Prescription Drug Coverage: An Overview

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (also known as the MMA) created optional 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.

Topics on this page:

1. Types of Part D Plans
2. Premiums & Plan Costs (includes TrOOP costs)
3. Covered Drugs
4. Drug Formularies
5. Pharmacies
6. If You Have Medi-Cal & Are New to Medicare
7. Marketing Rules for Your Protection

1. Types of Part D Plans

Private companies provide Medicare Part D coverage in 2 ways:

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

If you are enrolled in original, fee-for-service Medicare, you can enroll in a PDP, which only provides prescription drug coverage. In 2010, California has 47 of these plans available.

If you are enrolled in or want to join a Medicare Advantage (MA) plan with prescription drug coverage (MA-PD), you will get your Part D coverage through that plan. The availability of MA plans varies by county — some offer many options and others offer only a few. In addition, not all MA plans have prescription drug coverage. Your options are:

• Health Maintenance Organization (HMO)

  Some HMOs provide Part D prescription drug coverage and others do not. If your HMO does not offer Part D coverage, you can enroll in a stand-alone PDP during the annual election period (November 15 to December 31; your plan will be effective January 1 of the following year).

• Preferred Provider Organization (PPO)

  Most regional PPO plans offer Part D prescription drug coverage. In 2010, 2 of the state’s 3 regional PPO plans offer drug coverage.

• Private Fee-For-Service (PFFS) Plans

  Some PFFS plans provide Part D prescription drug coverage and others do not. If you choose to enroll in a PFFS plan without drug coverage, you can get coverage through a stand-alone PDP. PFFS plans are offered in every county in California. In 2010, 46% of California’s PFFS plans do not offer drug coverage.

• Special Needs Plans (SNP)

  SNPs are designed for certain individuals, such as those in certain long-term care facilities (like nursing homes), people who are eligible for both Medicare and Medi-Cal, or people with certain chronic or disabling conditions. All SNPs provide Medicare prescription drug coverage.

See also:

• Summary of California's Medicare Advantage (MA) and Prescription Drug Plans (PDPs) (PDF).
• 2010 California Medicare Part D Benchmark Plans (PDF)
• 2010 California Medicare Prescription Drug Plans (PDPs) (PDF) — not including a list of California's Medicare Advantage Prescription Drug plans.

For help finding and comparing plans, your best local resource is the Health Insurance Counseling and Advocacy Program (HICAP), which offers free and unbiased information. Find your local office or call 1-800-434-0222.

You can also visit medicare.gov or call 1-800-Medicare to speak to a customer-service representative. It is important to have your list of medications, Medicare number and the name of your preferred pharmacy available when you call or visit HICAP or the Medicare website.

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2. Premiums & Plan Costs

In 2010, California has 47 stand-alone prescription drug plans with monthly premiums ranging from $17.60 to $105.50. The insurance company or plan sponsor sets the premium in advance — it is not based on your health condition. In addition to the premium, you may also need to pay a deductible and/or a copayment or coinsurance for every prescription.

Note: Certain MA-PD plans may also have 2 separate premiums — one for Medicare Part A and B benefits, and one for Part D prescription drug benefits.

Part D Plans’ Standard Benefit Design

The chart below shows Medicare's standard benefit design for all drug plans. Plans can either follow this design, or coverage guide, or offer a variation with different cost-sharing structures. The standard plan has an annual deductible with different cost-sharing phases.

Note: In the coverage gap or “donut hole” noted below, you must pay 100% of your drug costs. The Health Care and Education Reconciliation Act passed in March 2010 provides a $250 rebate to all Part D enrollees who reach the “donut hole” in 2010. Only beneficiaries who enter the coverage gap and have to pay the total cost of their drugs will receive a $250 check from Medicare.

¹ Only drugs on your plan's formulary count toward the $4,550 out-of-pocket costs you pay before catastrophic coverage begins.

Companies may vary from the standard design as long as the beneficiary's out-of-pocket costs remain the same or lower than $4,550. For example, a company may offer a plan with no deductible, or more coverage and additional drugs for a higher monthly premium.

True Out-Of-Pocket (TrOOP) Costs

Not all out-of-pocket expenditures are counted to determine if the threshold is reached. For example, the premium is an out-of-pocket expenditure, but it is not counted. Out-of-pocket expenditures that are counted toward the threshold are called True Out-Of-Pocket costs (TrOOP). These include the deductible and cost-sharing for drugs covered on your plan's formulary that you purchase at one of your plan's contracted or network pharmacies. In other words, if you pay for a drug that is not in your plan's formulary or you don't buy it at a network pharmacy, your payment is not counted as TrOOP to determine if you have reached the threshold.

