Personal Finance

Here are tips for getting your 2021 Medicare drug coverage right during open enrollment

Key Points
  • The window to make changes to your coverage opened Oct. 15 and will close Dec. 7.
  • The average beneficiary can choose from 30 stand-alone Part D prescription drug plans for 2021, or get that coverage through an Advantage Plan.
  • Even if you don't take any medications and don't want the coverage, it may be worth getting a cheap plan so that you don't face late-enrollment penalties if you change your mind down the road.
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If you're on Medicare, now is the time to make sure you don't pay more for prescription drugs next year than necessary.

Even if you think you don't need drug coverage or you're content with the plan you have, evaluating your 2021 insurance options during Medicare's fall open enrollment is worth it, experts say. While doing nothing is an option, it also could result in higher costs than you anticipated.

"We're finding many circumstances where changing plans does benefit our policyholders," said Danielle Roberts, co-founder of insurance firm Boomer Benefits. "But sometimes we find that someone is already in the best plan for them next year … and they can let their current plan auto-renew."

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The window to make changes to your Medicare coverage opened Oct. 15 and closes Dec. 7. During this time, beneficiaries with traditional, or basic, Medicare (Part A hospital coverage and Part B outpatient care) can add or switch standalone Part D prescription plans or enroll in an Advantage Plan (Part C). Individuals already with an Advantage Plan can switch to another or drop it and return to basic Medicare.

For 2021, the average beneficiary can choose from 30 standalone Part D prescription drug plans, or get that coverage through an Advantage Plan.

The estimated average premium for a standalone Part D plan in 2021 is $41, according to the Kaiser Family Foundation. Premiums range from a low of $5.70 for a standalone Part D plan in Hawaii to a high of $205.30 for one in South Carolina.

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Additionally, plans may have a deductible (up to $445 for 2021), and copays can vary among plans and specific drugs.

"You should shop every year because every plan may have its own formulary — a list of covered drugs — and each year some medications come off it or are added," said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.

"Or, the medication may have gone up or down [in cost]," Gavino said.

Keep in mind that beneficiaries with modest incomes and assets may qualify for help paying premiums and other cost-sharing through Medicare's low-income subsidy program.

On the other hand, higher-income beneficiaries pay a monthly surcharge. In 2020, those charges affect singles with income above $87,000; for couples, it's $174,000 (see chart below). (The exact amounts for 2021 have not been announced by the Centers for Medicare and Medicaid Services yet.) 

If you don't want drug coverage because you take no medications regularly, be aware that you may pay extra if you change your mind down the road. Experts recommend getting at least some coverage to avoid late-enrollment fees.

"In many states there are plans with premiums in the $7 to $15 range, so they will appeal to people who are relatively healthy and are enrolling in Part D just so they don't incur a penalty," Roberts said.

The late-enrollment penalty for Part D generally equates to 1% for every month that you could have been enrolled but chose not to (unless you have qualifying coverage elsewhere, such as through an employer plan). You would pay that penalty for as long as you have Part D coverage.

Also, if you are on insulin, it's worth checking whether the plan you like is participating in a new program intended to lower the cost for that medication. Depending on the brand, the copay could be as low as $35.

"But not all plans are participating, because it's voluntary," Gavino said.

The best way to see your options for drug coverage is to use the online Medicare plan finder. You can enter the medications you take and the dosage, and the plan finder will rank your options.

Even if the top plan would cost the least amount, check to see if it comes with any restrictions and if so, whether they are palatable to you, experts say. For example, some plans may have quantity limits on certain drugs, require preauthorization or step therapy (trying a less-expensive medicine before one that costs more).