Medicare Prescription Drug Plan (Part D) FAQs

The Inflation Reduction Act was signed into law on September 16, 2022 and contains changes that will affect Medicare beneficiaries who are enrolled in MAPD or stand-alone Medicare Part D plans.

This article from the Kaiser Family Foundation contains an excellent summary of the revisions and how Medicare beneficiaries will be affected.

These three provisions are effective January 1, 2023 and will affect all beneficiaries who are enrolled in MAPD or stand-alone Part D plans. (Changes that will be effective in later years are explained in the referenced article, above).

1. Limits cost sharing for insulin to $35 per month for people with Medicare, including covered insulin products in Medicare Part D plans and for insulin furnished through durable medical equipment suppliers (e.g., insulin pumps) under Medicare Part B. Note: All Part D plans will be required to implement the $35 co pay for covered insulin drugs irrespective of whether the plans have adopted the Part D Senior Savings Model (see FAQ 16). If beneficiaries are required to pay more for their covered insulins than the $35 co pay, there are provisions in the law that permit beneficiaries to submit bills to their carriers for reimbursement. NOTE: the provisions on insulin furnished through durable equipment suppliers (e.g., insulin pumps) are effective July 1, 2023.)
2. Eliminates cost sharing for most adult vaccines covered under Medicare Part D and improves access to adult vaccines under Medicaid and CHIP. Each Part D plan comes with a list of drugs and vaccines it covers. The member cost share on all Part D Vaccines on the Advisory Committee on Immunization Practices (ACIP) list will be $0. The law specifically requires ALL Part D plan benefits to include the shingles vaccine (zoster) at zero co pay, so the shingles shot will become free in 2023.
   
   (NOTE: For more information regarding the Center of Disease Control and Prevention’s ACIP vaccination recommendations, please go here.)
3. Requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare beneficiaries. From 2019 to 2020, half of all drugs covered by Medicare had price increases above the rate of inflation over that period (which was 1%, prior to the recent surge in the annual inflation rate), and among those drugs with price increases above the rate of inflation, one-third had price increases of 7.5% or more, the annual inflation rate in early 2022. The inflation rebate provision will be implemented in 2023, using 2021 as the base year for determining price changes relative to inflation.

Unless you're eligible for a Special Election Period, you must enroll in a Part D Prescription Drug plan:

• During your Initial Coverage Period (the period beginning three months before and ending three months after your 65th birthday month); or
• During the Annual Election Period which runs from October 15-December 7 for a January 1 enrollment.

Note: Medicare begins the first of the preceding month for individuals whose birthday is the first day of the month.

Some plans (called "MAPD" plans) include prescription drug coverage while others (called "MA" or "MA Only" plans) do not.

If you purchase a Medicare Advantage HMO or PPO plan without prescription drug coverage, you CAN'T purchase a separate Part D plan. You can purchase a separate Part D plan with a PFFS (Private Fee for Service plan) that doesn't provide drug coverage and with certain other types of plans.

You can also purchase a Part D plan with a Medicare Supplement plan or with Original (Fee for Service) Medicare (i.e. without enrolling in either a Medicare Supplement or Medicare Advantage plan).

Part D plans are available either on a stand-alone basis or as part of a Medicare Advantage plan (these plans are called Medicare Advantage Prescription Drug plans).

Also, you should be aware of variations in the coverage and cost sharing associated with plans. Coverage generally follows this pattern:

• If the plan has a deductible, you pay the full amount of your prescription drug purchases until the deductible is met.
• After you satisfy the deductible, if any, you'll pay a share of the costs according to the terms of your plan. This part of the plan is called the "Initial Coverage Limit." Your share, which you typically pay to the pharmacy at the time of pickup (or to your mail order pharmacy), could be a flat amount (co pay) or a percentage of the total amount (co-insurance).
• Once your costs reach a certain amount (this is called entering the "coverage gap" or the "donut hole") your cost share will change.
• When you've paid a certain annual maximum amount out of your own pocket [the 70% manufacturer's discount received during the coverage gap and certain other items are also included in this calculation which is referred to as “True Out-Of- Pocket Costs ("TrOOP")], you automatically qualify for "catastrophic coverage." This means you will only pay a small co pay or co-insurance amount for prescription drugs during the rest of that particular year.

