-insurance for covered Part D prescriptions for the remaining part of the year.

Learn more about Medicare Part D plans

This updated rule applies to Part D enrollees who do not have an LIS (low-income subsidy).  When a Beneficiary reaches the catastrophic level in Part D coverage. they no longer pay 5% of their prescription costs.  In other words, there is a cap on Part D out-of-pocket spending for enrollees in 2024. the catastrophic threshold is $8,000.

How the catastrophic limit is calculated

The catastrophic limit includes the prescription costs paid out-of-pocket by Part D enrollees, as well as the value of the manufacturers price discount on brands of medications in the coverage gap phase.  In 2024, a Part D enrollee who uses only brand-name drugs and spends about $3,250 out-of-pocket pays no additional amount for their prescriptions.  The remaining part of the $8,000 catastrophic limit is taken from the manufacturer’s price discount for the medications.

What this means for beneficiaries

For beneficiaries who do not qualify for LIS and require expensive medications to maintain their health, annual out-of-pocket costs can be as high as $15,000 annually.  This cost applies to individuals who may take some lifesaving cancer medications.  This cost on top of fighting for their lives adds a terrible amount of stress for them. Once a beneficiary reaches the catastrophic phase, eliminating the 5% coinsurance in 2024 means that Part D enrollees who require high-cost medications covered by Part D can save thousands of dollars.

Click here to watch a quick video about the Part D changes

Changes in costs for Part D plan providers

Due to the end of the beneficiaries required 5% coinsurance payment in the catastrophic coverage phase, Part D plans will have to pay 20% of total drug costs during the catastrophic phase in 2024.  This is 5% over the 15% they currently pay in 2023 and in previous years.

Changes for 2025

CMS is putting a hard cap of $2,000 on out-of-pocket, prescription drug spending in 2025.  They will also end the coverage gap phase (donut hole).  Part D plans will have a greater responsibility for prescriptions in the catastrophic phase and more manufacturer price discounts will be added.  These measures will reduce the liability for Medicare in this phase of coverage.  There will be changes to Part D plan costs as well as manufacturer price discounts in the initial phase of Part D coverage.

Please note: the drug cap does not apply to out-of-pocket costs for Part B prescription drugs.

Medicare Part D cap

Although Medicare Part D provides catastrophic coverage for high out-of-pocket prescription prices, there is no limit on the total amount beneficiaries pay out-of-pocket annually.  Beneficiaries with high drug costs exceeding the catastrophic level are required to pay 5% of their total drug costs unless they qualify for LIS.  The Inflation Reduction Act 2022 addresses the high cost of prescription drugs for Medicare beneficiaries.  The inflation reduction will reduce the out-of-pocket cost beneficiaries pay for medications and reduce federal government spending.  Some of these cost saving measures include changes to the benefits provided by Medicare Part D. This includes a Part D cap on out-of-pocket prescription costs for Medicare Part D plan enrollees.

The Part D cap makes both PDP plan providers and drug companies pay more of the costs associated with expensive drugs.  Some of this cost usually falls on the beneficiary and the federal government.

Watch a quick video on our YouTube channel about the Part D drug cap

Changes to Medicare prescription drug plans coming in 2024

In order to better understand the changes coming for 2024, we will quickly explain the 4 phases of prescription drug coverage as they are in 2023.

1. Deductible phase – beneficiaries pay 100% of their drug costs.  In 2023 the highest deductible amount is $505, although some plans do not charge a deductible.
2. Initial coverage phase – beneficiaries pay a co-insurance rate of 25% of their prescription costs and their Part D plan pays 75%.  This phase lasts until the costs reach $4,660 in 2023.  Many PDP plans charge co-payments and co-insurance in this phase instead of the standard 25% co-insurance rate.
3. Coverage gap (donut hole) phase – beneficiaries pay 25% of the prescription cost for all covered drugs both generic and name brand.  The PDP plan pays the remaining 75% for generic prescriptions and 5% for name brand drugs while drug manufacturers give beneficiaries a 70% discount for these drugs.
4. Catastrophic phase – In 2023 the catastrophic threshold is $7,400.  Once the threshold is reached, Medicare pays 80% of the drug cost while the PDP plan pays 15% and the beneficiary pays the remaining 5%.

