Medicare Part D Guide

Medicare Part D, also known as the Medicare Prescription Drug Program, began in 2006 as a way to provide senior citizens with more affordable prescription medications. The plans are offered by private insurance companies and are overseen by the federal government. Choosing a plan involves some research, but these insurance policies can offer savings to anyone on Medicare taking prescription drugs.

Who Is Eligible

• Medicare Part D is available to anyone who is age 65 or older and on Medicare. When you first turn 65, your initial enrollment period for Part D begins three months before your birthday and continues until three months after your birthday. If you are covered by an employer or union insurance plan and your coverage is "creditable," meaning as good as or better than Medicare coverage, you can delay getting Part D. If you do not have other coverage and do not get Part D during your initial enrollment period, you may have to pay a penalty for late enrollment.

  Medicare Part D is also available to disabled individuals qualifying for Medicare.

Medicare Part D Plan Structure

• The plans are offered by private insurance companies, and each plan has a formulary, or list of drugs that it covers. All plans are required provide basic coverage, meaning they must cover certain widely used drugs and provide coverage of one or more drugs in all categories. Plans all have a monthly premium and may also have a deductible. For each prescription you fill, you will pay a co-pay or co-insurance. In general, the plan pays about 75 percent of the cost of your drugs and you pay about 25 percent.

The "Donut Hole"

• The insurance company that you sign up with will begin keeping track of the amount of money both they and you spend on your prescriptions as soon as your policy starts. If that amount reaches a certain dollar amount ($2,830 in 2010), your coverage will stop temporarily and you will be responsible for paying 100 percent of your drug costs. This temporary lapse in coverage is called the coverage gap or the donut hole and is an issue that presents itself for those taking a large number of prescriptions or who have a few very expensive drugs. If your out-of-pocket costs are high enough, you may spend enough to exit the donut hole to the catastrophic coverage phase, where the plan will pay about 95 percent of your drug costs. Beginning in 2010, the coverage gap will start to be eliminated and will be ending completely in 2020.

Choosing and Changing Plans

• The plans available in your state and their costs can be found at the Medicare website or by contacting Medicare. To sign up, you contact the insurance company directly. Every year there is an open-enrollment period from Nov. 15 through Dec. 31. During that time, you can enroll in a Medicare Part D plan, if you've never had one, or you can switch from your current plan to a new one. Because the prescriptions you take are likely to change from one year to the next, it is a good idea to reevaluate your plan every year during the open-enrollment period to see if you can save money by switching to a new plan.

Extra Help

• There are state and federal programs available that will provide low-income individuals with assistance in paying for their prescription drugs. If your income is below the limit in your state, you may not have to pay any premium or deductible for your drug plan and may have only a small co-pay for your prescriptions. Enrollment information for these programs is available from your local Social Security Administration Office.