October 6, 2016
Monthly premiums can differ significantly among stand-alone Medicare Part D Prescription Drug Plans (or PDPs). Once you have mastered a few key concepts associated with plan cost considerations, you may be better able to make an informed decision about plan enrollment that may keep your financial considerations in balance with your prescription drug coverage needs.
Medicare Part D Prescription Drug Plan premiums
Stand-alone Medicare Part D Prescription Drug Plans often charge a monthly premium for coverage. Since these plans are provided by private insurance companies contracted with Medicare, the premiums vary among plans.
Some of the things that may affect what you actually pay as your stand-alone Medicare Part D Prescription Drug Plan monthly premium are listed below.
- People who receive a full Low Income Subsidy, also known as the Extra Help program, do not pay a monthly premium for a Medicare plan offering prescription drug coverage if the plan’s monthly premium is at or below the benchmark monthly premium for PDPs in their region. People qualify for Extra Help by meeting certain income and asset levels or by participating in Medicaid. Many people might be eligible for these savings and don’t know it. For more information about the Extra Help program, contact your local Social Security office or call 1-800-MEDICARE (1-800-633-4227), 24 hours a day, 7 days a week. TTY users should call 1-877-486-2048.
- People who have modified gross incomes above a certain threshold (as reported on their IRS tax returns from 2 years ago) may pay a Part D income-related monthly adjustment amount (Part D-IRMAA) in addition to the monthly plan premium. This extra amount is paid directly to Medicare, not to the Medicare Part D Prescription Drug Plan.
- People who go without Medicare Part D prescription drug coverage or other creditable coverage for 63 consecutive days or more after the end of their Initial Enrollment Period when they were first eligible for Medicare Part D coverage, may be charged a late-enrollment penalty when they enroll in a Medicare Part D Prescription Drug Plan. Creditable coverage is prescription drug coverage that covers, on average, at least as much as Medicare Part D. People who receive Extra Help do not pay a late enrollment penalty.
Medicare calculates the late-enrollment penalty by multiplying 1% of the national base beneficiary premium, which in 2018 is $35.02, per month by the number of full months you didn’t have Medicare Part D or creditable coverage. That penalty is added to your monthly Medicare Part D premium. The national base beneficiary premium may increase each year, so your late-enrollment penalty may likewise increase each year.
Costs in the Medicare Part D program
Besides premiums, other out-of-pocket costs that factor into Medicare Part D Prescription Plan coverage may include deductibles, copayments and coinsurance.
- Although Medicare Part D Prescription Drug Plans have a maximum deductible ($405 in 2017) allowed by the Centers for Medicare & Medicaid Services (CMS), plans have the option of reducing or eliminating this deductible. In short, some Medicare Part D Prescription Drug Plans have deductibles well under these amounts and some plans don’t have a deductible, but no plans can have deductibles that exceed $405 in 2018.
- Copayments and coinsurance amounts for covered prescription drugs vary among Medicare Part D Prescription Drug Plans.
- Medicare beneficiaries who reach the Part D prescription drug coverage gap in 2017 generally will pay 40 percent of the cost of brand name prescription drugs, and 51 percent of the cost of generic drugs. In 2018, the coverage gap starts when total spending (by you and your plan) has reached $3,750.
Compare Medicare Part D Plans
To help make an informed decision regarding enrollment in a Medicare Prescription Drug Plan, you may want to use the comparison tool on this page. This tool will provide information on the Medicare Prescription Drug Plans available to you, their monthly premiums, and cost-sharing estimates based on the medications you enter.