As you get older, part of your healthcare needs will probably include a greater alliance on prescription drugs. Unfortunately, Medicare Part A and part B only cover some prescriptions in certain situations.
To get the best prescription drug coverage and reduce your drug costs overall, you may want to consider a Medicare Part D plan. The good news is that there are several Medicare beneficiary Part D plans to choose from in New Jersey.
Many people are already aware of what Medicare is and how it works. If you fall into that category, then skip ahead to the next section.
However, if you don't understand the basics of Medicare, here's a high-level overview of how it works.
Medicare is a federal health insurance program administered by the Centers for Medicare & Medicaid Services. People 65 and older and some younger people with qualifying disabilities such as End-Stage Renal Disease and ALS are eligible for benefits.
Medicare has four parts:
There are no premium costs for Part A in most cases, but you will be responsible for paying deductibles and copayments as services are rendered. You'll have to pay a monthly premium for all other parts of Medicare.
Medicare Part D prescription drug plans (PDP) are optional. However, if you delay enrolling in a Part D plan, in some cases you may have to pay a late enrollment penalty.
If you want this type of added coverage, you'll have to buy a plan from a private health insurance company that contracts with Medicare. In most cases, you'll also have to pay a monthly premium.
Part D plans work as an extension of Original Medicare coverage. As such, before you can sign up for a Part D plan, you must already be enrolled in Medicare Part A and/or Part B and live in the plan's service area.
Part D plan coverage is spelled out in detail under what is known as the plan's formulary. This is a complete list of all drugs covered by the plan. Drugs are divided into specific categories called tiers. Typically, each plan has three or four tiers identified as generic, preferred brand, non-preferred brand, and specialty.
All tiers are not created equal, and a drug listed in tier 1 in one formulary may be listed in tier 2 in another. Drugs in lower tiers cost less, and those in higher tiers cost more.
In some cases, health plans may choose not to cover a particular prescription drug. This might be because the drug has a generic version, is considered less effective than other similar drugs, or it costs more.
Formulary changes can also occur when a new drug hits the market or when the FDA flags a drug as harmful.
When you begin actively shopping for a Part D plan in New Jersey you will need a current list of your prescription medications. Look closely at each plan to ensure it covers all your prescriptions.
Each Part D plan has discretion in creating its formulary. The formulary can change at any time. However, when changes take place, you'll be notified by your plan if you are enrolled.
To avoid a possible late enrollment penalty, you should enroll during the Medicare Initial Enrollment Period (IEP). That is typically the seven months on either side of your 65th birthday or the seven months on either side of your 25th month of receiving Social Security or Railroad Retirement Board disability benefits. The Part D late enrollment penalty is an amount that is permanently added to your Part D premium.
You may owe a late enrollment penalty at any time after your Initial Enrollment Period is over if there is a period of 63 or more days in a row when you don't have Medicare drug coverage or other creditable prescription drug coverage.
Creditable drug coverage is prescription drug coverage expected to pay on average as much as the standard Medicare prescription drug coverage.
For example, this might be a part of your employee medical benefits through your current employer, one of your retired medical benefits, or coverage through entities such as TRICARE, Indian Health Service, or the Department of Veterans Affairs.
Also, if you get assistance through Extra Help, you won't have to pay an enrollment penalty.
Your plan must tell you each year if your non-Medicare drug coverage is creditable coverage.
A late enrollment penalty cost depends on how long you went without Part D or creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($33.06 in 2021) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.
The cost of a Part D plan can depend on the plan you pick and how much money you make. People with higher incomes pay premiums that are a little higher.
A deductible is an amount the beneficiary must pay for the prescription drugs before their Part D policy begins to pay its share. For 2021, the Part D deductible is $445 for the year, representing a small increase of $10 over 2020.
The wrinkle on deductibles is that most Part D plans exclude Tier 1 and Tier 2 drugs from the deductible. That gives immediate cost relief coverage to most lower-cost medications.Part D plans also have Initial Coverage Limits (ICL). The good news is for 2021, this amount was increased to a new high of $4,130.
However, plans also have an out-of-pocket threshold for 2021. This amount is now $6,550, an increase from $6,350 in 2020. The out-of-pocket amount does not include premium costs.
A coverage gap, also known as the Donut Hole, is the difference between the ICL and the out-of-pocket threshold. You enter this Donut Hole when your prescription drugs’ total negotiated retail value exceeds the plan’s ICL.
By agreement with Medicare, Part D plans are required to offer a coverage gap discount. For example, the 2021 brand name coverage gap discount is 75%. Some plans also offer additional cost-sharing gap coverage, and this might be one of the questions you ask as you shop for a plan.
To determine if you'll run out of coverage and fall into the Donut Hole, look at the average monthly cost of your medications and multiply by 12. If that dollar amount exceeds the ICL, you will enter the Donut Hole at some point. This assumes that your current retail drug pricing will stay the same, which isn't always the case.
When you max out on your total out-of-pocket cost amount of $6,550, you exit the Donut Hole coverage gap and enter a Part D plan's Catastrophic Coverage phase. This phase ensures that you only pay a small copayment or coinsurance percentage for covered drugs for the rest of the year.
If you're eligible for both Medicare and Medicaid, you're identified as dual-eligible. As a result, you're automatically enrolled in a New Jersey Part D prescription drug plan and the Social Security Extra Help assistance program.
Extra Help is a low-income subsidy that pays most of the costs for your prescriptions if you're eligible. To qualify, you must be enrolled in Original Medicare, live in the United States, and your combined income and assets can't be worth more than $13,640 as an individual or $27,150 if you live with your spouse.
If you qualified for Medicaid before you were eligible for Medicare, contact your local Medicaid office to discuss your prescription drug plan options.
Many leading New Jersey Medicare HMO and PPO insurers such as Cigna, Humana, Horizon Blue Cross Blue Shield, and others typically offer Medicare supplement insurance plans.
Understanding the details of Medicare prescription drug plans can be challenging if you haven't gone through the process before, so it’s wise to ask for help in you need it.
That’s why we’re here!
If you have questions or want help searching for the best plan for your situation, call us at 800-435-4765.
Information is for educational purposes only and should not be construed as an offer of insurance, advice, or recommendation. The information provided is not intended as tax, financial, investment or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
Not connected or endorsed by the US Govt or the Federal Medicare Program. Medi-Solutions Insurance Agency, LLC is an independent Life, Accident and Health Insurance Agency, NJ Ref#1642311. Some plans and features may not be available in all states.