The beneficiary’s costs in the catastrophic phase will change in 2024

In 2024 the 5% coinsurance payment for beneficiaries will be eliminated.  The PDP plans will pay 20% of the drug costs in this phase instead of the 15% they paid in previous years.  The catastrophic threshold in 2024 will be $8,000. The threshold limit includes the amount beneficiaries spend as well as the value of the manufacturers discount on prescriptions in the coverage gap phase.

In other words, there will be a spending cap for beneficiaries who take name brand drugs of about $3,2500 in 2024.  In 2025, there will be a hard cap of $2,000 on out-of- pocket costs for prescriptions.

Beneficiaries can save thousands on expensive medications

Beneficiaries who currently need expensive lifesaving medications to treat serious illnesses can now concentrate on recovering instead of worrying about how to pay the high cost of their medications.

The elimination of the 5% coinsurance spent in the catastrophic phase of Part D coverage will save enrollees thousands of dollars.

Please note:  this program benefits those enrollees who do not receive LIS for the cost of prescription medications.

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Medicare Prescription Drug Plans

What Doesn’t Medicare Part D Cover?

Medicare Part D is prescription drug coverage, provided by private insurance companies licensed by the federal government. There are certain kinds of drugs that are excluded from coverage, however. Medicare coverage does not include the following:

• Drugs used to treat anorexia, weight loss, or weight gain

  • Note: Part D may cover drugs used to treat physical wasting caused by AIDS, cancer, or other diseases

• Fertility drugs

• Drugs used for cosmetic purposes or hair growth

  • Note: Drugs used for the treatment of psoriasis, acne, rosacea, or vitiligo are not considered cosmetic drugs and may be covered under Part D

• Drugs that are only for the relief of cold or cough symptoms

• Drugs used to treat erectile dysfunction

• Prescription vitamins and minerals (except prenatal vitamins and fluoride preparations)

• Non-prescription drugs (over-the-counter drugs)

How to Access Medicare Part D Coverage:

In order to avoid additional medical expenses, it is a good idea to work with your doctor and pharmacy to ensure that what they are prescribing you is covered under your private prescription drug coverage. The following are some ways to ensure this coverage:

• Before you go to the pharmacy, find out if your drug is on your plan’s formulary. If possible, ask your doctor to check that your prescription is covered. Otherwise, call your plan directly or check your plan’s website.

• Find out whether your plan places any restrictions on coverage, such as:

  • Prior authorization: you must get prior approval from the plan before it will cover a specific drug

  • Step therapy: your plan requires you try a different or less expensive drug first

  • Quantity limits: your plan only covers a certain amount of a drug over a certain period of time, such as 30 pills per month

• Use a preferred, in-network pharmacy to fill your prescriptions. Many pharmacy networks include both preferred and non-preferred pharmacies. You typically pay less for your prescriptions at preferred pharmacies.

These steps will help you avoid gaps in coverage and unexpected fees and costs from prescriptions that are not covered by Medicare Part D.

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Why Purchase Medicare Part D

Medicare has four parts. The original Medicare consists of Parts A and B, the original federal program. Part C is Medicare Advantage. Medicare Part D is prescription drug coverage, which helps cover the costs of medicine. Prescription drug coverage is optional.  Additionally, it is only available through private insurance companies approved by the federal government. While it is optional, Part D is offered to everyone who qualifies for Medicare. Costs, of course, can vary from plan to plan depending on the provider.

How to Get Medicare Part D?

There are two different ways to acquire Medicare Part D:

1. Purchase a standalone prescription drug plan. If you have Medicare Parts A and B, you can choose to add Part D to cover the costs of prescription drugs. The cost is separate cost from any existing coverage.

2. Purchase a MAPD.   Medicare Advantage Plans include Parts A and B.  And, many include prescription drug coverage.

What Does Medicare Part D Cover?

