Whether it’s part of your daily regime or a rare necessity, most of us will need to take prescription drugs at some point in our lives. However, with new and increasingly expensive drugs being prescribed daily, it can be hard to manage the associated costs.
It’s important to understand that Original Medicare (Parts A and B) does not cover prescription drugs. You must purchase a Prescription Drug Plan (Medicare Part D) through a private insurer for a monthly premium. This Part D coverage can also be included in a Medicare Advantage Prescription Drug plan.
When looking for drug coverage, be sure to pay attention to the deductibles which typically apply to brand and specialty drugs. In 2020 a Prescription Drug Plan can have a deductible up to $435, but some plans have deductibles well below that amount or no deductible at all.
A surprising and not well-known fact is that your insurance company is allowed to pay for your drugs but is limited by parameters set by the federal government. After paying your deductible (if there is one) you’ll pay copays (a fixed amount) or coinsurance (a percentage of the cost) until the sum that you and your plan have spent reaches $4020. You will then enter the coverage gap or Donut Hole. While you’re in the Donut Hole, you’ll pay 25% of the costs of your medications (some plans will offer flat copays for drugs). You’ll leave the Donut Hole once your total out-of-pocket costs reach $6,350. The final phase is Catastrophic Coverage. For the remaining calendar year, you’ll pay either $8.95 for brand name drugs, $3.60 for generic OR 5% of the cost of the drug, whichever is more.
Additional take-aways: Even if you use no drugs now you should consider joining a Medicare drug plan. You can avoid a penalty, get lower priced drugs and protect yourself against higher future drug costs. Also, if you are assessed a penalty you will pay this in addition to your premium for as long as you have your drug plan.