In 2006, the government mandated that an independent prescription drug plan must be purchased when a medicare beneficiary is enrolled in Part B or a penalty would accrue, regardless if you were taking drugs. The penalty is 1% of the average monthly premium of a drug plan, currently 34 cents. While that may seem like pennies....a new client came to my office in 2014 who had enrolled in Part B in 2007 without purchasing an independent drug plan and their penalty was over $28 a month, which translates to over $300 a year.
Every year insurance companies present to CMS (Center for Medicare Services) their plan for approval for the upcoming year: premium cost, deductible, formulary tiers, and network of pharmacies. Once approved, clients have the option in enrolling during Open Enrollment (currently October 15th through December 7th) for the following year. Drug plans contract each year starting in January and ending in December. Unless a new application is filed with Medicare, the current contract will automatically renew.
Plans should be shopped every year based on current medications. If you move from a coverage area or are losing current coverage, you may be eligible for a special enrollment period. Certain low income subsidies are available to assist in paying for prescription drugs for those who qualify.
The Donut Hole
The "donut hole" refers to the cost sharing model used in paying for prescription drugs. On the far left of the donut, a member starts with the premium and any deductible charged by the plan. The left side of the donut represents the initial coverage period. When the full cost of your drugs reaches $3,750 (both the portion you pay as well as what your plan pays), you have entered the donut hole. Once in the donut hole, the cost sharing model changes because you are in the coverage gap, so your cost is about 45% on a brand name drug. When your cost sharing reaches $4,750, you are in the catastrophic coverage benefit where your cost is reduced to about 5%. Not everyone reaches the donut hole, so check with us to help navigate your costs annually.