Health Care Reform:

Medicare Prescription Drug Benefit Plans

Since Jan. 1, 2006, a prescription drug plan -- also called Medicare Part D -- has been available to people with Medicare. This gives you some insurance coverage for brand name and generic prescription drugs. Medicare works with insurers and other private companies to offer a number of different plans.

You have quite a few options. You can:

• Buy a plan that offers the drug benefit alone.
• Choose a Medicare Advantage plan that has prescription drug benefits.
• Keep an existing Medigap plan (H, I, or J) that covers prescription drugs, as long as you don't sign up for the new drug benefit. As of June 2010, the types of Medigap Plans that you can buy changed. Two new Medigap Plans are offered -- Plans M and N. Plans E, H, I, and J are no longer available to buy. If you already had Plan E, H, I, or J before June 2010, you can keep that plan. Contact your plan for more information.
• Keep the prescription drug benefits you get from your employer or other health plan (instead of getting drug benefits from Medicare).

There are many different Medicare prescription drug plans, and the specifics vary. But here's one example:

• Each month, you pay a monthly fee -- or premium -- to stay in the program. The fee will vary by plan and region. In 2012, this fee will be about $38 a month.
• You also pay a deductible of $320. This means that you have to pay the first $320 of medication fees out of your own pocket. Once you’ve paid the deductible, your Medicare prescription drug plan kicks in.
• In many plans, there is a coverage gap after you reach a spending limit. This is the "doughnut hole." After the total cost of your drugs (what you and your insurer paid combined) reaches a certain level -- $2,930 as of 2012 -- Medicare stops paying. You have to start paying your drug costs on your own, but you will, as a Medicare beneficiary, get a 50% discount on brand-name drugs and a 14% reduction in the cost of generics.
• Once the amount you have spent on drugs during the whole year gets high enough -- in 2012 the limit is $4,700 -- Medicare starts paying again. When this "catastrophic coverage" kicks in, Medicare pays about 95% of all your prescription drug costs for the rest of the year. Your deductible and all co-payments paid that year count toward that $4,700 limit. However, your monthly premiums do not.

Keep in mind, many seniors will never need to spend $4,550 because they don't use expensive drugs. Also, not all plans work like this. Plans differ in terms of their deductibles, co-payments, and coverage in the "doughnut hole." This coverage gap is an important consideration when choosing your plan.

Certain people with Medicare automatically qualify for extra help and will pay no premiums, no deductibles, and small co-payments ($1-$6) for prescription drugs:

• People with Medicare AND Medicaid (full benefit dual eligibles).
• People who get help from Medicaid paying their Medicare premiums (in a Medicare Savings Program).
• People with Medicare who get Supplemental Security Income (SSI).
• Other people with limited income and resources (including their savings and stocks, but not counting their homes) can apply and qualify for extra help.