Joanne: When it comes to Medicare coverage, perhaps the most disliked topic to discuss is prescription drug coverage, also known as Part D. However, it is also one of the most important parts of your overall Medicare coverage. So we'll discuss what you need to know about it in today's episode.

Cameron: But before we start, my name is Cameron Giardini, and together with my co-host, Joanne Giardini Russell, we're We operate Giardini Medicare, which is an independent insurance agency based out of Southeast Michigan.

Although we are based in Michigan, we do work virtually over the phone to directly help consumers in about 13 different states find the right Medicare coverage for them. If we do not work in your state, we will connect you with another trusted independent agent who will be able to help you find the coverage you want.

We also now have a free online course available for you that you can register for to learn more about all of the Medicare topics we could possibly think of. You can access this course by going to gmedcourse.com, which is gmedcourse. com. So, with that out of the way, we will briefly overview today's episode.

We will go over Part D. We will talk about the critical insurance terms that you should know when it comes to prescription drug coverage. We will talk about Part D enrollment periods and penalties that everyone is typically afraid of. We will also talk about the Part D coverage phases and how the plans work.

Last but not least, we will talk about how you can choose a Part D prescription drug plan, which is pretty valuable to know this time of year. Okay, what is Part D? The Medicare Prescription Drug Improvement and Modernization Act of 2003. Trust me, you do not need to remember that name. But that is the act, and that is when Part D of Medicare was created, and it was first actually implemented in 2006.

Part D provides coverage for most outpatient prescriptions that you will fill at a retail pharmacy. These will be like the CVSs and the Walgreens of the world. Part D is not a part of Original Medicare. If you've listened to our other episodes, you will know Original Medicare is simply Part A and Part B of Medicare, but instead, Part D is provided by private insurance companies that contract with Medicare to offer these Part D prescription drug plans.

Although these plans are provided by private insurance companies, according to the Center for Medicare Advocacy, these companies are both regulated and subsidized by Medicare and the federal government. To be eligible for Part D, you must be enrolled in Part A of Medicare and or Part B of Medicare and be a resident of the county slash service area where a Part D plan is actually being offered.

Several different insurance companies offer Part D plans. For example, in 2023 in Michigan, there are nine different insurance companies that provide Part D plans to consumers. Also, most Medicare Advantage plans typically include Part D prescription drug coverage. So just keep that in mind as we go through the episode.

Most of the information and topics we will discuss will also apply to the prescription drug coverage with Medicare Advantage plans, even though they do not directly have a standalone Part D plan like a Medigap plan. If you get prescription drug coverage through a different method, like retiree coverage, much of what we talk about in this episode will be different than your experience with your personal coverage.

So, instead, again, we will focus on the Part D plans and the coverage that most consumers on the market have access to when it comes to Medicare. So now that you know what Medicare Part D is, you have to know when you can enroll in it, which Joanne will discuss.  

Joanne: Alright, we've got three enrollment periods that I will discuss here.

So the first one is called the IEP. For most people, the first time they will enroll in a Part D coverage plan is during their initial enrollment period. Again, that's IEP. This enrollment period is the seven-month window that occurs three months before the month you turn 65, the month you turn 65, and the three months after the month you turn 65.

Note, however, that if your birth date does fall on the first day of any given month, your IEP, your initial enrollment period, is going to occur one month earlier. The Part D IEP occurs at the same time as the Part B (as in "Boy") IEP. That gets a little confusing, but that's related to your Part B Medicare coverage.

The second Part D enrollment period happens when somebody gets a Special Enrollment Period. This is also called a SEP. So you can enroll in or make changes to Part D coverage when certain events happen in your life. These events may give you access to that Special Enrollment Period. The SEP will depend on many different factors, but some common SEPs for Part D coverage include leaving employer coverage or if you change your residence to a new zip code.

If you have LIS, which is low-income subsidies, that's going to give you the ability to get a drug plan potentially. Government-declared disasters, we've got FEMA SEPs, they're called, and things like that. So there are dozens of SEPs, and we'll link to those in the show notes. The third enrollment period is called the AEP.

This is commonly misnamed as the open enrollment period each year, but it's actually called the annual election period. And this runs from October 15th until December 7th every single year. During this time, Medicare beneficiaries can enroll in a Part D plan for the first time, they can change from one drug plan to another Part D drug plan, or they can change from a Medicare Advantage plan to a Part D drug plan.

