Medicare Resource Center

Medicare Part D (Prescription Drug)

Part D is a stand-alone drug plan, offered by insurers and other private companies to people who get benefits through Original Medicare, a Medicare Private Fee-for-Service Plan, a Medicare Cost Plan, or a Medicare Medical Savings Account Plan. Everyone with Medicare, regardless of income, health status, or prescription drugs used, can get prescription drug coverage.

Medicare prescription drug coverage is insurance that covers both brand-name and generic prescription drugs at participating pharmacies in your area. It provides protection for people who have very high drug costs or from unexpected prescription drug bills in the future.

Everyone with Medicare is eligible for this coverage, regardless of income and resources, health status, or current prescription expenses. You may sign up when you first become eligible for Medicare (three months before the month you turn age 65 until three months after you turn age 65). If you get Medicare due to a disability, you can join from three months before to three months after your 25th month of cash disability payments. If you don't sign up when you are first eligible, you may pay a penalty. If you didn't join when you were first eligible, your next opportunity to join will be from November 15 to December 31 of each year. See also When to Enroll section.

How Medicare prescription drug coverage works

Your decision about Medicare prescription drug coverage depends on the kind of health care coverage you have now. There are two ways to get Medicare prescription drug coverage. You can join a Medicare prescription drug plan or you can join a Medicare Advantage

Whatever plan you choose, Medicare drug coverage will help you by covering brand-name and generic drugs at pharmacies that are convenient for you.

Who can enroll in a Medicare prescription drug plan

Anyone who has Medicare Part A, Medicare Part B or a Medicare Advantage plan (Part C) is eligible for prescription drug coverage (Part D). Joining a Medicare prescription drug plan is voluntary, and you pay an additional monthly premium for the coverage. You can wait to enroll in a Medicare Part D plan if you have other prescription drug coverage but, if you don't have prescription coverage that is, on average, at least as good as Medicare prescription drug coverage, you will pay a penalty if you wait to join later. You will have to pay this penalty for as long as you have Medicare prescription drug coverage.

The cost of Medicare prescription drug coverage

Like other insurance, if you join a Medicare prescription drug plan, generally you will pay a monthly premium, which varies by plan, and a yearly deductible. You will also pay a part of the cost of your prescriptions, including a copayment or coinsurance. Costs will vary depending on which drug plan you choose. Some plans may offer more coverage and additional drugs for a higher monthly premium. If you have limited income and resources, and you qualify for extra help, you may not have to pay a premium or deductible. You can apply or get more information about the extra help by calling Social Security at 1-800-772-1213.

How to Enroll in a Medicare prescription drug plan

Once you choose a Medicare drug plan, you may be able to join by completing a paper application, calling the plan, or enrolling online. Medicare drug plans aren't allowed to call you to enroll you in a plan.

Contact the plan to find out how you can join. When you join a Medicare drug plan, you will have to provide your Medicare number and the date your Part A or Part B coverage started. This information is on your Medicare card. Click here to find Part D plans in your area.

The Medicare prescription drug coverage gap (the "Doughnut Hole")

Most Medicare drug plans have a coverage gap, sometimes called the "Doughnut Hole". This means that after the person and the person's drug plan have spent a certain amount of money for covered drugs, the person then has to pay all costs out-of-pocket for the drugs, up to a limit. The yearly deductible, co-insurance or co-payments, and what the person pays while in the coverage gap all count toward this out-of-pocket limit. The limit doesn't include the drug plan's premium.

There are plans that offer some coverage while a person is in the gap, like for generic drugs. However, plans with gap coverage may charge a higher monthly premium. Check with the plan first to see if the person's drugs would be covered during the gap.

Once a person reaches the plan's out-of-pocket limit during the coverage gap, "catastrophic coverage" automatically kicks in. Catastrophic coverage assures that once a person has spent up to the plan's out-of-pocket limit for covered drugs, he or she will only pay a small co-insurance amount or a co-payment for the rest of the year.

The example below shows the costs for covered drugs in 2010 for a plan that has a coverage gap.

Ms. Smith joins the ABC Prescription Drug Plan. Her coverage begins on January 1, 2010. She doesn't get Extra Help and uses her Medicare drug plan membership card when she buys prescriptions.

Monthly Premium - Ms. Smith pays a monthly premium throughout the year.
Source: Information from the official government handbook published by the Centers for Medicare and Medicaid Services: Medicare & You 2010
1. Yearly Deductible	2. Copayment or Coinsurance	3. Coverage Gap	4. Catastrophic Coverage
Ms. Smith pays the first $310 of her drug costs before her plan starts to pay its share.	Ms. Smith pays a copayment, and her plan pays its share for each covered drug until what they pay (plus the deductible) reaches $2,830.	Once Ms. Smith and her plan have spent $2,830 for covered drugs, she is in the coverage gap. She will have to pay all of her drug costs until she has spent $4,550.	Once Ms. Smith has spent $4,550 out-of-pocket for the year, her coverage gap ends. Now she only pays a small copayment for each drug until the end of the year.

It's important to note that people who get "extra help" paying drug costs won't have a coverage gap and will pay a small or no co-payment once they reach catastrophic coverage. "Extra Help" is a special part of Medicare drug coverage that gives much more assistance to people with limited incomes than the regular program does. If you qualify, you can save a lot of money. If you qualify for "full" Extra Help, you receive coverage throughout the year (no doughnut hole) and pay very little for your prescriptions. If you qualify for "partial" Extra Help, you receive coverage throughout the year and pay a reduced premium and deductible and up to 15 percent of the cost of your drugs.