In retirement, health care costs are significant, and prescription drugs are often at the top of the list. According to a report published by the U.S. Department of Health and Human Services in 2022 says that about 5.8 million Medicare recipients had trouble paying for essential prescription drugs in 2019.
Prescription discount cards and apps like GoodRx can help people who retire early save money on their medicines. Most of these programs, though, can’t be used with Medicare drug plans, so retirees have to look for other ways to save money.
Here is how the Medicare Part D program works, the average costs, and how to compare prescription drug plans to ensure you’re getting the best deal. Additionally, some programs can help lower your out-of-pocket drug costs, and a non-profit group to help you find the right Part D coverage.
What is Part D of Medicare?
Medicare Part D is a program for people who want to pay for prescription drugs. Private insurance companies run that the federal government has approved. People with Medicare can choose between two ways to get Part D coverage:
- A stand-alone Part D plan adds to Original Medicare (Part A and Part B).
- A Medicare Advantage plan (Part C) includes coverage for prescription drugs and other benefits.
Most of the time, you can’t combine Medicare Advantage plans with Medicare Part D plans that are sold separately. Either you have Original Medicare with a separate Part D plan or a Medicare Advantage “all-in-one” plan that includes Part D coverage.
You have many options if you’re looking for a new Part D plan. The Kaiser Family Foundation, a non-profit group, working on health care policy, says there will be more than 760 stand-alone Medicare Part D plans in 2022.
On a local level, there are also hundreds of Medicare Advantage plans that cover prescription drugs.
How much does it cost for Medicare to cover prescription drugs?
The total cost of Medicare drug coverage includes your premium, deductible, and out-of-pocket costs you pay at the pharmacy.
When choosing the best coverage for your budget, it’s important to think about all of these costs:
Premium: The amount you pay for your drug plan each month.
Deductible: The amount you pay out of pocket each year for covered drugs before your insurance starts to pay its share.
Drug prices: Every year, Medicare Part D insurers often change the drugs they cover and how much they cover.
Your Medicare prescription drug costs will also be higher if you sign up for Medicare late, have a long break in coverage, or make a lot of money.
During Medicare’s open enrollment period, which runs from October 15 to December 7 each year, you can change your Part D or Medicare Advantage plan. Changes start on January 1 of the following year.
Plan expenses: Premiums and Out-of-Pocket Costs
According to the Centers for Medicare & Medicaid Services, the average monthly premium for Part D coverage is expected to be about $31.50 in 2024. (CMS).
The Kaiser Family Foundation says that in 2022, the standard Part D deductible will be $480, but some plans will have lower deductibles.
Most of the time, plans with lower premiums have higher deductibles.
If you don’t need prescriptions often, you can look at plans with low or no monthly premiums. Most of the time, these plans have high deductibles.
Costs of Prescriptions
Since private insurance companies run Part D, each plan has a different list of covered drugs. The copayment or amount you pay out of pocket for each covered drug can also change.
Plans for Medicare Part D also have pharmacies they like to use. You’ll pay more for your medicines if you go to a pharmacy that isn’t in your plan’s network. Remember that no plan covers all drugs when looking for the right Part D plan. Depending on the plan, the same drug may cost more or less.
Each year, premiums, deductibles, and copays can change.
Formulary
This is a list of covered drugs. Private insurance companies often change formularies at least once a year, which is why you should review your Medicare Part D coverage yearly.
Most of the time, Medicare formularies divide medications into different tiers based on how much they cost, and most models have between three and five tiers.
Usually, the cheapest drugs are in the first tier and consist mostly of generic medications.
The highest tier comprises specialty drugs and brand names, and these drugs come with a high out-of-pocket expense.