Once you become eligible for Medicare, choosing your coverage may feel a bit overwhelming. There are several different components of Medicare that you must learn about before making a choice. In the following sections, we will compare your Medicare options.
Original Medicare is the traditional Medicare plan. It consists of Part A hospital insurance and Part B medical insurance. Through these components, Medicare beneficiaries receive a majority of their health care coverage.
If you are interested in Original Medicare, this is what each Part of your benefits will offer:
Part D of Medicare covers prescription drugs for Medicare beneficiaries. Medicare Part D is not a part of Original Medicare, but it is a supplemental coverage type that can normally only be accessed by Original Medicare members. Part D plans are sold by private insurance companies, unlike Part A and Part B benefits which are administered by the federal government.
This is the period where you must pay a certain amount of prescription costs before your Part D plan kicks in. The maximum deductible a Part D plan can have is announced each year by Medicare. In 2023, the maximum deductible is $505. That doesn’t mean it’s the maximum you’ll pay all year, rather it’s what you owe initially before your plan begins to help pay a portion of your drug costs. Some Part D plans have the full $505 deductible, some have a lower deductible, some don’t have a deductible at all. It just can’t be higher than $505 in 2023.
Assuming your medications are on your plan’s formulary list of drugs, this is when your Part D plan begins to pay the bulk of a drug’s cost (as high as 75% or more). It’s “Tier-based” pricing. Typically, generic drugs are Tier 1 or Tier 2..and then, brand name drugs are Tier 3, Tier 4, and Tier 5. You will pay tier-based pricing until you reach the Coverage Gap (Donut Hole), which is when total “gross” drug costs reach $4,660 in 2023. Gross drug costs are what you pay, plus what your plan paid on your behalf.
Once your gross drug costs reach $4,660…you will enter the Coverage Gap (a.k.a. Donut Hole). This is where you will pay 25% of a drug’s full retail “gross” cost. For some drugs (like generics), the cost might not change much. For other drugs (like brand names), the cost could go up substantially because you’re now paying 25% of the full gross cost. It’s like this until you reach $7,400 of True Out-of-Pocket Costs (TrOOP).
NOTE: $7,400 is NOT a cap or max out-of-pocket limit. See Catastrophic below…
When your TrOOP costs reach $7,400, you will pay no more than 5% of a formulary drug’s full gross cost for the remainder of the calendar year. TrOOP is a combination of:
So this means you don’t have to spend $7,400 to reach the Catastrophic phase. It’s really in the neighborhood of about $3,000 or so of drug cost out of YOUR pocket to reach the $7,400 TrOOP (we know…it’s confusing!).
The Part D Senior Savings Model has basically been expanded and strengthened by the passage of the Inflation Reduction Act of 2022.
Approved insulins were limited to a $35 max copay for a 30-day supply in only CERTAIN Part D plans and Medicare Advantage plans that include drug coverage
The $35 max copay did NOT extend through the Catastrophic phase of Part D, so the price of insulin could be higher than $35 when reaching the Catastrophic phase
Approved insulins are now limited to a $35 max copay for a 30-day supply in ALL Part D plans and Medicare Advantage plans that include drug coverage
The $35 max copay extends through ALL phases of Part D, so the price of your approved insulin will be level through the year
NOTE: In order to benefit from this, your plan must cover your insulin on the formulary. So be sure to confirm this with your plan or via Medicare.gov.
If you don’t want Original Medicare, you do have an alternative option. Part C plans, or Medicare Advantage plans, are Medicare plans that are sold by private insurance companies. These companies contract with Medicare to provide Medicare beneficiaries with their Part A and Part B coverage.
Through a Medicare Advantage plan, you have more options for benefits and your benefits are also bundled into a single plan. The additional benefits you can get through Medicare Advantage include:
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