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Medicare Drug Benefit Rules

Medicare's prescription drug benefits work alongside Medicare's hospital and medical coverage programs to make the cost of prescription drugs more affordable. The rules that govern drug benefits can vary depending on the type of plan a person has.

  1. Medicare Prescription Drug Coverage

    • Medicare prescription drug benefits--also known as Medicare Part D--provide a layer of protection for people who have high drug costs and can also help to reduce overall prescription costs. These benefits are made available through Medicare prescription drug plans or through Medicare Advantage Plans. Unlike Medicare's hospital and medical plan coverage, private insurance companies handle the actual selling of different drug plans so coverage and costs can vary from company to company. Only pharmacies and insurance companies contracted through Medicare can provide the benefits offered through Medicare's prescription drug program.

    Payment Requirements

    • Payment requirements for different drug plans can vary from company to company, though most charge a monthly premium rate. In addition to the monthly premium, coverage plans may require deductible and copayment amounts as well. Deductibles must be paid before the actual plan benefits kick in. Copayments are then required with each prescription drug order once the deductible amount is paid off. Copayment amounts remain the same for each order and can range anywhere from $5 to $50 depending on the conditions of the plan. Some benefit plans require a coinsurance payment in the place of the copayment, which amounts to a percentage of the total cost of the prescription.

    Rules for Prior Authorization

    • Rules for prior authorization can vary depending on the type of prescription a person has. In some cases, a doctor will prescribe a higher cost or name brand medication in the place of generic drugs to avoid certain side effects or limitations placed on how long a person can take a particular medication. Medicare's prior authorization rules work to ensure a particular medication is medically necessary, according to Medicare.gov. In effect, the prescribing doctor must contact the drug plan administrator and prove that the prescription is a medically necessary treatment before Medicare benefits are granted.

    Coverage Gap Rules

    • Rules regarding Medicare drug benefits include a coverage gap period that applies when a participant's prescription costs reach a certain dollar amount within any given year, according to AARP's reference site. After this point, participants must pay 100 percent of their prescription costs until another dollar amount is reached. As of 2011, the coverage gap begins once a participant has reached $2,840 in prescription drug benefits. From thereon, participants pay 50 or 93 percent in out-of-pocket costs (50 percent for brand name drugs and 93 percent for generic drugs) until $4,550 is spent in out-of-pocket costs. After that point, Medicare drug benefits cover 95 percent of prescription costs for the remainder of the year.

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