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Medicare Part D Explained Part 2

February 22, 2021

See Part One of Medicare Part D Explained – click here!

Here are the links promised in the above video:

Welcome to Part two of Medicare Part D Explained.  This is a continuation of the Medicare Part D Explained first video.  While the first video included information about Part D for everyone researching their Medicare options, this video includes more advanced concepts that are important to those who are paying hundreds of dollars a month for their prescriptions.   I will assume in this video that you have already seen Part 1 of Medicare Part D Explained.

Hi I am Matthew Claassen with  We are an independent insurance broker helping people with their Medicare and retirement needs in 49-states from Hawaii to Virginia and Alaska down to the Florida Keys.  We are a true independent insurance broker.  That means we work with all the major insurance companies and offer all Medicare supplement plans.  Most of all, we represent your best interest, not that of any insurance company and our services are free to you the consumer. Check out our 5-star ratings, then contact us.  You will be glad you did.

Our service is free. You cannot save money or reduce your Medicare Supplement premiums by not using our service. As an independent insurance broker, we offer all Medicare Supplement plans from all major carriers. We put all the cards on the table for you and show you all your options and costs. That alone saves you days of work.  Then you decide the right plan and company for you. When you work with us, the insurance company you choose to insure you will pay our commission out of their pocket, not yours. You cannot reduce your premium by doing it yourself.

In this video we are going to talk about the four stages of the Medicare Part D prescription drug coverage.  This includes the deductible, your initial coverage, the coverage gap (formerly referred to as the donut hole) and catastrophic coverage.  We will discuss these stages are impact by your TROOP (True Out-Of-Pocket Expense).  Then last, but not least I will touch on Low Income Subsidy options that can be used to help relieve the financial burden of prescription drugs and Part D premiums for those who qualify.  If you are having difficulty paying for your prescriptions, this will be very important for you.

If you are spending a lot of money on prescriptions it is important to understand each of these four stages and how the right Part D plan can help you manage your out-of-pocket costs.  My objective is to help you understand what you need to know about Medicare Part D plans so that you do not spend more than you have to for your prescriptions.

Why am I doing this video for you?   I think that is a fair question for you to ask.

In past videos including the ones titled  “Do I Need an Insurance Agent for Medicare?”, “Medicare Advantage Plans Explained” and “Medicare Supplement Plans Explained” I have detailed how we, as independent insurance brokers, are paid and who pays us. The consumer doesn’t pay us.  I believe it’s important to share this information because you need to know what motivates a salesperson when you accept their advice.

With Stand Alone Medicare Part D plans, CMS (Center for Medicare and Medicare Services) sets the maximum allowable commission each year.  You can Google this information searching for  “CMS Maximum Medicare Advantage or Part D commissions”.

As of the making of this video, if you use our services to purchase your Part D plan and you are new to Medicare.  It’s your first Part D Plan.  We are paid a onetime payment of $81.   If you are simply re-shopping for a Part D, it’s half of that at $41.

In order to even offer a Part D plan we have to go through Federal re-certification each year, which takes a full weekend.  Then the same recertification for each insurance company we work with, which can take six to eight hour per company.  In general, it takes about a full one week to ten days each year just to be able to talk about and offer Medicare Part D Prescriptions Drug Plans.  And it takes that much time again just to make a video like this one. I am not a natural personality in front of a camera.

Obviously, we can’t make a living just selling Part D Medicare Plans.  Which is why we also work with Medicare Supplement Plans, Medicare Advantage Plans, Dental, Vision Hearing, Life and Final Expense, Cancer Protection and so on.

But there is a reason that I am making this video that goes beyond all of that.  I want to share that with you because I believe it’s important.

Back during the Annual Election Period of 2016 I was helping a gentleman with his Medicare supplement plan.  He was in his mid-70s and had an AARP / United Healthcare Medicare supplement he purchased when he was 65.  It had become very expensive and so I save him about $800 a year by moving him to a different company.  Well, the person who sold him the Medicare supplement was a captured agent, he worked as an employee of United Healthcare and so also sold him a United Healthcare Part D prescription drug plan.  So after saving him money on his supplement he asked me if I could help him with his Part D.

Begrudgingly, I said yes.  We went over his situation.  For ten years he just rolled over his drug plan and never shopped for new plans during AEP.  I found he was spending almost $11,000 a year on his prescriptions.  Almost $1,000 a month.  Wow.

So, we looked at the plans that were available to him using the Part D Plan Shopper.  I found a Part D plan where his entire cost for the year, premiums, prescriptions, deductible everything was a little over $1,600.  He went from $11,000 a year to $1,600.

That was when he started to cry.  This was, it impacted me.   So, I was uncomfortable and said something like Hey, I know it was hard, but it’s fixed now.  You’ll be fine.

He replied, and I will never forget.  He said “You don’t understand.  I can see my grandkids now.”

Medicare is not a perfect Health Care system. It’s complex and full of potholes.  Your responsibility is to try to understand it as best you can and to re-shop your Part D prescription drug plan every year during the Annual Election Period.  Even if you like your current plan.  Your current plan can and will change each year.  If you fail to shop your plan or if you make a mistake because of what you don’t understand, you can end up paying much more than you should for your prescriptions.

I am going to go over the four stages of your Part D prescription drug coverage.  It might be worthwhile to take notes.