Each Medicare Part D plan has a list of approved drugs.   This list is the formulary.   Formularies identify what is covered and what is not covered. Plans sort their list of prescriptions into categories called tiers. Usually, drugs in a lower tier will cost less than drugs in a higher tier. The tiers often go from one to five or six.  Tier one is  low-cost.  These are typically common generic RX.  Tier five or six are specialty drugs.  These are the highest cost drugs and specialty medications. Not all medications are covered by Medicare Part D, however. Coverage may be limited due to medical necessity, availability, cost, or safety.

How To Enroll in Medicare Part D

Usually, if you qualify for Medicare, you qualify for Medicare Part D.  However, beneficiaries must have a qualify for a valid enrollment period.

• Your Medicare Initial Enrollment Period (IEP): You can enroll in a Part D plan in the 3 months you turn 65, the month of your 65th birthday or 3 months after.

• The Medicare Annual Enrollment Period (AEP): This runs from Oct. 15 to Dec. 7 every year. During the AEP, you may make changes to your Medicare Part C and Part D coverage. They will take effect on Jan. 1 of the following year.

• The Medicare Advantage Open Enrollment Period (OEP): This lasts from Jan. 1 to March 31 each year. You may add, drop or change your Part D coverage during this time.

• Special Enrollment Period (SEP): You may be able to enroll in a new Part D plan if you’re eligible for an SEP. You may qualify for an SEP under certain circumstances, such as if you make changes to a job-based drug coverage plan, or if you have or lose Extra Help.

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What will Medicare pay for

Because many people are unsure what will Medicare pay for, we are providing a quick summary of the parts of Medicare and what they cover.

Medicare is a federal health insurance program.  It provides coverage to people who are either 65 years or older, people with disabilities, and those with end-stage renal disease.  There are four parts of Medicare plans: Part A, Part B and Part C, as well as Part D.

What Medicare Part A pays for:

Part A or hospital insurance covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care services.

1. Inpatient Hospital Stays: Part A pays for the cost of a semi-private room, meals, nursing care, and other hospital services and supplies. It also covers the cost of surgeries, anesthesia, and other medically necessary procedures.
2. Skilled Nursing Facility Care: If you need to stay in a skilled nursing facility for a short period after being discharged from the hospital, Part A covers the cost of a semi-private room, meals, nursing care, and therapy.
3. Hospice Care: If you have a terminal illness, Part A covers hospice care services, including pain relief, counseling, and medical care.
4. Home Health Care: Part A covers some home health care services if you are homebound and need skilled nursing care, physical therapy, or speech-language pathology services.

What Medicare Part B pays for:

Part B is also called medical insurance. It covers medically necessary services and preventive services that are not covered by Part A. Here’s what Part B pays for:

1. Doctor’s Services: This includes office visits, consultations, and surgical procedures.
2. Outpatient Services: Part B covers services that include diagnostic tests, laboratory services, and imaging tests.
3. Preventive Services: These services  include flu shots, cancer screenings, and annual wellness visits.
4. Durable Medical Equipment: Beneficiaries receive coverage for the purchase of durable medical equipment, including wheelchairs, walkers, and oxygen equipment.
5. Ambulance Services are covered if they are medically necessary.

What Medicare Part C pays for:

Medicare Part C or Medicare Advantage (MA plans). It is an alternative to Original Medicare, which includes Part A and Part B. Medicare Advantage plans are offered by private insurance companies. In most cases, they include additional benefits, such as vision, dental, and hearing coverage. Medicare Advantage plans must cover all the services that Original Medicare covers, but the cost-sharing and rules may be different.

What Medicare Part D pays for:

Some people refer to these plans as prescription drug coverage.  Private insurance companies offer this coverage to cover the cost of prescription drugs.  Part D plans typically have a formulary, which is a list of drugs that the plan covers. The cost-sharing and rules for Part D plans may vary.

In conclusion, Medicare covers a wide range of medical services.  This includes hospital stays, doctor’s visits, preventive care, medical equipment, and prescription drugs. Understanding what each part of Medicare covers can help you make informed decisions about your healthcare needs.

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What is Medicare Part D

If you are thinking about signing up for Medicare, you will need to ask the question; What is Medicare Part D.  Medicare Part D is prescription drug insurance.  This insurance will cover your medication needs. If you choose a Medicare Part D plan, you will pay a monthly premium to an insurance carrier for your coverage. The insurance carrier will send you an ID card to use at your  insurance provider’s network of pharmacies to fill your prescriptions. In most cases, you will not pay full retail price for your medication, you will pay a copay (a percentage of the drug’s price).  And, the insurance carrier pays the remaining balance.

