7 Tips for Choosing a Medicare Part D Drug Plan

Medicare Part D provides prescription drug coverage for those enrolled in Medicare and can significantly help in the management of healthcare costs during retirement. However, plans are available from many private insurance companies, and each plan differs in terms of costs, coverage and restrictions. This can make picking a plan feel overwhelming. To make the right decision, it's important to consider your current medications, budget and healthcare needs .

A financial advisor can also help you create a plan to pay for your healthcare costs in retirement.

What Is Medicare Part D Coverage?

Medicare Part D is a federal program designed to help cover the costs of prescription drugs for those enrolled in Medicare. An optional add-on to Medicare Parts A and B, it is available through private insurance companies approved by Medicare. These plans can vary widely in terms of drug coverage, premiums , deductibles and copays, so it's important that you choose a plan that aligns with your health needs.

Part D plans have a formulary, which is a list of covered medications, typically divided into different tiers. Lower-tier drugs, such as generics, usually come with lower out-of-pocket costs, while higher-tier, brand-name medications may cost more.

Medicare Part D also includes different phases of coverage, such as the initial coverage phase, a donut hole coverage gap and catastrophic coverage. The donut hole begins after you and your plan have spent a certain amount on covered drugs, during which your out-of-pocket costs may be higher. Once your out-of-pocket costs reach a specific limit, you enter the catastrophic coverage phase, where your costs for prescription drugs decrease significantly.

7 Tips for Choosing a Medicare Part D Drug Plan

When selecting a Medicare Part D drug plan, there are several factors to keep in mind. Consider first your specific needs, including your usual prescriptions and whether you are more interested in keeping drug costs even throughout the year or want to minimize the coverage gap.

Once you've thought those over, here are seven general tips to help you choose a plan:

1. Use Medicare.gov to find plans: Start your search by using the Medicare Plan Finder on Medicare.gov. This tool allows you to compare available plans in your area based on the medications you take. It's a helpful way to view the various options side by side, including coverage, costs and the pharmacies that work with each plan.
2. Look for restrictions: Some Medicare Part D plans have restrictions, such as prior authorization, quantity limits or step therapy, which may affect how and when you can access certain medications. Review these restrictions before choosing a plan to ensure your medications are easily accessible without delays.
3. Understand the exception process: If your medication isn't covered by your chosen plan, you may be able to request an exception. It's important to understand how the exception process works and how to navigate it if necessary. Plans are required to provide coverage for necessary medications under certain circumstances, so knowing your rights can help avoid gaps in coverage.
4. Compare monthly premiums: Monthly premiums can vary significantly. Rather than simply seeking lower premiums, balance the cost against the coverage offered. A plan with a low premium might not cover your specific medications or could have higher out-of-pocket costs in other areas.
5. Compare annual deductibles: Some Medicare Part D plans have an annual deductible , which is the amount you pay out-of-pocket for your prescriptions before your plan begins to cover costs. Compare deductibles across different plans to see which one fits your budget.
6. Estimate out-of-pocket costs: Consider how much you might pay out of pocket , including copays and coinsurance for your medications. The Medicare Plan Finder tool can help by providing estimates based on specific drugs you take and pharmacies you use.
7. Seek help when necessary: If you're struggling to choose a Medicare Part D plan, consider seeking help from a Medicare counselor, financial advisor or insurance agent. These professionals can offer personalized advice based on your health and financial needs, making the decision-making process smoother and less stressful.

How to Get Medicare Part D

Enrolling in a Medicare Part D plan is relatively straightforward. You can sign up during your initial enrollment period (IEP), a seven-month window that begins three months before the month you turn 65 and ends three months after your birthday month.

If you miss this window, you can also enroll during the annual enrollment period from October 15 to December 7 each year. During this time, you can join, switch, or drop a Medicare Part D plan. Under certain circumstances, which include moving to a new location or losing your current coverage, you may be able to sign up outside the usual enrollment periods.

There are two primary costs to be aware of when signing up for Medicare Part D: the monthly premium and the annual deductible.

Premiums vary based on plan and your location. Income can also be a factor. High earners may have to pay an additional surcharge known as the income-related monthly adjustment amount (IRMAA) .

It's also important to keep in mind that late enrollment in a Part D plan could result in a penalty, which is added to your monthly premium for as long as you have the plan. Make sure you review your options early to avoid unnecessary fees and ensure you have the coverage you need.

Bottom Line

Choosing a Medicare Part D drug plan can be an important step in managing your healthcare needs. By understanding what each plan offers, comparing costs and reviewing any restrictions or exceptions, you could make an informed decision that fits both your health and financial situation.

Financial Planning Tips

• Whether you're saving for a specific financial goal or simply want to build wealth, a financial advisor could help you determine which type of account or investment will fit your needs. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• About the time you become eligible for Medicare, you are likely to be eligible to claim Social Security benefits as well. Use SmartAsset's Social Security calculator to estimate the size of your monthly payment.

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