Medicare Part D prescription drug coverage: an overview

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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (also known as the MMA) created voluntary prescription drug insurance through Medicare. It is commonly referred to as “Medicare Part D.”

This drug coverage is available to everyone who has Medicare, regardless of income, health status, or how their prescriptions were previously covered. Private companies provide the insurance coverage. You choose the drug plan and pay a monthly premium. If you have limited income, you may get extra help to cover prescription drugs at little or no cost. See our section “Extra help with Part D costs.”

Types of Part D plans

Private companies provide Medicare Part D coverage in 2 ways:

1. Stand-alone prescription drug plans (PDPs); or,
2. Medicare Advantage Prescription Drug plans (MA-PDs).

If you are in original, fee-for-service Medicare, you can enroll in a PDP. If you are in, or want to join, a Medicare Advantage plan with drug coverage (such as a Medicare HMO or PPO), you can enroll in that plan's MA-PD. The availability of Medicare Advantage plans varies by county. Some counties have many options and other counties have only a few. Also not all Medicare Advantage plans have prescription drug coverage. Read more about Medicare Advantage.

Premiums

The amount of the monthly premium you pay cannot cost more because of your health condition or the number of prescriptions you need. In 2008, California has 56 stand-alone prescription drug plans with premiums ranging from $14.30 to $102.70. In addition to the premium, you may also have to pay a deductible and a portion of your drug costs.

Note that some MA-PD plans may also have 2 separate premiums – one for Medicare Parts A and B benefits and one for Part D prescription drug benefits.
Medicare has a set standard benefit design for all the drug plans. (See chart below.)

*Only drugs on your plan’s formulary count towards the $4,050 out-of-pocket costs you pay before catastrophic coverage begins.

Companies have to offer a plan that is at least as good as the standard design. However, every plan is different. Some companies offer more coverage and additional drugs for a higher monthly premium.

Drug formularies

Medicare drug plans cover both generic and brand name drugs. Plans have a formulary, which is a list of drugs covered by the plan. This list must always meet Medicare’s minimum requirements, but it does not have to include all prescription drugs.

In some circumstances with Medicare’s approval, plans can change their formulary during the year. 2 such circumstances include:

1. if a new generic version of a covered brand-name drug becomes available;
   
   or
2. new FDA or clinical information shows a drug to be unsafe. In general, however, plans cannot discontinue or reduce the coverage of a drug you are currently taking. If a formulary change is made that affects you, the plan must let you know at least 60 days before the change takes place.

If your doctor thinks you need a drug that is not on the list, or feels a formulary change will adversely affect you, you or your doctor can apply for an “exception” with your plan. If the plan denies you, you can appeal the decision. For information on Part D appeals, see our section “If your Part D prescription is denied.”

Pharmacies

Prescription drug plans must contract with pharmacies in your area, but not all pharmacies will contract with all plans. Check with the plan to make sure that the pharmacies in the plan you choose are convenient for you. Many plans will also allow you to get your prescriptions through the mail, often at a lower cost.

Enrollment

If you have not joined a plan AND if you do not have creditable coverage for your prescriptions, (coverage that is at least as good as the standard Part D benefit) your next opportunity to enroll in a PDP is during the annual election period. This period begins on November 15 each year and ends on December 31st. Coverage begins on the following January 1st.

Note: depending on your situation, you may have other limited opportunities to enroll in a Part D plan. Call your local Health Insurance Counseling and Advocacy Program (HICAP) for more information.

In addition, if you do not join a plan AND do not have creditable coverage for your drugs, you will incur a penalty of 1% of the average national premium (about $28 in 2008) for every month you were eligible and did not sign up. This amount is added on to your drug plan premium. (The average national premium changes each year.)

For people who are new to Medicare, the initial enrollment period for Part D lasts for 7 months; it begins 3 months prior to the month you become eligible for Medicare Part A or Part B, the month you become eligible, and ends 3 months after the month you become eligible.

To find and compare plans, your best local resource is HICAP, which offers free and unbiased information. You can call the statewide toll free number 1-800-434-0222 to locate the closest office to you or find your local office online. You can also go to the website medicare.gov or call 1-800-Medicare and speak to a customer service representative. It is important to have your list of medications, your Medicare number and the name of your preferred pharmacy available when you call or go on the website.

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This section provides general information and should not be relied upon to make individual decisions regarding your Part D coverage. If you would like to discuss your specific situation, call the Health Insurance Counseling and Advocacy Program (HICAP). HICAP provides free and objective information and counseling on Medicare and can help you understand your specific rights and health care options. You can call 1-800-434-0222 to make an appointment at the HICAP office nearest you.

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Page updated April 23, 2008