Your Guide to Medicare Part D

Medicare’s New Prescription Benefit

Medicare Part D can help you pay for expensive, medically necessary prescription drugs in order for you to live a healthier, less financially burdened life. The program was created by the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA), and coverage began January 2006.

If you are a Medicare beneficiary, you can purchase prescription drug coverage through Part D regardless of your health status, prescription drug use, or income. Most Medicare beneficiaries signed up for coverage during the first enrollment period in early 2006. However, if you recently became eligible for Medicare (for example, if you just turned 65), the next enrollment period will be from November 15 to December 31, 2006. If you previously enrolled in a plan earlier in the year, you will be able to switch to another one if you find a plan that is better suited to your needs during this period as well.

To obtain Part D prescription drug coverage, you must select a Medicare drug plan offered from a private insurer by Medicare, and you pay a monthly premium for this service. Because the process can be a bit complicated, we wrote this booklet to help you. Here you will learn how Medicare Part D works and how you can take advantage of this new prescription drug benefit.

By selecting and enrolling in a Part D prescription drug coverage plan, you will be able to receive coverage for prescription drugs and biologicals (such as insulin). Generally, Part D does not cover medications that are already covered by other Medicare programs or “Medicaid-excludable drugs” (described later). Part D will cover drug used to help you quit smoking. Part D also does not usually pay for over-the-counter (OTC) medications, which are medications that you can purchase without a prescription.

While the cost-sharing responsibilities will shift back and forth between you and the insurance provider as the tab for your drug costs adds up, there is no cap (maximum amount that Medicare will cover), and if your out-of-pocket costs exceed a certain dollar amount, the insurer will pick up 95% of the cost of your prescriptions after that for the rest of that calendar year.

Beware of the Penalty

As Medicare Part D is currently set up, if you do not enroll in a policy promptly when you become eligible, you may end up having to pay a penalty once you sign up. To avoid this penalty, you must be able to prove that you already have “credible coverage,” which is coverage that is “at least as good as” that offered by a Part D Plan. If your present Medigap policy or the coverage from your retirement policy or union does not meet this requirement, you will have to pay a penalty of one percent per month for every month that you waited to join Plan D after you first became eligible. You continue to pay this penalty as long as you stay enrolled in the program. (For tips on avoiding this penalty, see page 18.)