Medicare Part D: What is it?
Medicare Part D is Medicare’s prescription dug coverage plan. Like Medigap, it is sold through private insurance companies. Medicare beneficiaries who are entitled to Part A or enrolled in Part B may elect to enroll in Medicare Part D. Enrollment is voluntary.
Annual enrollment for Medicare Part D is known as the Annual Election Period. It begins on November 15 and ends December 31. During this period you may enroll in a plan or switch from one plan to another. You may not enroll or switch plans at any other time of the year. The costs and benefits of Medicare Part D plans vary from year to year, so make sure you review your coverage and costs during this period each year, and comparison shop before recommitting to your current plan.
How It Works
Medicare Part D is a standalone plan that offers only prescription drug coverage. There are hundreds of Medicare Part D plans available. The plans may cover specific drugs or entire classes of drugs, or may not cover some drugs at all. The copayments for covered drugs vary by plan.
Coverage begins in January, following the enrollment period. There is a standard Part D drug benefit as established by Medicare law, but plans are not required to offer the standard benefit. As an alternative to the standard drug benefit, they may offer what is referred to as the “actuarially equivalent” of drug coverage; this simply means the value is equal or greater than the standard benefit as established by Medicare law. With such a plan, your deductible or out-of-pocket expenses might be higher, but your copayments could be less.
The Donut Hole
The gap in prescription drug coverage with Medicare Part D is sometimes referred to as “the donut hole.” Here is how it works. After meeting your annual deductible ($295 in 2009), you pay 25 percent of the cost for covered drugs until you reach your coverage limit ($2,700 in 2009). After that point, you must pay full cost for the drugs you need until your out-of-pocket expenses reach a threshold determined annually by Medicare ($4,350 in 2009). At that point, what is known as Catastrophic Coverage kicks in, and you would pay the greater amount of the following: $2.40 for generic or preferred drugs, $6.00 for brand name drugs, or a flat 5 percent coinsurance for either. The out-of-pocket threshold includes the cost of your deductible and coinsurance.
For more information on choosing a Medicare Part D plan, visit Medicare.gov and use The Prescription Drug Plan Finder, where you can compare drug availability and costs of Part D plans within a specified geographic region. You can also find information about other Medicare Health Plans, such as Medicare Advantage, that provide prescription drug coverage.
Written by senior housing writer Nikki Jong.