How to find the best Medicare drug plan
What you need to know about Part D
If you do not have a Medicare Advantage plan that includes Part D drug coverage, you must sign up for it separately.
When to sign up
You should sign up for Medicare Part D at the same time that you enroll in Part B.
Do not delay even if you do not take any prescription drugs regularly right now. If you wait until later to sign up, you will be charged extra on your premium for every month that you waited.
The amount of the premium penalty changes every year. In 2015, you will be charged one percent of $33.13 for every month you are late in starting Part D. So if you have waited for two years, the extra charge would be 24 percent of $33.13, or about $8 extra per month.
The only way to avoid this penalty without signing up for Part D is having equivalent drug coverage, called “creditable” coverage, from another source, such as a retiree plan. Your plan administrator can tell you whether your plan is equivalent.
What you will pay for Part D
The average Part D plan costs about $32 a month but prices can vary. In general if you buy a plan with a higher premium, you will pay less out of your own pocket when you actually use the plan.
If your 2013 income was above $85,000 for a single person or $170,000 for a married couple filing jointly, you will be charged extra for your Part D premium in 2015.
In 2015 the maximum allowable deductible for a Part D plan is $320, though many plans have lower or even no deductibles. And plans also charge varying amounts for the prescriptions. Sometimes they charge a flat-dollar co-pay and sometimes they charge a percentage of the cost of the prescription, called co-insurance.
Most plans sort drugs into “tiers,” with drugs in the lower tiers costing less.
The three coverage phases of Part D
You can think of your Part D “coverage year” as divided into three phases that come in order. If you don’t take a lot of costly drugs, you probably will never get out of the first phase.
Phase 1: Initial coverage
In 2015 you will pay an average of 25 percent of the costs of your medications until you and Medicare together have spent $2,960. But that’s only an average. Your personal share of expenses might be different depending on whether your plan has a deductible, how many drugs you take, and how much your drugs cost.
Phase 2: Donut hole
When you and your Part D plan together have spent $2,960 on drugs, you will enter this phase, also called the “coverage gap.” While in the donut hole, you will have to pay a larger share of your drug costs. In 2015 you will pay 45 percent of the cost of brand-name drugs and 65 percent of the cost of generics.
One part of the Affordable Care Act created a schedule for closing the donut hole. It is about half-closed now and will be completely eliminated as of 2020. Then there will be only two coverage phases in a year. (For more information on how the donut hole is closing, download this guide from Medicare.)
Phase 3: Catastrophic coverage
When total cost of your brand-name drugs and your share of the cost of generic drugs together add up to $4,700 for the year, you will exit the donut hole and enter the “catastrophic coverage” period. With catastrophic coverage, you will pay only 5 percent of the cost of your drugs until the end of the year.
How to choose a good Part D plan
Depending on where you live, you might have dozens of private plans to choose from, with different premiums, co-payments, and levels of coverage, including which drugs are covered.
Choosing a plan that is right for you can save you thousands of dollars per year in premiums and out-of-pocket drug expenses. It pays to review your Part D coverage every year at open enrollment, especially if you have started taking new drugs.
1. Start at Medicare.gov
Your first stop should be the plan finder on Medicare’s website, Medicare.gov. On the home page (pictured above), click on the green button titled “Find health & drug plans” to get started. Follow the screen instructions carefully and you should be ok. If you mess up, you can always start over.
After you have entered your ZIP code, you will be asked to list the drugs you take. Before starting this step, make sure you have an up-to-date list of the names of your drugs and the monthly dosages, because you will be asked to provide this information.
This step is tedious if you take a lot of drugs, but if you take it slow, you will clearly see how to use it. When you are done, you will be allowed to save your drug list for later reference. Do this because you’re going to need to come back to it. Write down the “drug list ID” and your “password date” so you can retrieve it later.
If you don’t take any regular medications, you can skip this step.
Next you will be asked to select up to two pharmacies near you. Make sure they are not part of the same chain.
2. Look at your annual drug costs
Once you have finished answering all the questions, you will come to a page titled “Refine your plan results.” Check the box that says you want to see “Prescription Drug Plans (with Original Medicare).” Finally click the brown box that says “Continue to Plan Results.
The first thing to do is make sure you are seeing all the plans in your area. At the top of the list, you will see a choice between seeing just 10 plans or seeing all of them. Ask to see all of them.
The plans will be automatically sorted in order of annual cost to you, based on your drug list and the pharmacies you chose. The cost will include your premium and your out-of-pocket costs for the drugs you take. (If you don’t take any drugs, you’ll see the average cost for plan members.)
If you click on an individual plan name, it will give you access to details about the plan.You will be able to see which tier of coverage your drugs are in, and exactly how much they will cost you every month of the year at each pharmacy you chose.
You may be surprised to see that the cost of your drugs may be quite different from one pharmacy to the next, even within the same plan. The drugs might even be in a different tier, depending on the pharmacy you choose.
Many plans give a better to deal to “preferred” pharmacies than to “standard” ones, so you want to keep looking until you find out whether the plan does this. When you look at the plan’s detailed results, you will see this information under each pharmacy’s name.
That is why it pays to repeat your search several times, using a different pharmacy each time, to make sure you are truly getting the lowest possible price. This is easy to do by clicking on “Update Search” in the “My Current Profile” box that appears at the upper right on all your search result pages.
3. Check out coverage rules
Sometimes plans have extra rules concerning certain drugs. When you look at the detailed results for each pharmacy, you will see these under three headings.
- Prior authorization. The plan will only approve the prescription under certain specific medical circumstances. Your or your doctor will have to supply this information before you can get the drug.
- Quantity limits. The plan will only allow you to get a certain amount of medication at a time.
- Step therapy. The plan will ask you to try other drugs first.
4. Consider star ratings
Every plan has a star rating, with five stars being the best. Star ratings are based on factors such as customer service, how well and promptly the plan handles coverage appeals, and how many members have complained about the plan.
Find out if you can get financial help
Individuals and couples with limited financial means may be able to qualify for Extra Helpfrom Medicare to pay their Part D premiums and out-of-pocket drug costs.
The financial and asset limits for 2015 are:
Individuals must have annual incomes of less than $17,505 and financial resources (not counting your primary home) of less than $13,440.
Married couples must have incomes of less than $23,595 and resources of less than $26,860