The federal government controls the Medicare Part D program:

Medicare Part D is administered through private insurance companies. These companies provide beneficiaries prescription drug coverage. This program began in 2006 and offers Medicare recipients a valuable benefit that saves them thousands of dollars on medication each year.  Beneficiaries can choose 2 ways to receive this benefit.

1.  They can enroll in a standalone prescription drug plan along with a Medigap/Medicare Supplement plan.
2.  Or, they can choose a Medicare Advantage(Part C) plan that includes prescription drug coverage.

All Medicare Part D plans must follow guidelines set by the federal government.  This means, every insurance carrier who participates must submit it’s plan to the CMS/Centers for Medicare and Medicaid Services.  The carriers have to do this every year to have their plans approved before they can offer them to clients.

Each year the drug plan providers make changes to benefits; this includes the formulary, in network pharmacies, providers as well as costs.  The changes go into effect on January 1st.  Be sure to check your coverage during open enrollment every year.  This is important if you need to change your insurance provider.  If you do not check, it could end up costing you a lot.

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If you need help finding the right plan for you, please contact us either by phone at (203)796-5403 or by email at teal@croweandassocites.com.

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Medicare Part D Income Penalty 2017

This post will explain the Medicare Part D Income Penalty 2017.

The cost of your Medicare Part D coverage will go up if, you reported an adjusted gross income of over $85,000. for a single person on your IRS tax return from 2 years ago.  For couples, your cost rises if the income you reported on your IRS tax return two years ago equaled more than $170,000. The income that Medicare uses to assess your Part D cost is your adjusted gross income as well as any other type of tax-exempt income you may have.

In fact, The rate you pay will change according to how high your income level is. The more income you have, the higher your premium for Part D coverage will rise.  Your normal part D plan premium payment will stay the same and you will continue to use the same payment method.  Medicare will automatically deduct any additional premium charges you receive directly from your Social Security check.  Medicare will send you a bill only if the additional premium amount is more than your Social Security check.

The additional premium uses a calculation that starts with the national base beneficiary premium of $35.63 for 2017. Below we have listed some examples of the rise in premium cost levels for Part D. The examples will help you figure out how much more you will pay for Part D coverage in 2017. Additional costs will not apply unless, your income is above the specified amounts.

 Additional premium costs for Medicare Part D in 2017, as calculated by income level as follows:

Medicare Part D Enrollment Penalty

How much is the Part D penalty?

The cost of the Medicare part D enrollment penalty depends on how long you go without Medicare Part D or creditable prescription drug coverage.

How do I know if there will be a Medicare part D enrollment penalty?

After you join a Medicare drug plan, the plan will tell you if you owe a penalty and what your premium will be. Most people will have to pay this penalty for as long as you have a Medicare drug plan. The exceptions would be for those that drop coverage or are approved for a drug help program such as MSP.

What if I don’t agree that I have a penalty?

You may be able to ask for a “reconsideration.” Your drug plan will send you a letter explaining how to appeal.  All appeals will be sent to a company called Maximus that will review appeals.  Maximus is the only company that can review them. As a result, you will need to wait until they make a decision. You must do this within 60 days from the date on the letter telling you that you owe a late enrollment penalty. Also send any documentation that supports your case.

Do I have to pay the penalty even if I think it is wrong?

You must pay the penalty until a decision has been made on the appeal. Failure to pay the penalty could result in termination of your enrollment.

How long does it take to decide on the appeal?

In general, Maximus (Medicare contractor) has 90 days to make a decision.

What happens if Maximus decides the penalty is wrong?

If Maximus decides you should not have a penalty, they will send you a letter stating that fact.   Your drug plan will then stop charging you the penalty and will send details regarding a refund of the penalty amount you already paid.

What happens if Maximus decides the penalty is correct?

They will send you a letter stating the penalty is correct. You will be forced to continue paying the penalty if you want to maintain you drug coverage.

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