The new coverage that they choose during that window is going to begin on January 1st of the following year. Please pay attention to this. October 1st is when you can first see the new Part D details for the upcoming plan year. So make sure you check that out on Medicare.gov when that happens on October 1st.

Cameron: So again, that is when you can enroll and potentially change Part D plans. Now let's just give you an overview of some essential terms that you should know, some of the more technical jargon when it comes to understanding prescription drug coverage. So the premium for a plan is the monthly amount you essentially pay to your part D insurance company to have your coverage in place.

When it comes to standalone prescription drug plans, most plans will have a monthly premium. So just be aware of that. Now a deductible, and again you may be familiar with all these terms from past experience with insurance, but we just want to make it clear in case you haven't heard of these in a while.

So the deductible according to dictionary.com, the deductible is the amount for which the insured is liable before an insurance company makes a payment. So, in simple terms, this means that you are responsible for the total cost of a medication until your deductible is met. For example, if you have a $500 deductible and your medication for a 30-day supply costs $100, You will pay $100 each time until your full deductible has been met.

Now that's how it typically works, but it's good to know that part D plans are a little bit unique. So one of the unique things with part D coverage is that with many plans or at least some plans, Your deductible. It does not always apply to all medication tiers. So a $500 deductible may not apply to the lower cost tier one and tier two medications with the plan, meaning you might actually have a set copay for those low-cost medications.

Even before your deductible has been fully paid, this is generally a good thing. Again, it does not apply to all plans, but make sure you understand what your deductible is with Part D and how it actually applies to your medications. Now, a copay is what you might be familiar with as well. This is a fixed amount that you pay for a covered prescription.

And this usually occurs again after you have met your deductible. For example, you may have a prescription with a $5 copay for a 30-day supply. This copay is fixed regardless of the actual retail cost of the medication. So, if the actual price of the medication is $50 for 30 days, again, that's the retail price if you were paying cash, you would instead still pay that 5 copay with your plan, and the insurance would pay the remaining $45.

Your copay was set at that $5 limit we talked about with the example. Now, this one is important. It's a little less understood, and it's something that I think will become more common in the future, but that is co-insurance. So co-insurance is a percentage instead of a fixed dollar amount you might pay for prescriptions.

What that means, for example, is that you might have a prescription with a 40%. Coinsurance, which means you would pay 40 percent of the total retail cost of that prescription. So, in this case, if you have a prescription with a retail cost of $100, you would pay $40 or 40%. And now, if the total price is actually $500.

You're still paying 40 percent, which now is 200 coinsurance. It usually applies after your deductible is met, but unlike the copays we talked about, the amount you pay is not fixed. When it comes to part D coverage, know that coinsurance will be most applicable when it comes to tier three, tier four, or higher tiers like tier five medications.

So another term that's really good to know is the Medicare Part D formulary, and I'll have Joanne Talk about that one. 

Joanne: Yeah. Let's dive into the formularies. So now that we discussed Part D, the different cost-sharing terms like deductibles, co-pays, and co-insurance, it's really crucial to understand what a plan's formulary is.

Very simply speaking, a plan's formulary is a complete list of the specific prescription drugs that are covered by each Part D plan. So, if a prescription is listed on a plan's formulary, it means that the plan covers at least a portion of the medication cost. But if it's not listed on the formulary, the plan won't cover any cost of that medication.

It's very important to understand that Part D plans that are offered by different insurance companies are going to have different formularies with different covered prescriptions. That's super important. Don't assume that all plans are the same. Please, please, please don't assume that. According to the Medicare Rights Center, all Part D plans must cover at least two drugs from the following categories, HIV and AIDS treatments, antidepressants, antipsychotic medications, anticonvulsive treatments for seizure disorders, immunosuppressant drugs, anticancer drugs, unless those are covered under Part B of Medicare.

Let's discuss what a formulary exception is. So if you take a prescription drug that is not covered on a plan's formulary, you can request a formulary exception with that particular Part D insurance company to see if they'll make an exception to cover that medication for you. This is never a guarantee, but it's generally always worth a shot in asking.

Now I'll dive into medication tiers. So aside from telling you which medications are covered by Part D plans, the formulary is also really important because it shows you what tier all of your different medications are covered at. There are typically five tiers. Of medications that range from a tier one, a low-cost generic, all the way up to a tier five specialty medication.

