Navigating the ins and outs of Medicare can be an intimidating experience if you’re not familiar with certain terms.
Medicare Part D, which helps cover prescription drug costs, has its own terminology. Medicare Annual Enrollment runs from Oct. 15 to Dec. 7, so now is a good time for a refresher on key words to inform your coverage decisions for 2021.
Deductible, copay and coinsurance
A deductible is the amount you pay out of pocket in a given year for eligible prescription drugs before your plan’s coverage kicks in. The deductible can vary from plan to plan.
Some plans charge a copay, a flat fee, each time you fill a prescription. For example, a plan may require you to pay $2 when you fill a prescription for generic drugs and a higher amount for brand-name drugs.
With coinsurance, you pay a set percentage of the cost of the drug instead of the flat fee associated with a copay.
Part D plans are offered by private insurance companies, and each plan has what’s known as a formulary, a list of the prescription drugs covered under the plan.
“When considering a Part D plan, review the formulary to make sure your medications are covered,” said Mike Anderson, CEO of the Medicare Part D business at UnitedHealthcare.
And keep in mind that plan formularies can change from year to year, so don’t assume that the prescription drugs covered under your current plan will carry over in 2021.
A Medicare Part D plan’s formulary is made up of tiers, depending on the cost of the medications. The lower tiers generally include preferred generic drugs, and many plans cover these medicines with low or no copay or coinsurance.
Higher tiers generally include brand-name drugs and specialty medications and tend to have higher copays or coinsurance. So, talk to your doctor to see if the brand-name prescription you take can be replaced with a generic version.
Preferred pharmacy network
A Part D plan may designate a preferred network of pharmacies, and if you use these pharmacies, you can save money on prescriptions.
“Make sure the plan offers access to pharmacies that are convenient for you,” Anderson said. “Some plans also have mail-order pharmacy benefits, and you may be able to get prescriptions delivered to your home for a lower cost than purchasing from a retail location.”
The donut hole
The majority of Part D plans have a coverage gap known as a “donut hole.” For example, in 2020, you enter this donut hole once your out-of-pocket costs (including deductibles, copays and coinsurance) for prescription drugs reach $4,020. Once you’re in the donut hole, you will pay 25% of the cost of your drugs. In past years, this percentage was higher.
In 2020, once your out-of-pocket costs reach $6,350, you exit the donut hole and pay a smaller coinsurance. Your Part D plan tracks your out-of-pocket spend progression and should be accessible on your plan website and monthly statements.
If you meet certain income and resource requirements, you may be eligible for Extra Help, which helps qualified beneficiaries pay some or all Medicare Part D premiums, deductibles, co-payments and co-insurance.
Now is a great time to start thinking about your health and budget needs for the upcoming year. Whether you’ll be enrolling in Medicare for the first time, looking to change your coverage during Medicare’s Annual Enrollment Period, or helping a loved one make decisions, visit GetToKnowMedicare.com to access resources to help you prepare and make confident choices.