Medicare Part D is the Medicare prescription drug benefit. If you have Original Medicare (Medicare Part A and Medicare Part B, you are eligible for a Medicare Part D plan. (If you have Medicare Part C (Medicare Advantage), you may already have prescription drug coverage and if so, you are not eligible for Medicare Part D.
But What Is Medicare Part D?
Medicare Part D is the prescription drug benefit part of Medicare. Not part of the original Medicare legislation, Medicare Part D only started in 2006. Unlike the Original Medicare Parts A and B, Medicare Part D is not automatically provided as part of Medicare once you turn 65. If you want to take advantage of Medicare Part D, you have to enroll yourself in one of the many Medicare Part D plans that are offered by private companies, either as a stand-alone prescription drug plan (PDP) or as part of a Medicare Part C (Medicare Advantage) plan.
What Does Medicare Part D Cost?
Medicare Part D has a standard Medicare Part D drug benefit, but in reality plans and premiums vary widely. Health insurers must offer the standard benefit set out by law or a benefit package that is at least as comprehensive as the standard package. Although there is no standard drug formulary, there are minimal requirements that major classes of drugs necessary to treat common diseases are covered. Plans vary greatly as to the specific drugs covered and the co-pays/coinsurance for individual drugs. For more information on Medicare Part D benefits and the Donut Hole, see our article “Medicare Part D-The Donut Hole and Me”.
In 2012, the Medicare Part D standard benefit included an initial $320 deductible. After meeting the deductible, Medicare Part D enrollees pay 25% of the cost of covered Part D prescription drugs, up to an initial coverage limit of $2,930. Once the initial coverage limit is reached, Medicare Part D enrollees must pay for the cost of their drugs until total out-of-pocket expenses on drugs reach $4,700 and the “Catastrophic Coverage” benefit begins.
This gap in coverage is known as the “Donut Hole.” In the Donut Hole, Medicare Part D enrollees will continue receive a 50% discount on the total cost of their brand-name drugs while in the Donut Hole. The full retail cost of the drugs will still apply to getting out of the donut hole even though 50% was paid for by the pharmaceutical manufacturers. Enrollees will pay a maximum of 86% co-pay on generic drugs while in the coverage gap.
If you qualify for Catastrophic Coverage, you will pay $2.60 for a generic or preferred drug and $6.50 for other drugs, or a flat 5% coinsurance (whichever is greater) for the rest of the year.
Please note that these amounts (deductibles, initial coverage limit and the out-of-pocket threshold) change annually as Medicare Part D spending growth changes. In addition, if you reach the out-of-pocket threshold to qualify for Catastrophic Coverage in one year, you still have to reach the threshold again in the next year to re-qualify.
Finding a Medicare Part D Plan for You
The best advice we can give you is: Shop around! The standard benefit only dictates the structure of the plan. It doesn’t require coverage of any standard group of drugs, and formularies (lists of covered drugs and co-pays) can vary widely. If you’re considering signing up for a Medicare Part D plan, make sure that any prescription drugs that you take regularly are on the plan’s formulary and that you comfortable with the co-pays you will have to pay.
Medicare also does not require any standard premium to be charged. As a result, plan costs and coverage vary from plan to plan and region to region. When you enroll in Medicare Part D, it pays to shop around and research the plan options available to you based on your needs and budget. Because your circumstances may change, it also pays to review your Medicare Part D plan every year and see if it is still the best plan for you.
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Some More Medicare Part D resources: