In 2006, an addition was made to the federal Medicare program in the form of Medicare prescription drug plans, also known as Medicare Part D.  If you were already receiving Medicare benefits when the drug plans were introduced and you didn’t opt in, or you’re nearing the age at which you’ll be eligible for Medicare benefits, there are some things you need to know about Medicare Part D that will help you to understand the program and make informed decisions.

Medicare Prescription Drug Plans:  Who Is Eligible For Medicare Part D Coverage?
If you are entitled to Medicare Part A or are enrolled in Medicare Part B, you can join a Medicare Part D prescription drug plan.  The plan can be a stand-alone that accompanies Parts A and B, or it can be part of Medicare Part C (also known as Medicare Advantage) which rolls together hospital, medical and prescription drug insurance.  Some Medicaid recipients are automatically eligible for low-cost Part D coverage.

Prescription Drug Plan:  Who Runs Part D?
Though the federal government sets the basic rules for Part D prescription plans, private insurance companies issue the policies themselves.  These private companies set the specific terms for payments and coverage.  You must enroll directly with the insurer, not the federal government, whether you choose a stand-alone plan or a plan that is part of Medicare Advantage.

Medicare Prescription Drug Plans:  How Much Does Part D Cost?
Premiums and deductibles vary by private insurers and what they offer; however the national base beneficiary premium for 2015 was $33.13 per month.  Premiums can increase for participants in higher income brackets and for people who enroll late.  For late enrollees, the monthly penalty is 1% of the national base beneficiary premium.

Medicare Insurance:  Which Drugs Are Covered?
Medicare only requires that insurers cover two drugs (either brand or generic) in each therapeutic class of drugs.  That means that for any disease or condition, part D plans will cover some, but not all, medications.  The specific drugs that each plan covers are included on a list called a “formulary,” which is updated in the fall.  If you are using a specific drug that you’d like to stay on, it’s wise to check out the formularies to find out if you can continue to receive the drug on your plan.  There are other restrictions on types of medications you may receive that can require you to try a less expensive medicine before a higher-priced one, and they may require higher co-payments for brand medications.

Prescription Drug Plan:  How Much Will Drugs Cost?
The rules for how much you’ll pay for each prescription can be extremely complicated.  Generally, you’ll pay for all drug costs until the yearly deductible, which will be $360 in 2016, is met.  After the deductible is met, you’ll pay a percentage of each prescription until a gap in coverage known as the “doughnut hole” is reached.  In 2016, the doughnut hole will be reached when you and your plan have spent $3,310 on drugs, at which point the percentage you pay increases.  Once you’ve spent $4,850, you’ll be out of the doughnut hole and be eligible for catastrophic coverage, which ensures that you only pay a very small co-payment for the rest of the year.

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