Although they must meet minimum Federal guidelines, Part D plans differ markedly between carriers, and one of the most important differences is which drugs are covered and which are not. (There are 35 therapeutic categories of drugs, and carriers are generally required to include only two drugs in each category, except they are required to include more drugs in a few categories.) This is a particularly important consideration for individuals who have been prescribed expensive medications.

 Each carrier provides a formulary that lists which drugs are covered under that plan and which co pay or co-insurance tier the drug falls into. Beneficiaries should always check the formulary to determine if their drugs are covered--and at which co pay or co insurance rate--before purchasing a plan. It's also a good idea to review your Medicare prescription drug coverage every year to see if your plan covers the medications you need now and may need in the upcoming year.

Be sure to talk to your doctor to see if you're taking the lowest cost medications available to you.

Because Part D plans can be designed to be actuarially equivalent to the standard benefit model (see FAQ 9), these plans can have no or lower deductibles than required by the standard benefit model, co pays and/or co-insurance can vary, and there can be other differences in plan design as well. Specific coverage will vary from plan to plan, so read your documentation carefully and make sure to check out which of your drugs are included in your plan’s formulary.

Medicare (CMS) publishes a formulary finder on their website that permits you to enter your medications, dosages, and frequency of use and then lists the carriers that cover these medications in their formulary. After you enter your drugs into the formulary finder there are various options as to how to present the findings: i.e. list in order of plans with the lowest premium; list in order of lowest premium AND cost of drugs; and list in order of plans with the lowest deductible.

The Part D coverage gap ("donut hole") for 2023 begins when total drug costs reach $4,660 and ends when TrOOP reaches $7,400. Note that total drug costs and TrOOP are two different calculations. Regular co pays and/or co-insurance stop during the coverage gap. Instead, beneficiaries pay 25% for both brand-name and generic drugs when they enter the donut hole.

In determining how you get into the coverage gap, you count the total cost of the drugs [both what you pay (excluding premiums) and what the carrier pays]. In determining how you get out of the coverage gap, you count TrOOP [generally what you pay (excluding premiums) plus manufacturers’ discounts (70% for brand name drugs and biosimilars) and any benefits paid through State Pharmaceutical Assistance Programs (SPAPs].

You pay 25% for generic and brand name drugs during the donut hole. Before you reach the donut hole you may have a deductible for certain or all drug tiers and then pay a flat amount (co pay) or co-insurance (a %). See FAQ 9.

Once you've spent $7,400 in true out-of- pocket costs ("TrOOP") in 2023 you're out of the coverage gap and automatically qualify for "catastrophic coverage." Once you qualify for catastrophic coverage you pay the greater of (1) 5% or $4.15 for generic drugs or (2) 5% or $10.15 for brand-name drugs.

All amounts you pay for medications, as well as the manufacturer's discount that applies to brand-name drugs during the coverage gap (also called the "donut hole") count as "TrOOP" ("true out of pocket cost"). Manufacturer's discounts are 70%.

Note that one set of calculations (total drug cost) determines how you ENTER the coverage gap; another set of calculations (TrOOP) determines how you GET OUT of the coverage gap and enter catastrophic coverage.

Medicare drug plans must meet or exceed what is called the “standard benefit model” or its actuarial equivalent.

Note: plans are permitted to provide different benefits than those required by the standard benefit model if the plan provides benefits that are actuarially equivalent to the standard benefits model. For example, plans can have lower or no deductibles; co pays or lower coinsurance; cover certain drugs at the Initial Coverage Limit level during the coverage gap; and are also permitted to offer supplemental benefits that cover certain drugs not covered under Part D, such as erectile dysfunction drugs. Plans are permitted to have higher coinsurance for at least some benefit tiers during the Initial Coverage Level if the total benefits under the plan are at least actuarially equivalent to the Standard Benefit Model.

