Medicare includes Part D, the prescription drug benefit, offered through private health insurance companies. Each prescription drug plan meets federal requirements as managed by the Centers for Medicare & Medicaid Services (CMS). Insurance companies enter into agreements with both drug manufacturers and drug distribution networks. Some of the costs associated with Part D drug coverage are:
Premium: The monthly amount that you pay to your Part D plan for coverage. Premiums vary by plan, and the average national premium in 2023 is $32.74.
Annual deductible: The amount you must pay for your Part D prescription drugs before your plan begins to pay. The deductible varies by plan, and the maximum deductible in 2023 is $505.
Coinsurance or copays: The amount that you pay out of pocket for covered drugs after you have met your deductible and before you enter the coverage gap (see below). A coinsurance is a percent of the cost of a drug. A copay is a set amount. Many Part D plans use tiers to price drugs listed on their formularies. Drugs on lower tiers are less expensive, and drugs on higher tiers are more expensive. A sample tier structure could be:
Tier 1: Preferred generic drugs
Tier 2: Generic drugs
Tier 3: Preferred brand-name drugs
Tier 4: Brand-name drugs
Tier 5: Specialty drugs
After you and your plan together spend $4,660 in total drug costs, you reach the coverage gap; your out-of-pocket cost by this point is approximately $3,100 if brand name drugs were only obtained. This coverage gap is also sometimes called the “donut hole”. During the coverage gap, you will have to pay 25% of the cost of your drugs. In all plans, catastrophic coverage is the amount above $7,400, the coverage period when you pay 5% of the drug cost for the remainder of this calendar year.
Following the implementation of the Inflation Reduction Act, beginning next year, an individual enrollee’s maximum out-of-pocket cost is estimated to be about $3,250 and in 2025, the maximum out-of-pocket cost will be reduced to $2,000 for the copayments of brand name drugs.
Extra Help Program
Extra Help is a federal program that helps pay for your out-of-pocket costs with your Medicare Part D prescription drug coverage. Your income and assets determine if you are eligible. Here in Alaska, the monthly income limit is $2,296 for individuals and $3,100 for couples. The asset limit is $16,660 for individuals and $33,240 for couples. Even if you think your income or assets are above the eligibility limits, you may still qualify for Extra Help because certain types of income and assets are not be counted, including your residence, your personal possessions and your vehicle. You automatically qualify for Extra Help if you have Medicaid, Supplemental Security Income, or a Medicare Savings Program.
Extra Help can save you money in many ways. The Extra Help program pays for your Part D premium up to an amount determined by the State of Alaska. It lowers the costs of your prescription drugs. If you delayed Part D enrollment and have a late enrollment penalty, Extra Help eliminates your Part D late enrollment penalty. Finally, people with Extra Help can change their Part D plans more often, if needed, such as to lower costs. Remember that Extra Help is not a replacement for Part D. It is also not a plan; instead, it is a cost assistance program. To be eligible, you must have a Part D plan to receive Medicare prescription drug coverage. If you do not choose a plan, you will in most cases be automatically enrolled in one.
Other ways to save on drug costs
Whether or not you qualify for Extra Help, you have other options to help save on drug costs. If you are struggling to pay for expensive brand-name medications, you may want to speak to your doctor about whether you can use a less expensive generic drug. You can also speak to your doctor about getting samples of your medication. You may try speaking to your pharmacist about waiving your copay. Although pharmacists cannot routinely waive copays for people without Extra Help, your pharmacist may waive your copay on a case-by-case basis.
If you are getting a drug from a hospital pharmacy, you may also be able to ask if the hospital has a charity care program that would allow you to access the drug at a lower cost. You may be able to get medications at a reduced price for national or local discount programs, such as NeedyMeds.org or GoodRx.com. You might also be eligible for free or low-cost drugs directly from the drug manufacturer.
An early reminder to remember that the annual Open Enrollment to review your Part D prescription drug plan begins Oct. 15 and lasts through Dec. 7. For any Medicare related questions, please feel free to contact the State of Alaska Medicare Information Office at 800-478-6065 or 907-269-3680; our office is also known as the State Health Insurance Assistance Program (SHIP), the Senior Medicare Patrol (SMP), and the Medicare Improvements for Patients and Providers Act (MIPPA) program.
If you are part of an agency or organization that assists Seniors with medical resources, consider networking with the Medicare Information Office. Call us to inquire about our new Ambassador program.
Sean McPhilamy is a volunteer and Certified Medicare Counselor at the Alaska Medicare Information Office.
