With the ever rising costs of prescription drugs, understanding the Medicare Part costs and premiums, as well as the best ways of reducing those costs, is paramount to seniors.
To that end, I am going to explain to you not only the costs associated with Medicare Part D, but also give you some tips and ideas for reducing those costs.
First of all, let me list the costs that are associated with Medicare Part D:
- Monthly Premium
- Yearly Deductible
- Your co-payment per prescription
- Your out-of-pocket fees if you enter the coverage gap, otherwise known as the “Medicare Donut Hole”
- Fees if you receive Extra Help
- Late enrollment penalty…if you didn’t sign up during the Open Enrollment Period
Let me go over each one of these costs and show you how to reduce them, if practical:
The Medicare Part D premium that you pay monthly is based upon the plan you choose…and as I point out when I talked about comparing Medicare Part D plans the monthly premium is one of the LEAST important aspects to choosing a Part D plan.
The most important aspect is the formulary, the list of prescription drugs that are covered by the plan you choose.
If your plan contains the prescription drugs you are taking, there are other ways to lower the Medicare Part D costs.
This doesn’t mean that you choose the most expensive plan…just that you look at the formulary first when you are choosing a Medicare Part D plan.
This is the out-of-pocket expense that you must pay before your plan kicks in. This amount can vary from $0 up to $320…that is the cap in 2012, but this could change in subsequent years.
You should consider owning a plan with no yearly deductible.
This is the amount you pay out-of-pocket per prescription after you have paid the deductible. Most plans come with either no co-payment or a small one, in the area of $4 per prescription. Again, so long as the plans formulary has all of the medications that you need, go for a plan that features as low a co-payment as possible.
Costs In The Coverage Gap/Donut Hole
This is where your problems start…in the coverage gap, which is also known as the Medicare Donut Hole.
The coverage gap occurs after the drug plan has spent a certain amount for your covered drugs. You are then in the “Medicare Donut Hole”, where you will have to pay a significantly larger portion of the costs of the drugs, until you enter the “Catastrophic Coverage” phase, where most of the costs of your prescription drugs are covered through the end of the year…and then the cycle starts over next year.
Now, this is such an important topic that I have written a separate blog post, “The Medicare Donut Hole” that will give you more details and ideas for you to bridge the coverage gap, and maybe even avoid it entirely.
If you do not apply for your Medicare Part D policy during the Open Enrollment period, you may be forced to pay a penalty.
Now personally, I think these enrollment periods are the dumbest things associated with Medicare, but I have no control over the Medicare rules so we will all have to tolerate it.
Once again, I have put together a simple explanation to the Open Enrollment issue to let you know when you need to apply for your policy this was you do not have the pay the open enrollment penalty.
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