To address the problem of costly prescriptions, Congress passed Medicare Part D as an addition to the original Medicare insurance program. While other elements of Medicare cover necessary and vital health care concerns, Part D, which is optional, is just for prescriptions.
To enroll in Part D, a person must carry Medicare Part A, which is for general medical coverage, and/or Part B, which covers hospitalization. Part D is also available for people in the private Medicare Advantage plan or Medicare Part C. As with other parts of Medicare, enrollment in Part D is open as soon as a person turns 65. Anyone of that age must apply for general Medicare around that time unless that person as credible coverage equal to or better than Medicare. Anyone who enrolls nine months after he turns 65 will pay a penalty for late enrollment.
Part D is available as a separate prescription drug plan administered by a private insurance company such as Aetna or Humana. It's also available as part of a Medicare Advantage plan. A person can't enroll in both. Anyone with an established Medicare Advantage plan with prescription coverage, and who then enrolls in a prescription drug plan, must move out of the Advantage plan and enroll instead in parts A and B.
Stages of Coverage
Medicare Part D features three stages of coverage. The initial coverage stage has the plan paying more than the patient for each medication..When that ends, a coverage gap opens up, and the covered individual must pay the larger portion of the drug costs. In 2015, for example, the gap began at $2,960 of combined deductible and total insurance payments, and ended when the patient reached an out-of-pocket maximum of $4,700. While you're in the gap, you pay 45 percent of the price of brand-name and 65 percent of the price of generic drugs. These percentages fall each year until the gap phases out in 2020. After the coverage gap closes, the catastrophic coverage stage begins, and Part D then pays a large percentage of the cost.
How Prescription Drug Plans Work
Insurance companies draw up formularies of drugs covered by their plans. The drugs are arranged by tiers. The lower the tier, in general, the cheaper the drug. Medicare has to give users 60 days notice of any changes in the status or reimbursement amount of a drug. To prevent a sudden, unexpected rise in costs, the rules allow patients to present this notice to the pharmacy and get a 60-day supply at the previous price.
Premiums, Deductibles, and Plan Ratings
Premiums on drug plans vary by company and location. The plans require an annual deductible as well as co-payment. The Find-a-Plan page at the Medicare.gov web site offers information on monthly premiums for drug plans offered in your area. Using your zip code, the page searches for and returns important plan information such as the premiums and deductibles, an estimated annual cost, and how Medicare has rated it in the past.
- Keith Brofsky/Photodisc/Getty Images