Stage One of Medicare’s Prescription Drug Program – The Deductible

The first stage is the deductible.   A deductible is the amount of money you pay before your insurance will pay any benefit.   Each year Medicare sets a maximum deductible that a Medicare Part D plan can charge. They can charge the maximum.  They can charge less than the maximum or have no deductible at all.   For 2021 the maximum Medicare Part D deductible is $445.  I would suspect the amount of the deductible will continue to increase a little each year.

There are a couple things that are important to understand about the deductible that you will not find on the Medicare Plan Finder on the government website.   First is that with most insurance companies the deductible only pertains to higher tiered prescriptions.

You may recall in Part One of this video that a tier is a level of cost or cost sharing to you, the consumer.  Most Part D plans have five tiers with tier one being the lowest cost, most common prescriptions.  On my Medicare Part D shopper (linked below) you can easily see if your Part D plan exempts any tiers from the deductible.  Exempting tiers one, two is the most common.  I have seen some plans also exempt Tier 3 as well and at least one low premium plan only exempt only Tier one.

Again, the Part D Plan shopper leaves a lot to be desired.  It simply does not offer the helpful detail you need to evaluate and compare Part D Plans.  We have a Medicare Part D Shop & Enroller you will find on our website,  A link for the current year will be below the video.   When you are using our service to evaluate plans and want to know about the deductible, you will see it clearly indicates those tiers, in any, that are exempt from the deductible:


Stage Two of Medicare’s Prescription Drug Program – Initial Coverage

After you meet your deductible, for those prescriptions that are not exempt, your Medicare part D Plan will help pay your prescription costs.  The Initial Coverage is where you would pay a copay or coinsurance for part of the prescription costs, and the insurance company will pay the rest.

How long you stay in this Initial Coverage stage will depend on two things; the cost of your drugs and your Part D Plans benefit structure.

For 2021 you will stay in the Initial Coverage Stage until you have a total of $4,130 in drug costs.

This is important, that is $4,130 in total drug costs, not just your total out-of-pocket.  Total drug costs include your out-of-pocket PLUS what the Part D Plan has paid as well.

In the first half of this two-part Medicare Prescription Drug series I mentioned that you, the level of the premium for a Part D plan ahs nothing to do with the quality of benefits you receive.  A $90 a month Part D plan is not better than a $10 a month plan.  They are simply designed for people in different situations.  Now you can understand what that means.   In simply terms, a high premium plan is designed to get you to and past that $4,130 total drug cost with minimum out of pocket so you can get to stage four, Catastrophic Coverage as painlessly as possible.  For the high premium plan, low tier drugs are usually a bit more costly and high tier drugs come with a greater discount that counts toward your total costs.

That is stage two – your Initial Coverage which ends when your total costs reach a pre-set limit.  That limit for 2021 is $4,130.  When your total costs reach $4,130 you exit Stage Two and enter Stage Three.

Stage Four of Medicare’s Prescription Drug Program – The Donut Hole

For Stage Three, I need you to understand a new term.  You may want to write this down.   The term I need you to understand is your True Out-of-Pocket cost, often abbreviated as your TROOP.  TROOP is your total out-of-pocket costs on the prescriptions in your Medicare Part D plan formulary.

Your TROOP includes the money you spend on Part D prescriptions.   It also includes money spent on your prescriptions on your behalf.  For example, the pharmaceutical manufacturer contribution or discount, or an HSA plan or Medicare Saving Account (MSA) or Flexible Spending Account (FSA). It can also include the Extra Help from a Low-Income Subsidy.  Your TROOP does not include your Part D monthly premium.  It does not include drug you pick up over the counter or by using Good Rx.  It does not include prescriptions NOT on your Medicare Part D Plan Formulary.

During Stage Three, or the Coverage Gap, you pay 25% of your dug costs.  Your costs go up during this stage.  You pay 25% of the cost of the prescription.  The Pharmaceutical Industry will pay 70% of the prescription and Medicare will pay the remaining 5%.   You will be credited 95% of the drug cost toward your TROOP.   For example, let’s sat a drug has a retail price of $100.  You will pay $25.  The Pharmaceutical Company will pay $70 and Medicare will pay $5.  Of the month spent, $95 is credited toward your TROOP.

During Stage Three, the Coverage Gap or Donut Hole, you pay 25% of your prescription drug costs until your TROOP is equal to $6,550 for 2021.

Once your TROOP reached the Part D Donut Hole limit, you enter Stage Four, Catastrophic Coverage.

Stage Four of Medicare’s Prescription Drug Program – Catastrophic Coverage

Catastrophic Coverage is Medicare is simple.  In this stage Medicare will typically pay the greater of 95% of your prescription drug costs or $3.70 for a generic prescription or $9.20 for a brand name prescription.  If you have a $10,000 prescription, Medicare will $9,500 you will pay $500.

If you have a $100 brand name prescription, 5% is $5.  Since $9.20 is more than $5, you will pay $9.20.  Another way to look at this is you will pay $9.20 unless your brand-named prescription cost more than $184.  If your brand-named prescription costs more than $184 you pay 5%. For a generic prescription, you pay no less than $3.70.

If you have watched my Medicare Explained videos for Medicare Advantage Plans and Medicare supplement plans you may have noticed there is a term that I used in those videos that is conspicuously absent here.  That term is your MOOP.  Your Maximum Annual Out-of-Pocket.

There is no MOOP for Medicare Part D prescription drug plans.

Once you are in Catastrophic Coverage you will continue to pay 5% of your drug costs until December 31 when your plan ends.  On January 01 you start a new plan and a new deductible stage one all over again.

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