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3. Covered Drugs

Medicare prescription drug plans (PDPs and MA-PDs) are required to:

• Cover at least 2 options in each drug category.
• Make sure you have convenient access to retail pharmacies.
• Have a process in place for you to get drugs that are not on the formulary when it is medically necessary (see Part D appeals).
• Provide useful information, such as how formularies work, how to save money with generic drugs, and how to navigate the grievance and appeals processes.

When choosing a Part D plan, it is important to find one that covers most, if not all, of the prescription drugs you take. If you join a plan that doesn't cover one of the drugs you take, check with your plan's transition policy. The plan may cover a drug that's not on the formulary for 30-90 days while you work with your doctor to find an alternative drug that is covered by the plan. If your doctor believes you need to take your current drug and should not switch to a covered drug, you can contact the plan and ask for an exception. You will probably need to provide information from your doctor explaining why you need the drug. If your plan denies the exception, you can appeal the decision.

Certain types of drugs are not covered by any standard Medicare drug plan. However, certain enhanced drug plans may cover some of these drugs. These excluded drugs include:

• Barbiturates (often used for seizure disorders or to relieve anxiety)
• Benzodiazepines (including Xanax, Valium and other drugs often used for anxiety and insomnia)
• Drugs used for anorexia, weight loss and weight gain
• Fertility drugs
• Drugs used for cosmetic purposes and hair growth
• Cough and cold medicines
• Prescription vitamins and mineral products
• Over-the-counter (OTC) drugs

If you are on full Medi-Cal and are concerned about how you will receive any excluded drugs when you enroll in a Medicare Part D plan, see the Medi-Cal section.

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4. Drug Formularies

Medicare drug plans cover both generic and brand-name drugs. Each plan has a list of drugs it covers, called a formulary. This list must always meet Medicare's minimum requirements (for example, plans are required to include at least 2 drug options in each drug category), but it is not required to include all prescription drugs (see Covered Drugs). In certain circumstances, Medicare may allow plans to change their formularies during the year. Two examples are:

1. If a new generic version of a covered brand-name drug becomes available
2. If 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 your plan's list, or feels a formulary change will have an adverse effect, you or your doctor can apply for an exception with your plan. If the plan denies you, you can appeal the decision. Learn more about Part D appeals.

Note: Medicare prescription drug plans use a system of tiers to apply a copayment to a particular drug. Generic drugs on a plan's preferred list usually have the lowest copayment while drugs on the plan's non-preferred list are on a higher tier with higher copayments.

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5. Pharmacies

Prescription drug plans must contract with pharmacies in your area, but not all pharmacies contract with all plans. Make sure the pharmacies in the plan you choose are convenient for you to access. You can check a plan's pharmacy network on the Medicare Prescription Drug Plan Finder at Medicare.gov, or call the plan's customer service department. Many plans also allow you to receive prescriptions through the mail, often at a lower cost.

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6. If You Have Medi-Cal & Are New to Medicare

If you have Medi-Cal and you're newly eligible for Medicare, you will no longer receive your drugs from Medi-Cal. You will now receive your drugs through Medicare Part D coverage (see our section on Medi-Cal & Prescription Drugs).

If you have not yet chosen a Part D plan or been assigned to one, you can still receive your drugs through Medicare Part D. Pharmacies can bill a backup system called Wellpoint/Point of Sale (POS) for drugs you need immediately. If you encounter problems obtaining drugs, contact your local HICAP office. Note: Your Part D drug plan may be required to reimburse you for drug costs you incur during this delay/gap of coverage minus copayments of up to $2.50 for generics and up to $6.30 for brand-name drugs.

If you're newly eligible for Medi-Cal, you may also experience the same delay/gap in automatic enrollment for your Part D plan (if you don't already have one) and the Low-Income Subsidy (LIS) program. During this delay, POS may help you, as well. Your benefits are retroactive to the date you first became eligible for Medi-Cal. Plans may be required to retroactively pay for your prescription drug costs for a period of up to 7 months.

For more information, see our sections on Medi-Cal Part D's Extra Help/Low-Income Subsidy (LIS) program.

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7. Marketing Rules for Your Protection

Part D plans and their agents/brokers must comply with many marketing rules to protect you and prevent marketing fraud. A few key rules/protections include that plan representatives:

• Are not allowed to come to your home and give you information about their drug plan unless you invite them.
• Can not call you at home if your phone number is listed on the National "Do Not Call" Registry.
• Are not allowed to call you and ask for your Medicare number, Social Security number and other private information. They may only ask you for this information if you call them.

If you find a plan or representative that does not comply with these rules, report your complaint to your plan and 1-800 MEDICARE. You can call your local HICAP office for help as well. You can also email us at , because we track such cases as part of our Medicare advocacy efforts.

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