How Much Does Medicare Part D Cost?
Part D Cost – The cost for a Medicare Part D prescription drug plan is not as cut and dry as other Medicare premiums, like those for Part A and Part B. Your premium largely depends on how many prescriptions you take and, therefore, how much coverage you need. But, there are other costs associated with these plans. Understanding those costs will help you prepare for prescription expenses throughout the year.
Part D Premiums, Deductibles, and Cost-Sharing
The total cost for your Part D plan will depend on a few factors. The plan you choose, your income, when you enroll, the kind of prescriptions you take, and which pharmacy you use will all play into your out-of-pocket expenses.
Let’s start by taking a look at the costs nearly everyone has as part of their drug coverage: your premium, deductible, and copayments or coinsurance amounts.
If you have a Part C (Medicare Advantage) plan that includes drug coverage, you will not need to get a separate Part D plan and will not pay any additional premiums for that coverage. However, if you have Original Medicare with or without a Medicare supplement plan, you’ll need to enroll in a stand-alone prescription drug plan.
Part D plans are sold by private insurance companies, so they are allowed to set their own rates. Generally, the more coverage you need – either because you take many prescriptions or you take expensive prescriptions – the higher the monthly premium. To give you an idea of the cost, in 2022, premiums range from around $7 per month to $99 per month.
Each year, the Centers for Medicare and Medicaid Services (CMS) sets a standard deductible amount. This year, that amount is $480. Insurance carriers can choose to set their deductibles lower, but never higher than this amount. Many plans waive the deductible for prescriptions that are categorized into the first one or two drug tiers of the formulary.
Copayments and Coinsurance Costs
Each medication will also have a copayment or coinsurance amount. A copay is a set dollar amount, and coinsurance is a percentage of the drug’s cost. Once you meet your deductible, your cost will only include one of these amounts.
When choosing your Part D plan, you’ll need to consider all three of these expenses. You should add all expenses together: the annual premium, the copay or coinsurance amounts you’d pay to refill your prescriptions all year, and the deductible if it applies. Fortunately, you can work with a Medicare advisor that will do all the math for you! Once you know the total estimated cost for each plan, you can choose the one with the lowest amount.
Keep in mind that if your prescriptions change throughout the year, your cost will also likely change. In addition, make sure you are using a preferred pharmacy instead of a standard one. Preferred pharmacies allow you to get the lowest out-of-pocket costs.
Other Factors That Influence Your Part D Cost
There are two other things that could increase how much you pay for your Part D plan. You may pay both, or you may pay neither.
Part D Late Enrollment Penalty
The federal Medicare program has a few penalties you might incur. The most common of these penalties is the one for Part D late enrollment. For every full month you go without drug coverage, you will pay a small penalty. The longer you wait to enroll, the more you’ll pay. To calculate your penalty, multiply 1% times the national base beneficiary premium ($33.37 this year) and then multiply that number by how many months you went without coverage. For example, let’s say you went without coverage for 12 months.
1% x $33.37 x 12 = $4.00
You’ll pay that extra $4 every month for as long as you are enrolled in a Part D plan. Since the base premium goes up each year, your penalty will also increase each year. The penalty payment goes to the government, not the individual insurance company you enroll with.
The Income Related Monthly Adjustment Amount
Individuals with higher incomes pay more for their Medicare Part B and Medicare Part D coverage. This additional premium is the Income Related Monthly Adjustment Amount or IRMAA. As with the late enrollment penalty, any IRMAA amounts you owe are paid to the Medicare program, not the insurance company.
IRMAA is determined by looking at your Adjusted Gross Income (AGI) from two years prior. There are different thresholds for IRMAA amounts, and it will depend if you are single or married (and filing taxes jointly). For example, the first threshold begins at $91,000 for a single filer and $182,000 for joint filers. If your income is above one of these amounts, you’ll pay an extra $68 for Part B and an extra $12.40 for Part D.
Our Medicare advisors can help you choose a Part D plan that will leave you with the least out-of-pocket costs. We’ll make sure you know how to best utilize your coverage, and we’ll also help you solve any problems that might come up during the year. We are licensed with many insurance carriers, so we’ll be able to find the plan that’s right for you. Call us today to schedule your appointment.