Medicare Part D is the latest Medicare program, introduced in 2006 as
part of the enactment of the MMA Act(Medicare Prescription Drug,
Improvement, and Modernization Act). It provides subsidies to
prescription-drug coverage for Medicare beneficiaries through various
plans.
Earlier Medicare programs cover mostly hospital stays and doctor visits
through Part A and Part B respectively. Later, Medicare Part C, also
knows as Medicare Advantage, combines A and B for people who so choose
and may offer additional benefits at higher premiums, but is not
prescription drug oriented at its outset either. The new Medicare drug
benefit offered by Medicare Part D intends to address, among others, the
issue of forgoing medications among some Medicare recipients and also
provide better affordability for all participants.
Enrollment in Medicare Part D with Different Plans
To be eligible for Medicare Part D, a participant must have first
enrolled in Medicare Part B, which covers doctor visits. Plans under
Medicare Part D for prescription-drug coverage are administered by
private insurance companies based on rules and regulations set by the
federal government. There are two basic types of Medical Part D plans:
Prescription Drug Plan(PDP), a stand alone drug coverage plan, and
Medicare Advantage with prescription drug coverage(MA-PD). Enrollment
starts at age 65 and is voluntary, but late enrollment incurs a penalty
of 1% based on an average monthly premium for all the months the
enrollee did not enroll.
Out-of-Pocket Costs
The government establishes a standard benefit that a Medicare Part D
plan may offer in terms of out-of-pocket expenses by a plan beneficiary
in relation to deductible, co-insurance, co-payments, and coverage
limits, which may adjust yearly.
In 2008 for example, the defined standard benefit called for a
deductible payment of $275, after that a 25% co-insurance of the cost of
a covered prescription drug up to $2,510, the so-called initial
coverage limit, then after the initial coverage limit a full payment of a
covered drug until the total out-of-pocket expenses, including the
deductible and the initial co-insurance but not monthly premium paid,
reach to another limit of $4,050, (the period in between the two limits
is known as the Coverage Gap), and finally beyond the second limit in
the final period, the catastrophic coverage period, a co-payment of
$2.25 for generic or preferred drug and $5.65 for other drugs, or a
co-insurance of 5%, whichever is greater. A catastrophic coverage period
does not roll into next year; it ends on Dec. 31 and the deductible
starts anew on Jan. 1
Standard benefit is the minimum benefit required of a Part D plan. Some
insurance companies offer more benefits using more expensive plans with
higher premiums. For a plan offering gap coverage to eliminate the
Coverage Gap, premiums can roughly double those of defined benefit
plans.
Other Ways of Drug Coverage
Medicare Part D does not require that plans cover all drugs at the same
benefit level. To offer incentives, plans sometimes organize their drugs
into tiers using a formulary based on the cost of a drug, as to whether
it's preferred generic, preferred brand, non-preferred brand, or a
specialty drug. Each tier is then assigned a set co-pay. The lower the
tier, the lower the co-pay.
Under such a tiered benefit system, deductible and co-insurance used in
the standard benefit are replaced with co-pay, which could save plan
participants money if they choose certain drugs over others. But a
plan's tiered co-pay amounts apply only during the initial coverage
period. Once in the Coverage Gap, the rules set for the standard benefit
are again followed. And the better benefit during a catastrophic period
is also preserved regardless a plan’s tiered co-pay.
For more information on finding a Medicare Part D plan, use the
Prescription Drug Plan Finder from Medicare, located on its website. The
Plan Finder can search all plans in a certain geographic area for
personalized or general results to allow comparisons of monthly
premiums, out of pocket costs, drug availability, drug prices under
different benefit designs, such as standard or tiered.
