Medicare began covering some of the costs of prescription medications in 2006, through "Part D." This Medicare Part D prescription drug benefit is administered through private insurance companies and replaces drug coverage previously provided through medigap plans, many managed care plans, Medicare drug discount cards, and most Medicaid coverage.
Medicare Part D, however, is not a panacea. Most beneficiaries must pay a small monthly premium, a good-sized yearly deductible, and a copayment for each prescription. Gaps in most plans' coverage also lead to situations where beneficiaries become, for a time, responsible for all their prescription costs. (These coverage gaps are also aptly referred to as "doughnut holes," because people receive coverage both before and after reaching certain payment limits.)
Anyone entitled to Medicare Part A (whether actually enrolled or not), or anyone currently enrolled in Medicare Part B, may join Medicare Part D. (To learn more about Medicare Part A and Medicare Part B, read Nolo's article Medicare FAQ.)
Enrollment is voluntary, except for people who also receive benefits from Medicaid. If you qualify for Medicaid, the government automatically enrolls you in a Medicare Part D plan, through which you will receive your prescription drug coverage.
Medicare Part D does not replace drug coverage through Veterans Affairs, TRICARE, the Federal Employee Health Benefits program, or employer-sponsored drug coverage if that coverage is equal to what is offered by a basic Medicare Part D plan.
Most beneficiaries pay a monthly premium, a yearly deductible, and a copayment for each prescription. However, some low-income Medicare beneficiaries can get help with Part D costs. Some Medicare beneficiaries may qualify for a low-income subsidy (LIS), called Extra Help, to help pay costs associated with Part D plans. Learn about eligibility requirements and apply for a subsidy at a local Social Security Administration office, online at www.ssa.gov, by calling the Social Security Administration at 800-772-1213, or at your local county social services office.
A premium is the monthly amount you pay directly to your prescription drug or managed care plan to maintain enrollment in Part D coverage. Amounts vary from $0-$50 per month.
The deductible is the amount you must pay out-of-pocket for covered medications before your Part D plan begins contributing. With most plans, the 2015 deductible is $320 per year. However, some plans offer "first dollar" (no-deductible) coverage, which means the plan begins paying its share for an enrollee's first covered prescription of the year.
After you pay the deductible, your Part D plan pays most of the cost of covered drugs. You are personally responsible for the remainder, known as a copayment, or coinsurance. Under Medicare's minimum standards, people without a low-income subsidy pay no more than 25% of the prescription cost and the plan pays no less than 75% (after the deductible is met). This split continues until total covered expenditures have reached the year's coverage gap (see below).
Under several circumstances, a Part D plan enrollee may not have to pay the normal copayment for a covered drug. For example:
In addition to the costs discussed above, there are restrictions on prescriptions, as well as a coverage gap.
A notorious part of the Part D program is the coverage gap, popularly referred to as the "donut hole." After you and your plan together pay a certain amount for covered prescription drugs ($2,960 in 2015), your plan stops paying anything and you must pay the full cost of your prescriptions. The plan begins to pay again -- and pays 95% of all further costs -- when total expenditures reach a "catastrophic" level ($4,700 in 2015). Low-income Medicare beneficiaries with a subsidy do not have a coverage gap.
Insurance companies may impose many different types of restrictions on their Part D coverage. For example:
Also, each Part D plan contracts with specific pharmacies to deliver medications, and you must get your drugs from a participating pharmacy to get full benefits.
Medicare prohibits Part D plans from covering most medicines within certain drug categories, even if lawfully prescribed by a physician. These include:
Some state Medicaid programs, however, continue covering some of these drugs for people who are also enrolled in a Medicare Part D plan.
You enroll in a Part D plan by signing up directly with the plan you want to join. If you don't enroll in a plan when you are first eligible for it, your premiums will be higher when you do finally enroll. (Medicare charges an additional 1% premium for each month you delay enrolling). So carefully consider when you will enroll in a Part D plan. Before you choose a specific plan, research several. (For help choosing a plan, read Nolo's article Medicare Part D: Choosing a Prescription Drug Plan.)
To learn more about Medicare Part D, and other health care options for your retirement years, get Social Security, Medicare & Government Pensions, by Joseph L. Matthews and Dorothy Matthews Berman (Nolo).