How Does Part D Work?

Here’s what you need to know about Part D

If you’re new to Medicare you may be anxious to enroll in a Part D plan. In fact even before you were eligible you were probably inundated with advertisements from several Part D plans.

This short video, the first in a series of 5 will give you a good foundation on how Part D works.

Part D basics

Part D was first available in 2006 to people with Medicare coverage and is not Part of original Medicare.

Part D is available from private insurance companies that are authorized to offer plans and it is your responsibility to choose a plan.

Although Part D is optional, most people without other creditable coverage generally enroll in a plan.

You can receive benefits in one of two ways; you can enroll in a stand-alone plan or you can enroll in a Medicare Advantage plan which includes drug coverage. Not all Medicare Advantage plans include Part D benefits.

Premiums can vary widely from plan to plan and will vary depending on your income. In addition, plans may include an annual deductible. This deductible is capped at $325 for 2013 plans.

Once you have satisfied your annual deductible (if any) you will then be subject to copayments and coinsurance. This is your share of costs for each covered drug.

These costs can vary widely from plan to plan and may often be lower if you use preferred pharmacies if any are offered by your plan.

What all Part D plans have in common

Plans must adhere to specific Medicare guidelines. The Standard Benefit Model outlines when you reach the coverage gap, what benefits you have while in the gap and when you reach the catastrophic coverage portion of your plan.

The initial coverage period lasts until your deductible and cost sharing amounts plus what the plan pays for covered drugs equals $2970. At which point you enter the coverage gap, otherwise known as the Part D donut hole.

While in the donut hole you will pay 47.5% of the cost for covered name-brand drugs and 79% for covered generic drugs. This amount is expected to less each year until 2020 when the coverage gap is to completely close.

You will come out of the donut hole after you have spent $4750 and will then be eligible for catastrophic coverage. During this phase of Part D you will have very little out-of-pocket costs.

The above Standard Benefit Model figures are for 2013 plans.

Part D plans last for one calendar year and you are able to switch, drop or enroll in a new plan each year.

Next: Video 2 – Understanding Part D Enrollment Periods

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