Medicare Prescription Drug Plans: Medicare Part D

Medicare prescription drug plans provide some insurance coverage for brand name and generic prescription drugs. Medicare works with insurers and other private companies to offer many different plans.

The Medicare prescription drug benefit isn't perfect by any means. But it is helping millions of people pay for medicines. So you should understand how to take advantage of it.

How Do I Get a Medicare Prescription Drug Plan?

To get a Medicare prescription drug plan, you must already have Medicare Part A and/or B. There are many different plans. Compare the ones that are available in your area. You can use the Medicare Prescription Drug Plan Finder to do that.

Once you've chosen the plan that best fits your needs, call the specific plan to find out how to enroll. You will probably receive a form in the mail that you can fill out and return. You can also enroll online.

How Does a Medicare Prescription Drug Plan Work?

Medicare prescription drug plans differ in their costs, the drugs they cover, and the pharmacies they work with.  But here's how a basic plan would work.

• Each month, you pay a monthly fee -- or premium -- for your Part D prescription drug plan. The average is $30.36, although it varies across the country. You have to keep paying the Medicare Part B premium, which covers doctor visits, as well. 
• You may also pay a yearly deductible. Yearly deductible is the amount you pay for your prescriptions before the plan begins to pay. Some plans charge no deductible. The standard is $295 in 2009, 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. 
  
• Then, when you buy medications, you pay part of the costs, and your plan covers the rest of the costs. Your share may be a flat fee, called a co-pay, or a percentage of the cost of the drug, called co-insurance.
  
• 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 -- typically $2,700 -- Medicare stops paying. You have to start paying your drug costs on your own. Sometimes the plan will cover generic drugs, but not brand name drugs.  
• Once the amount you have spent on drugs during the whole year gets high enough -- in 2009 the limit is $4,350 -- 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 $4,350 limit. However, your monthly premiums do not.

Keep in mind, many seniors will never need to spend $4,350 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 Medicare Prescription Drug Plan.