So medication tiers are generally going to tell you what you may have to pay for that prescription. For example, a tier one medication might have a $2 copay for a 30-day supply, while a tier four medication might have a co-insurance of 40%. So medications are not the same tier with all plans. A tier three medication with one plan.

It could be a Tier 2 or a Tier 4 with another Part D plan. Generally, the higher the tier, the higher the cost to the consumer. There's a lot there, but this is really important stuff.

Cameron: Yeah, exactly. And to make it easier, too, you don't have to always search for the physical formularies for plans. They can be hundreds of pages long.

You can either go online and you can search for them easier on your computer, or you can just use Medicare.gov; it will essentially use the formulary data and tell you where your prescriptions fall with different plans. So another concept that is important to understand is preferred versus standard pharmacies when it comes to Part D.

Each Part D plan will typically have a list of contracted pharmacies which are the pharmacies you can use to fill your prescriptions. Now, these are not all created equally with each plan, so They can also be separated by preferred versus standard pharmacies, again, when it comes to most plans.

Preferred pharmacies are pharmacies where your out-of-pocket cost for prescriptions should be the lowest, and standard pharmacies they're still in the network, so you can still use them, but typically, your costs will be higher than with a preferred pharmacy. So, for example, You may have a Tier 1 medication with a $0 copay for a 30-day supply at a preferred pharmacy, and that same medication could have a $10 copay for a 30-day supply at a standard pharmacy.

The preferred and standard pharmacies are different with all plans, so make sure that your actual plan fits your pharmacy preference. One plan might have CVS preferred and Walgreens as standard, while another Part D plan might be the complete opposite. We will highlight this briefly later in the episode, but generally speaking, one of the best places, again, to find preferred versus standard pharmacies is by using the Plan Finder tool on medicare.gov.

Joanne: Let me just interject with a quick story there. Someone called yesterday, he's been using a non-standard pharmacy all year, and he said I'm just a little frustrated because my tier one medication that used to be cheap is costing me $50 every 90 days. I said, well, are you using a preferred pharmacy?

And he said, well, I don't know. We had run it based on what he liked, which was a small hometown kind of pharmacy, but he knew going into it, but he forgot that CVS would be a zero copay versus the $50 he was paying for 90 days. So that's $200 a year. Makes a big difference. Yeah. And we 

aren't 

Cameron: saying not to use the small hometown pharmacies, but know that, I mean, typically speaking, they are going to be a standard pharmacy with most plans compared to the big box retailers that are typically preferred.

So you have to make that judgment call based on your finances. So moving on to probably the least popular or the least fun topic when it comes to Part D, we'll talk about Utilization Management Techniques. You don't need to remember that term, but we'll break down what these are.

Simply speaking, they are strategies used by Part D insurance companies to make sure that prescription drugs are used appropriately and cost-effectively, probably with cost-effectiveness being their most significant criterion. We will discuss a few of these right now. So, what you'll see in Part D plans are typically step therapy, quantity limits, and prior authorization.

 Step therapy, medicare.gov defines this as you must first try a specific less expensive drug on a plan's formulary that's been proven effective for most people with your condition before you can move up a step to a similar more expensive You can think of this as having to try a lower cost medication A before the plan will cover the more expensive medicine B.

You may be able to receive an exception not to have to do sep therapy if your doctor documents the treatment. The medical necessity of the medication you are currently taking, or if you can show that you have already tried those less expensive medications. Now, the other one we talked about is quantity limits.

These are essentially what they sound like. So part D plans might limit how much of a supply you may be prescribed once for a medication. For example, if you have a medication with a quantity limit of 30 tablets per 30 days, You would have to get an exception to get 60 tablets during that one 30-day period.

Now, these guidelines typically follow FDA guidelines. We don't usually see many issues with quantity limits but know that they are there for some medications. Now, the last one we'll talk about is prior authorization; Medicare.gov defines prior authorization when they say you and your prescriber must contact your plan before you can fill specific prescriptions.

Your prescriber may need to show that the drug is medically necessary for the plan to cover it. You need permission from your Part D insurance company before they would allow you to fill that prescription at the pharmacy. With all of these management tools, you can see if your medications are subject to one if you look again, on your plan's formulary, or by using the online Medicare.

gov Plan Finder tool. So, shifting to financial assistance with Part D, Joanne will discuss low-income subsidies. So 

Joanne (2): the low-income subsidy is also called LIS. And that's a federal program that can help those with lower incomes save on their prescription costs. According to the Medicare Rights Center, if your monthly income is up to $1,843 in 2023, that's for a single person or $2,000 485 for a couple, and your assets are below specified limits, you may be eligible for extra help.

