Medicare Part D: The Prescription Drug Benefit

The new Medicare Prescription Drug Benefit (Part D) provides many older consumers with a once in a lifetime opportunity. For example, older beneficiaries in their 70's, 80's, and 90's, who have no other coverage and enroll when the program begins in 2006 will get a better "deal" than younger seniors. They can enroll on the same terms as everyone else, whereas people who turn 65 in 2006 or later will face late enrollment penalties if they enroll at a later age.

Unlike many employer sponsored drug plans that provide first dollar coverage and a uniform co-payment for every drug purchase, the Medicare plan is more of a catastrophic insurance plan which includes the following features:

  • Participation in this plan is voluntary.

  • From spring 2004 through 2005, Medicare beneficiaries will have the option of buying a drug discount card for about $30 per year. Those with limited incomes may qualify for an annual credit of up to $600 toward their annual prescription drug purchases.

  • Beginning in 2006, Medicare beneficiaries have the option to sign up for a stand-alone drug plan or join a private health plan that offers drug coverage.

  • The initial premium will be about $35 per month, or $420 per year.

  • The initial deductible will be $250.

  • Medicare would then pay 75 percent of drug costs from $251 to $2,250.

  • There will be no Medicare coverage for drug costs between $2,250 and $5,100. This gap has been referred to as the "donut hole."

  • Once a beneficiary reaches $5,100 in total prescription drug costs, Medicare would pay 95% of the rest of their drug costs for that year.

  • Extra help will be available for those with low incomes and limited assets.

  • The deductible, premiums and the coverage gaps are subject to future increases.

Benefit Plans Negotiate Discounts

Keep in mind that many large benefit plans negotiate significant volume discounts. Seniors who have no prescription drug coverage pay some of the highest retail prices in the country. Through the new Medicare prescription drug benefit they will pay the lower prices negotiated by plans. However, Medicare beneficiaries who fail to sign up during an initial enrollment period will be subject to a late enrollment penalty if they choose to sign up later, unless they can show that they had other prescription drug coverage through a retiree plan, veterans' benefits, etc. The idea is to discourage healthy seniors who currently have no other drug coverage from waiting "until they need it" to enroll.

Conduct Careful Research

It is important for Medicare beneficiaries to conduct careful research before they decide whether or not to enroll in Medicare Part D (the Prescription Drug Benefit), because unfortunately, if a mistake is made during the open enrollment period, it could prove very costly at a later date. To learn more contact Medicare at 1-800-MEDICARE (1-800-633-4227) or www.medicare.gov.

Home