Part D 101

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Given all the changes with Medicare reform, understanding your Medicare benefits may be more difficult. This guide was prepared to help make Medicare changes easier to understand.

The Medicare Modernization Act passed in 2003 provided for the introduction of Medicare prescription drug coverage, also known as Medicare Part D. Coverage began on January 1, 2006. Anyone who is entitled to Medicare Part A or enrolled in Medicare Part B is eligible to enroll in the new prescription drug coverage, which offers substantial federal help to people with Medicare by paying some of the costs of prescription drugs.

Key elements of the standard Part D coverage

In 2009, beneficiaries with standard Medicare prescription drug coverage will pay a $295 annual deductible and then 25 percent of drug costs from $295 to $2,700. When total yearly drug costs (i.e., paid by the beneficiary and the plan) reach $2,700, the beneficiary pays 100 percent of the cost of each prescription until the beneficiary’s yearly out-of-pocket costs reach $4,350. At that point, the beneficiary pays about five percent of the cost of each drug. Extra help will be available for those with limited incomes and resources.

Here’s another way of looking at it:

Steps	Standard Part D Drug Coverage
Step 1: Deductible What you pay before the plan starts to pay.	$295
Step 2: Cost-Sharing What you and the plan pay in total covered prescription drug costs up to a certain level — the Initial Coverage Limit	You pay 25% coinsurance per prescription up to $2,700 in total drug costs (i.e., paid by you and the plan).
Step 3: Coverage Gap When you pay all drug costs until reaching the catastrophic “trigger.”	You pay 100% at discounted prices after total yearly drug costs reach $2,700.
Step 4: Catastrophic Coverage Starts after you have paid $4,350 out of pocket for covered drugs in a year.	You pay the greater of $2.40 per generic/$6.00 per brand-name drug or 5% coinsurance per prescription for the rest of the year. The plan pays the rest.

This is insurance coverage

Medicare Prescription Drug Plans provide insurance coverage for prescription drugs. Like other insurance, if you join you will pay a monthly premium and a share of the cost of your prescriptions. Costs will vary depending on the drug plan you choose.

Under Part D, Medicare beneficiaries will have a choice of at least two plans — a drug-only benefit offered by a private plan that contracts with Medicare (Prescription Drug Plan) or a Medicare-approved HMO, PPO, or PFFS plan that provides both drug coverage and other health care services (Medicare Advantage — Prescription Drug Plan).

If you have a Medicare Advantage HMO or PPO plan

If you are enrolled in a Medicare Advantage plan, you must get your Part D prescription drug coverage through the plan. The plan may offer enhanced drug benefits for an additional premium.

Like Part B, Medicare Part D prescription drug coverage is entirely voluntary

The Part D program has an “opt-in” rule, which means that, with few exceptions, beneficiaries need to actively sign up for the drug coverage by completing an enrollment form and joining a Medicare-approved plan (either a Prescription Drug Plan or a Medicare Advantage — Prescription Drug Plan).

This is different from how you sign up for Part B, which is through the Social Security Administration. With Part D, you sign up with a private plan that has been approved by Medicare to cover prescription drugs. While some Medicare beneficiaries may be automatically enrolled in a Part D drug plan based on income level, for most people it works like this: if you don’t sign up with a drug plan, you don’t get the Part D drug benefit.

Paying your Part D premiums

Like Medicare Part B, there is a monthly premium for your Medicare Part D drug coverage. Just like your Part B premium, your Part D premium can be automatically deducted from your Social Security check and you won’t need to write a check each month. You can also pay the monthly Part D premium directly to the Prescription Drug Plan or Medicare Advantage — Prescription Drug Plan.