Pharmacy Benefits and Medicare Part D

Medicare Part D is Medicare's prescription drug coverage, which provides pharmacy benefits. Part D coverage is obtained through private companies, rather than through Medicare directly, as Parts A and B are. Part D coverage is available to anyone with Medicare coverage, whether it's Part A, B or both. Plans typically have a monthly premium, co-pays, and deductibles. There is also a coverage gap, commonly referred to as the "doughnut hole," during which plans cover significantly less.

History

• Medicare Part D was enacted as part of the Medicare Modernization Act of 2003. Previously there was some prescription coverage available through private plans or through Medicaid, but none widely available to all Medicare beneficiaries. Part D plans were available starting in 2006. All Medicare beneficiaries were given an opportunity to enroll at that time. Medicaid recipients were also transitioned over to Part D coverage.

Plan Types

• There are two types of Medicare Part D plans. There are stand-alone plans that can be obtained through a number of private companies. Stand-alone plans are for those with just original Medicare (Parts A and/or B) or those with original Medicare and a Medigap, or Medicare Supplement, plan. Medicare Advantage plans also offer Part D coverage as a part of their overall benefits. All plans must be approved by Medicare.

Pharmacy Benefits

• Each plan provides pharmacy benefits through a formulary. A formulary is a list of covered prescriptions, and is usually made up of a variety of generic and brand name drugs. Drugs are classified into tiers, and each tier will have it's own co-pay amounts. Typically, generic drugs have the lowest co-pays. Some drugs may require prior authorization from the plan, or the plan may require another prescription to be tried first (step therapy). Plans may also limit the quantity of a given prescription. Plan members can, however, request an exception to those rules.

The "Doughnut Hole"

• Part D plans will cover total drug costs up to a certain amount. This amount in 2010, for example, is $2,830. Once that amount is reached, you are responsible for prescription costs up to a maximum out-of-pocket amount. This amount is $4,550 in 2010. Once you exceed the out-of-pocket maximum, catastrophic coverage begins, which lowers co-pays significantly. Plans do provide a discount for prescriptions purchased while in your coverage gap.

Paying for a Plan

• Plans have a monthly premium that can be paid directly or deducted from Social Security checks. There is a late enrollment penalty if you did not enroll when you were first able to. This penalty is 1 percent for each month you delayed, and is added on to your monthly premium. There is also extra help available that can be applied for through Social Security. The extra help can provide assistance with monthly premiums, co-pays, or both. Qualifying for extra help is determined by a combination of assets and income.