As part of the changes made by the Affordable Care Act, the donut hole began being phased out in 2011 and was considered totally phased out as of 2020. Starting in 2020, beneficiaries pay 25% for both brand-name and generic drugs when they reach the donut hole (formally referred to as the “coverage gap”).

Since the phase-out of the donut hole is tied to the “standard benefit model” (see FAQ 9, above), the donut hole is considered fully eliminated. Since carriers are permitted to design plans that are actuarially equivalent to the standard benefits model, what the beneficiary pays for medications during the deductible and initial coverage limit phases of a drug plan are usually different from what the beneficiary pays in the donut hole.

Plans are required to include medication therapy management including step therapy, quantity limits and prior authorization. Part D sponsors may substitute generic drugs for brand name drugs if the generic drugs have the same or lower cost sharing and certain conditions are met. In accordance with the Comprehensive Addiction and Recovery Act (CARA), plans may impose certain limitations to manage utilization for beneficiaries who are at risk of misusing or abusing frequently abused drugs, such as opioids.

You may owe a late enrollment penalty (LEP) if, at any time after your initial enrollment period is over there is a period of 63 or more continuous days when you don't have Part D or other creditable coverage (i.e. coverage that, as a minimum, meets the Part D standard benefit model).

The late enrollment penalty is assessed for EACH month that you haven't had creditable drug coverage.

The amount of the penalty changes annually and is based on each year's national average Part D premium ($32.74 for 2023). The monthly penalty is 1% of that year's national average Part D premium multiplied by the number of months you have not had creditable coverage. The calculation is rounded off to the nearest $.10. This is a lifetime penalty for as long as you have Part D coverage and is a monthly penalty.

Part D Prescription Drug Plan premiums are adjusted if your income exceeds a certain level. This additional premium (called the IRMAA) will be deducted from your Social Security check and is in addition to your premium for the basic plan. (You will have to pay Social Security directly for any IRMAA payments if you are not drawing Social Security.)

The Bipartisan Budget Reconciliation Act of 2018 changed how IRMAA is calculated. See FAQ 9 in the Medicare Overview section for details. See these charts for the 2023 IRMAA Part D premiums.

Here are a number of ways you can save on drug costs.

In addition, this article by Bankrate contains a number of good suggestions. Bankrate suggests looking into patient assistance programs at www.rxassist.org (this site contains a wealth of other useful information); shop around for the best prices on medications; tread carefully using current credit cards (look closely before choosing to use a medical credit card), and talk to your physician about switching to generics.

For a complete listing of plans available in your service area please contact 1-800-Medicare (TTY users should call 1-877-486-2048) or go to www.medicare.gov. Your copy of Medicare & You 2023 also contains a listing of 2023 plans available in your general area. You can also contact us at 877-734-3884 (TTY: 711) or 561-734-3884 (TTY: 711) for this information.

Beginning in 2021 a five-year test program called the Part D Senior Savings Model became available for stand-alone Part D drug and Medicare Advantage Drug Plans to decrease the cost of certain insulins. Insulins (not all insulins are included) in this program can be in either tiers 1, 2, or 3 and can’t cost more than $35 for a 30-day supply in the deductible, initial coverage, and coverage gap phases of drug plans. The model does not change cost sharing in the catastrophic phase of drug plans, but most drugs cost 5% in that phase, so insulin shouldn’t be affected. . A number of stand-alone Part D and Medicare Advantage Plans have adopted this model, and the number of plans adopting the model has increased each year since the introduction of the model.

Click on this link to learn more.

NOTE: Inflation Reduction Act requirements take precedence over Senior Savings Model requirements, so the $35 limit on insulin listed in the plan’s formulary will be applicable in the catastrophic phase starting in 2023. Also, a person on a plan offering the Part D Senior Savings Model will pay the lesser of the Part D Senior Savings Model co pay or $35 for any insulins listed in the formulary (the $35 limit would be applicable in the catastrophic phase, however)..