The extra help program can be a really large savings if you do qualify for that. This can lower your Part D premiums, deductibles, co-pays, and more. According to the Social Security Administration, the savings with extra help are estimated to be worth up to five thousand three hundred dollars annually. That's a lot. So, this program is straightforward to apply for.

You can do that by going online at ssa.gov; there's a link, we will link to that in the show notes, but there's a link right there for the online application. 

Cameron: And it's not hard to do, so make sure you do it if you're close to eligible. 

Joanne: It's very, very easy to do, and it's always worth trying, like, many of these things.

There's also other than the federal extra help program I just went through; there also are states that offer state pharmaceutical assistance programs known as SPAPs. These programs vary by state, but they may help with planned premiums and out-of-pocket costs. We will also link the show notes to a resource that lists all the different SPAPs that might be available to you.  

Cameron (2): Exactly. Yep. On the flip side of government assistance and financial help with your Part D cost, we'll talk about the Part D penalty. Of course, we can't talk about Part D coverage without talking about this dreaded Part D penalty that many people are worried about. Whether or not it will actually happen to them is another story, but...

We'll talk about that now. So from Medicare.gov, they say that Medicare calculates the penalty by multiplying one percent of the national base beneficiary premium, which in 2023 is $32.74, and it is projected to be $34.70 in 2024. Now they take that national base beneficiary premium and multiply it by the number of full Uncovered months; you didn't have Part D or creditable coverage.

The monthly premium is rounded to the nearest 10 cents, which is added to your monthly Part D premium as a penalty. So that's a lot of numbers a lot of confusion, I think. But here's an example that you can go by. So, if you go 29 months, we'll say, without proper creditable coverage for your prescriptions, your penalty in 2023 would be 29% because, again, 29 months uncovered, times that base beneficiary premium of 32.

74. It's rounded to the nearest 10 cents, which in this case, this penalty would be added to your monthly premium. And that penalty amount is actually 9 and 50 cents per month on top of what you pay. So again, it's really important to remember this penalty amount. It's added to your Part D monthly premium.

And these are lifetime penalties. So if you have a $10/month premium, let's say your plan on the market costs $10/month, and now you have a $9.50/month penalty. You are now paying $19.50/month as part of that package with the penalty included. Also, it's good to know that we already mentioned that the base beneficiary premium will be adjusted in 2024.

This base beneficiary premium changes every single year. So your Part D penalty also gets recalculated every year as well. When it comes to avoiding the Part D penalty, the key is creditable coverage. This creditable coverage essentially means that you have another source of prescription drug coverage that is as good or better than what Medicare Part D would provide.

Some examples of creditable coverage include employer-group health insurance. Employer or union retiree coverage, VA coverage through the Veterans Health Administration, TRICARE for Life, or Champva. Also, Indian Healthcare Services and more can be considered creditable Part D coverage. So make sure you ask your current insurance provider if they are creditable for Medicare Part D if you plan on delaying or not enrolling in Part D coverage.

We have another podcast episode devoted entirely to Medicare penalties, so make sure you listen to that episode as well to learn more about the Part D penalty. Also, before I forget, if you think you can avoid that penalty by having a Medicare Advantage plan, know that if you have a Medicare Advantage plan with prescription drug coverage, the same Part D penalty would apply if you are assessed a penalty.

So we're getting closer to the end, and Joanne can talk about the Part D coverage phases, which is how Part D coverage works when you have it. 

Joanne (2): Right. It's the pricing mechanisms. So many people have heard of the dreaded Medicare donut hole for prescription drug coverage, but there are four Part D phases of that prescription drug coverage, and I'm going to go into that right here.

We will give you a basic overview of all four of those now. The first stage is the deductible stage, and during this phase, you are responsible for paying 100 percent of the cost of your covered medications. The deductible amount and the medication it applies to will vary based on the different Part D plans.

For 2023, the maximum Part D deductible is $505, and this is going to increase to $545. Just remember, in this deductible phase, if you see that $505 or $545, Note about Part D if you have a Tier 1 medication, check to see if your plan will require you to pay towards that deductible with that medication.

