Medicare Supplement Plans and Medicare Prescription Drug Coverage

Last Updated : 12/12/20194 min read

The need for prescription drug coverage

According to the National Institutes of Health, people aged 65 and older make up only 13% of the population, but make up for more than 33% of outpatient spending on prescription medications in the United States.

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This means that much of the population of Medicare beneficiaries age 65 or older may take at least one prescription drug and want prescription drug coverage.

Medicare beneficiaries under 65 may want prescription drug coverage as well. Prescription drug coverage is generally not covered by Original Medicare (Part A and Part B) unless, for example, you receive the prescription drug as a hospital inpatient during a covered stay or have the prescription drug administered to you by a doctor in an outpatient setting such as a clinic. In order to avoid paying for most prescription drug costs out-of-pocket, you generally need to purchase additional coverage.

Does Medicare Supplement insurance include prescription drug coverage?

Medicare Supplement (Medigap) plans are generally sold by private insurance companies to people age 65 and older who have enrolled in Medicare Part A and Part B. Medicare Supplement plans may help pay for some of Medicare’s out-of-pocket costs, such as coinsurance, copayments, and deductibles. Federal law does not require private insurance companies to sell Medicare Supplement plans to people under 65, although some states require that Medicare Supplement policies be sold to Medicare beneficiaries under 65.

Some Medicare Supplement policies used to be sold that included prescription drug coverage. Now, such Medicare Supplement policies can no longer be sold. (However, if you have prescription drug coverage under an older Medicare Supplement policy, you can keep it.)

Today, if you buy a Medicare Supplement policy and want prescription drug coverage, you generally must buy a stand-alone Medicare Part D Prescription Drug Plan. You can still buy a stand-alone Medicare Part D Prescription Drug Plan if you have a Medicare Supplement policy that includes prescription drug coverage, but you can’t be covered by both plans. You must tell your Medicare Supplement policy of your stand-alone Prescription Drug Plan coverage so they can remove this coverage from your Medicare Supplement policy and adjust your premium. Once the prescription drug coverage is removed from your Medicare Supplement plan, you can’t get that coverage back.

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Prescription drug coverage may also be available through a Medicare Advantage plan, but a Medicare Supplement plan won’t work with a Medicare Advantage plan.

According to the Centers for Medicare and Medicaid Services, over 25 million Medicare beneficiaries were enrolled in stand-alone Medicare Part D Prescription Drug Plans as of April 2017.

What is a stand-alone Medicare Part D Prescription Drug Plan?

Medicare Prescription Drug Plans, under Medicare Part D, are offered by Medicare-approved private insurance companies. Different insurers offer different types of plans, so your monthly plan premium and out-of-pocket expenses for prescription drugs may differ from plan to plan. Every Medicare Prescription Drug Plan has a formulary, which is a list of prescription drugs the plan covers. The formularies vary among plans and may change at any time. You will receive notice from your plan when necessary.

If you’re enrolled in Medicare Part A and/or Part B, you can usually sign up for a Medicare Prescription Drug Plans during your Initial Enrollment Period. This is usually the 7-month period surrounding your 65th birthday (3 months before your birthday, the month of your 65th birthday, and three months after your birthday) or the 7-month period surrounding the 25th month of your receiving disability benefits (3 months before, the 25th month of getting disability benefits, and 3 months after your 25th month of getting disability benefits). You may pay a late-enrollment penalty if you sign up for a Medicare Prescription Drug Plan after having gone 63 or more days without credible prescription drug coverage after your Initial Enrollment Period. If you have a Medicare Supplement policy with prescription drug coverage, this may or may not be considered credible. Your Medicare Supplement plan must send you a notice every year telling you if your policy includes credible prescription drug coverage. Keep these notices if you want to later sign up for a Medicare Prescription Drug Plan and avoid the late-enrollment penalty.

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