Health Care Reform:

What Does Medicare Cost?

continued...

 Medicare Prescription Drug Plans (Part D):

You must pay a monthly premium and annual deductible to get prescription drug coverage from Medicare. Since there are many different plans, the costs can vary widely.  

In most plans, you'll pay:

• A monthly premium. The fee varies by plan and region, although the average is estimated to be $38.
• A yearly deductible. The standard is $320, although it varies depending on your plan.  After you have paid the deductible out of your own pocket, your Medicare prescription drug plan kicks in.
• Part of the cost of your medications (called a co-pay or co-insurance). Again, the amount depends on the plan you've chosen.

Specific plans differ in their costs, the medicines they cover, and the pharmacies they work with.  Some people with low incomes and limited assets will be granted "extra help" to pay for their Medicare drug plan. If you qualify, you may not have to pay the monthly fee and your co-payments will be cheaper when you buy drugs.

There's also a gap in drug coverage -- the so-called 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, although for 2012 there's a 50% discount for covered brand-name drugs and plans will pay 14% of the cost of covered generic drugs.

Once the amount you have spent on drugs during the whole year gets high enough -- the limit as of 2012 is $4,700 -- Medicare starts paying again. Once 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 Part D drug 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 $4,700 because they don't use expensive drugs.

 Medigap:

Medigap is supplemental health insurance provided by private insurance companies that covers some of the costs Medicare doesn't, including co-pays and deductibles. Medigap generally doesn't cover long-term care, vision or dental care, hearing aids, eyeglasses, and private-duty nursing. You don't need, nor can you buy, a Medicare Advantage Plan if you carry a Medigap policy.

To join a private Medigap plan, you pay a monthly fee to an insurance company in addition to the premium you pay to the government for Medicare Part B.

The costs of Medigap plans vary a lot, depending on the coverage, the company, your location, and your age. Some plans may charge you more if you have any pre-existing health problems.  Keep in mind that different companies may charge different rates for the exact same Medigap plan. So make sure to shop around before buying one.