Ten Things Every American Retiree Needs To Know About Medicare Part D

In 2006, Medicare greatly expanded coverage for the costs of prescription medications for Americans enrolled in the Medicare program. The Medicare Part D program currently covers all but about $4,700 of each enrollee's annual prescription drug expenses, low-income retirees usually paying even less. Although $4,700 per year is a lot of money for most people on Social Security, it is a great deal easier on the budget than the nearly unlimited prescription drug expense that could have been incurred before Part D was put in place.

Enrollment in Medicare Part D, however, is not automatic, and potential pitfalls abound. Here are 10 common problems that everyone on Medicare has to resolve to get the maximum prescription drug coverage.

1. It is necessary to be signed up for Medicare Parts A and B to enroll in Part D.

Part A is the basic coverage of Medicare. It only covers 80% of most hospital expenses, and (although coverage is changing in 2014), essentially nothing for out-patient services and medications. It also has a very low lifetime hospital coverage, just 60 days, with potential for unlimited medical expense.

Part B fills in most of the gaps left by Part A coverage. This program enrolls the Medicare recipient in a private insurance program that covers the other 20% of in-patient services and makes most out-patient services (such as visits to the doctor) available with the payment of a $10 to $50 co-pay. Some Part B plans also cover the cost of medical treatment when touring outside the USA.

Part D covers many prescription drug costs, but is only available to people who have already signed up for Parts A and B. A complicated formula leaves up to $4700 in drug costs to the individual, but after that amount it is possible to get generic drugs for $2.50 and brand-name prescription drugs for $6.30 per month, for each prescription.

2. There are hundreds of companies that provide Medicare Part D coverage.

Although retirees sign up for Part D through Medicare, their coverage is provided by a private insurer. Currently there are at least 1,560 insurance companies providing Part D coverage in at least one state, with residents of every stage offered at least 40 and up to 55 different policies. Since different companies treat different medications in different ways, it is best to choose a plan with the help of the online Medicare Plan Finder, for which there is a link below.

3. Certain kinds of drugs are never covered by Medicare Part D.

No Medicare prescription drug plan pays for fertility drugs. Plans also exclude treatments for hair loss, nutritional supplements, drugs for erectile dysfunction, cold and cough remedies, medications available without a prescription, and treatments for obesity or anorexia. Even treatment for morbid obesity prescribed by a doctor is currently not eligible for Medicare Part D coverage. Medicare Part D also does not pay for barbiturates or benzodiazepine tranquilizers. 

4. Other kinds of drugs excluded from many non-Medicare plans actually are covered by Medicare Part D.

Medicare Part D will cover medications for the treatment of acne, psoriasis, rosacea, and vitiligo, even if cosmetic concerns prompt the visit to the doctor. It will cover vitamin D and niacin, when prescribed for specific health conditions (although not for general health). It will pay for drugs for specific health conditions that cause coughs, although for a diagnosis of "cough." Medicare Part D will pay for doctor-prescribed smoking cessation products and for drugs to treat cachexia (wasting) although not anorexia (loss of appetite) caused by chronic disease.

5. If a drug is available under Part A or Part B, and you choose not to pay a co-pay for it, you cannot get the drug under Part D.

Some medications are available as part of Part A or Part B coverage, usually for a co-pay greater than the $2.50 or $6.30 charged for Part D. If you don't take the drug when it is covered by Parts A or B, you can't have it under Part D.

Five Situations You Want To Avoid With Medicare Part D Coverage

Medicare Part D is a little harder to "mess up" than the other parts of Medicare, but not knowing the rules can be costly. Here in the ten things every American retiree needs to know about Medicare Part D are five situations you want to avoid with your Part D coverage.

6. Not being able to document prescription drug coverage under an employer insurance program can cause problems down the line.

Many people continue working and continue getting employer health insurance coverage after the age of 65. They usually have to enroll in Medicare Parts A and B, but they can opt to get their prescription drug coverage through their employer's plan. Only when they retire from their jobs do they want Part D coverage.

The catch is, unless you have other prescription drug coverage, you have to enroll in Medicare Part D at the same time you enroll in Medicare Parts A and B, or pay a penalty (which can really add up) for the rest of your life. Even with the late-enrollment penalty, it can still make financial sense to take Medicare Part D, but you can avoid this problem by getting a written statement of your prescription drug coverage every year you are covered by an employer policy after age 65.

7. Beware the Medicare Part D lock-in provision.

Once you choose a Part D plan, you usually have to stay in that plan unless you move into a different service area. Usually this means, you have to keep the same Part D provider unless you move to a different state. 

It might seem to make sense to go with the Part D plan that has the lowest premium, but you want to choose a national company that can give you service even when you travel to other parts of the USA, and you need to look very carefully at deductibles. The lowest monthly premium is not necessarily the lowest cost coverage, and once you choose a plan, you may be locked in for a long time.

8. Make sure any drugs you take regularly are in the plan formulary.

A formulary is a master list of drugs that are covered by a Part D provider. These are all drugs that meet Medicare requirements for inclusion on the list, but a Part D company may also further restrict what it is willing to pay for.

Here's an example of how formulary restrictions may work. Suppose you take a "nitrate" for angina or high blood pressure. One company may allow you to get 30 capsules of 30 mg each of Imdur (isosorbide mononitrate) every month, dispensed one capsule  per day. Another company may say, no, we have studies that it's better to get the drug in two doses a day rather than one, and you have to take 60 capsules of a product called Imso, which is also isosorbide mononitrate, but which is given as a 10 mg dose in the morning and a 10 mg dose in the afternoon, 1/3 less medication than the other company provides. The cost difference is small, but the effect on how you feel may be great, and if you want to take a form of the drug not in your Part D formulary, you may have to pay the entire cost yourself.

9. Make sure any brand-name drugs you take are in the plan formulary.

Some Part D providers insist you take a generic medication even if you know you need the more expensive, brand-name version of the drug. They will insist that you try the generic, then go back to doctor if it is not working for you, and get a second prescription before they will pay for the more expensive drug. If you don't want to deal with this situation, make sure the company you choose covers the drug you need before you sign up.

10. Beware the US Postal Service.

New postal service rules sometimes have letter carriers taking mail out of your box if you don't pick it up in three days or less. When this happens, it is sent back to the sender, with a note that you may have moved. If a notice from your Part D provider gets sent back to the insurance company, it may decide that you have died or moved away and cancel your insurance coverage. (They may or may not also cancel the automatic debits to your bank account to pay the premiums.) Make sure you have someone to stay in touch with your Part D provider should you need to stay in a hospital or nursing home before returning home to stay.