Medicare Part D

The Part D Prescription Drug Benefit

In December 2003 Congress enacted the MMA of 2003. It added the prescription drug benefit o the Medicare program under Medicare Part D that started on January 1, 2006. The law created a voluntary drug benefit that is delivered through private, stand-alone prescription drug plans (PDP), or through Medicare Advantage (MA) prescription drug plans. The law provides for a government fallback plan for geographic areas without sufficient plan choices.

All Part D plans must offer at least a standard drug coverage benefit or its actuarial equivalent. The monthly premium for the standard benefit is estimated to average $28 in 2009, (which may change in the future) though premiums are likely to vary from plan to plan. The plan sponsors may also offer separate plans with enhanced coverage at an extra cost.

This is the standard Part D drug prescription plan for 2009 required by Medicare:

  • If you join Medicare prescription drug plan, you pay the $295 of your drug costs. This is known as the deductible.
  • During the initial coverage phase, your drug plan pays 75% of the covered prescription drug cost after your deductible is met, and you pay 25% until the total drug costs (including your deductible) reach $2,700.
  • Once you reach $2,700 in total drug costs, you will be in the donut hole and you must pay the full cost of prescription drugs until your total out-of-pocket cost reaches $4,350. This annual out-of-pocket spending amount includes your yearly deductible and copay amounts.
  • When you spend more than $4,350 out-of-pocket, the coverage gap ends and your drug plan pays most of the costs of your covered drugs for the remainder of the year. You will be responsible of a copay of $2.40 for each generic drug and $6.00 for other drugs. This is known as a catastrophic coverage.

The expenses outlined above only include the cost of prescription medications. It does not include the monthly premium that you pay to the prescription drug plan.

It is important to understand that your Part D prescription drug plan may differ from the standard Medicare plan only if the plan offers you a better benefit. For example, your plan can eliminate or lower the amount of the coverage gap. And, your plan can pay for generic or brand name medications in the coverage gap. In 2009, more than 50% of plans have no deductible and 25% of plans have some drug coverage in the donut hole.

For seniors with prescription drug coverage through employer-sponsored plans, Congress created incentives to encourage employers to continue offering drug coverage to their retirees. The law provides the subsidies of 28 percent of costs to employers if the provide drug coverage that is at least as good as the Part D standard benefit. Seniors who receive drug coverage through a qualified retiree plan may not enroll in a Part D plan.

Exclusions from Part D coverage include drugs for which Medicare Parts A or B already pay (examples include epoetin for severe anemia and cyclosporine to prevent organ rejection), and those dealing with weight loss or gain, cosmetic appearance or hair growth, vitamins and minerals, nonprescription drugs and some others. Part D plans may use formularies, lists of preferred drugs, provided that the formularies meet Medicare standards. The law provides that the plan enrollees can appeal for coverage of nonformulary drugs when a prescribing physician determines that formulary drugs would not be as effective, or would create significant adverse effects for the patient, or both.

The information above is reprinted from Working with Seniors: Health, Financial and Social Issues with permission from Society of Certified Senior Advisors® . Copyright © 2009. All rights reserved.