If all of this up to now has been fun and straight forward, now we come to the next alternative part of Medicare, the Prescription Drug coverage or Part D.
Part D isn't technically an alternative to replace Original Medicare, it's actually an optional coverage designed to be used in conjunction with either Original Medicare or an Advantage plan.
Part D, or PDP, plans are like Advantage plans as they are not available directly from the government, but from private insurance companies authorized by CMS to market plan(s) to cover prescription drugs.
They can vary significantly from state to state, county to county, region to region, etc. A single insurance company can offer multiple versions of plans with significant cost and coverage differences.
All PDP plans will follow a common format dictated by the CMS to include certain components, such as:
- 4 stages
- preferred and standard pharmacies in their network
- mail order pharmacies
Plans can change from year to year with changes in:
- will your drug(s) be covered in their formulary
- will your drug(s) be in different tiers with different costs
- will the pharmacies of choice be changed and effect your costs
- will the plan still be offered in your area
All the plans have a coverage year from Jan 1st through Dec 31st.
Lets get some definitions of the components of a plan.
Premium. The amount you will be charged monthly, whether you use the plan or not.
Deductible. The amount you will have to pay out of pocket before the plan starts to pick up some or all of the cost of your drugs.
Formulary. The list of drugs that the plan will cover. Sometimes referred to as the Drug List or Drug Guide. This list is developed by the company's team of professional doctors and pharmacists.
Tier. Within the formulary each drug is assigned to a tier (usually 4 or 5 of them) which determines the amount of cost to you for that drug.
Copay(ment). A fixed dollar amount that you pay for each tier. Usually in the lower tiers 1 an 2.
Coinsurance. This is a percentage of the drugs cost you will be required to pay instead of a copay. Usually in th higher tiers 3, 4, and 5.
Stages. The CMS has specified that all drug plans have 4 stages which determine how the costs you pay are calculated. The 4 stages are
- Stage 1 - Yearly Deductible stage
- Stage 2 - Initial Coverage stage
- Stage 3 - Coverage Gap stage, also known as the Donut Hole
- Stage 4 - Catastrophic stage
Network Pharmacies. Each plan has it's own network of pharmacies which can only be used to purchase the drugs. Some of these pharmacies are classified as preferred cost-sharing and others are standard cost-sharing. Preferred pharmacies usually provide lower cost-sharing.
Mail Order Pharmacy. Some plans offer mail order pharmacies, both preferred and standard, where you can get your drugs in 3 month supplies.
That's it for today. Next post will give you process of the plans in greater detail, giving samples of how the costs are covered though the 4 stages.