Very often, lower-tier drugs don't count towards the deductible. So don't, you know, start the panic if you have a Tier 1 and you're seeing that significant deductible. The second phase is called the initial coverage phase. So after you have met that deductible, you're now in the initial phase of coverage where you will pay the co-pays or the co-insurance for all of your covered medications. 

These costs will depend on the plan itself and the tier of that specific medication. Then we moved into that dreaded donut hole, which is also called the coverage gap. So once your total covered medication cost reaches $4,660 dollars in 2023. This number will be moved upwards to $5,030 in 2024.

You now enter the coverage gap, and you are responsible for paying 25 percent of the total cost of your covered prescriptions. Then, once you get out of that, you enter the catastrophic coverage phase. So finally, based on that out-of-pocket total cost, you might reach the catastrophic phase of coverage, which is the final phase.

In 2023, during this phase, you will continue to pay at most 5 percent of the total cost of covered medications. However, this is very new in 2024. For the first time ever, you will pay zero for all your covered drugs in this catastrophic phase. So that'll eliminate a good chunk of the cost for people who hit that catastrophic phase.

Cameron: Essentially, the catastrophic phase will still exist, but you won't notice it as much because, again, as Joanne said, you're paying 0 for medications on your plan's formulary. 

Joanne: Right. And there are some drastic changes as, again, this will be the first time in 2024 that we will ever see that happen.

And the donor hole in many of these phases that we just talked about is going to drastically change. Going into 2025 and beyond, make sure you're tuning into future episodes where we're going to discuss this as time goes on as well. 

Cameron (2): So we're going to round this out by talking about how you choose Part D coverage since we've discussed all of the different details of Part D coverage.

So once you understand the different terms, the coverage styles, and everything there is to know about Part D coverage, choosing a specific plan becomes much more accessible. We have another podcast episode about this process in more detail, but here is an overview. Of course, an independent broker like ourselves or somebody else can help with this process, but you can also find Part D plan options by using Medicare.gov and their online plan finder tool. So when you use this tool, you will want to put in your specific zip code on the website, as well as the complete list of medications you are currently prescribed. You can also choose pharmacies based on the ones that you want to have access to with your Part D coverage.

Or even ones you want to compare the pricing with. Now, just a quick note on the medications that you'll enter. Make sure you're entering again the ones that you take regularly. Don't forget about ones you might take every few months or maybe a couple of times a year, whether those are EpiPens or creams or ointments, whatever it might be.

But don't get too caught up in the what-ifs and worry about all the potential medications you might be prescribed in a year. Now, after you've input your personal prescription information, you will then be taken to the final analysis page that filters all of the Part D plans available in your county, and it will sort them by the lowest overall cost.

This, importantly, includes the premiums for the plan, as well as the out-of-pocket cost estimate. So, they are considering what you pay per month to have the plan, as well as what you might spend out of pocket on prescriptions. You will likely want to choose from one of the plans with the lowest overall cost estimates.

Narrow down the plan options with the information we talked about in this episode. Make sure the plan formularies include your prescriptions, see if the pharmacy you use is preferred, then check the tiers of your medications and the cost, and check if the lowest cost plans have restrictions like prior authorization.

Once you have done all that, You can almost be certain that you have made the right choice when it comes to Part D, and then you can do an enrollment online with Medicare. gov or through the independent broker that you are working with. And 

Joanne: let me say that that sounds like a lot there, but it isn't that hard.

Cameron (2): No, it truly is not. And once you get used to it, it's great because you can always go online, and basically, anytime you get a new medication or anytime you want to check your coverage, you know exactly how to do it on Medicare.gov. Once you get used to it, that process does not take more than probably five minutes.

So, to recap, Part D prescription drug coverage plays a key role in understanding the overall Medicare puzzle. Whether you plan on having Medigap coverage with standalone Part D coverage or if you plan on having a Medicare Advantage plan that includes prescription drug coverage built into the plan, the information that we talked about in today's episode should help you better navigate that world of Medigap.

 Medicare prescription drug coverage. As always, please leave us a review on your podcast app and subscribe so you can listen to future episodes. If you want to find more Medicare content from us, you can register again online for our free course at gmedcourse.com, or you can go to TikTok and search Giardini Medicare.

Or also search Giardini Medicare on YouTube. Last but not least, if you want to send us any feedback or questions, please just email us at info at gmedicareteam.com. But thank you for listening, and have a great day.