All Medicare beneficiaries are eligible for the Medicare Prescription Drug Coverage also referred to as Medicare Part D. This benefit is one of many changes brought about by the Medicare Modernization and Improvement Act of 2003 (MMA). Medicare consumers who are enrolled in Part A (medical insurance) and/or entitled to Part B (hospital insurance), are eligible for the prescription drug coverage. Enrollment in a drug plan is on a voluntary basis and requires completion of an enrollment form. Although enrollment is voluntary, there are time limitations during which consumers must enroll to receive the benefits. Also, people who are eligible for both Medicare and Medicaid benefits (dual-eligible) may also enroll.  

The following enrollment periods offer consumers the opportunity to participate in this coverage:

You can start applying for and setting up your coverage when you’re 64 and nine months because the Initial Enrollment Period for Medicare actually starts three months before you turn 65. Medicare is made up of four component Parts that are mentioned below:

•   The Initial Enrollment Period applies to an individual who is first starting Medicare benefits. Disabled individuals may enroll three months before and three months after their 25th month of disability. For individuals first starting, it includes the three months before an individual turns 65 to three months after turning 65;
•   Special Enrollment Period (mandatory to have a qualifying circumstance such as a change of residence).
•   Annual Coordinated Election Period: October 15 through December 7 of each year

The standard Medicare drug coverage is divided into three levels of expense that beneficiaries will move through during the year as they purchase their prescription drugs. Out-of-pocket costs for covered medications in 2011 included:

•   25 percent of prescription costs between $310 and $2,840 (a total of $632)
•   100 percent of prescription costs between $2,840 and $6,448 (a total of $3,608)
•   An annual $310 deductible

Consumers will pay $2.50 for generics and preferred drugs and $6.30 for all other drugs, or a 5 percent co-pay—whichever is greater, when prescription costs reach $6,448 (a total of $4,550 true out-of-pocket costs—without including the premium).

There are two important documents that are part of any Part D drug plan:

1.    Formulary or List of Covered Drugs, which describes the prescription drugs covered and developed by the plan, usually with the help of a team of doctors and pharmacists—and  it is mandatory for the list to meet the requirements set by Medicare. This list is usually updated once a year and also tells you if there are any rules that restrict coverage for certain drugs.

2.     Pharmacy Directory, analogous to the Provider Directory in a Part C plan, which lists network pharmacies that have agreed to fill covered prescriptions for plan members. This Directory is usually updated once a year.

Drugs that are excluded from coverage under Part D plans include: Barbiturates, Benzodiazepines (anti-anxiety medications), fertility drugs, cosmetic drugs, cough or cold remedies, weight loss and weight gain medications, vitamins (except prenatal), or drugs covered under Part A or Part B benefits. The plan will send you a report- “Explanation of Benefits” (EOB) - when you use Part D prescription drug benefits that explain the payments that it has made for prescription drugs and a summary portion that describes the drugs you’ve used during previous periods—most often the previous month and year.

An important note: A Part D plan may also cover some drugs that are not listed in the Formulary. If you use a prescription drug that’s not listed, you can contact the plan’s Member Services office to inquire whether it is…and whether it can be added. (You may need some supporting materials from your doctor to get a drug added.). Only payment for prescription drugs that are part of a plan’s formulary will count toward the deductible and out-of-pocket limit. An “exceptions” process will be in place for a beneficiary to request a drug that is not on the plan’s formulary or a covered Part D drug at a lower cost-sharing level. It is the job of the beneficiary’s physician to determine whether the lower-cost drug on the formulary is as effective as the requested drug, or that they would have adverse effects on the enrollee.

Most people pay a standard monthly Part D premium. However, you may have to pay an extra amount if your annual income is higher than certain limits such as $85,000 or above for an individual or married individuals filing separately or $170,000 or above for married couples. The Social Security Administration will send you a letter telling you whether you have to pay an extra amount and what it is. You might have to pay more for the Part D drug coverage and the reason for that is: if you’ve had a “continuous period of 63 days or more” when you didn’t have “creditable” prescription drug coverage or if you did not join a Medicare drug plan when you first became eligible, you will have to pay a late enrollment penalty. (“Creditable” coverage means a drug plan that is expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage.)

How long you waited before you enrolled in drug coverage or how many months you were without drug coverage after you became eligible determines the amount of the late enrollment penalty. Usually, you’ll be asked to pay the penalty as a surcharge to your monthly Part D premium though in some cases, you can pay the penalty in a lump sum.

There are some Medicare Advantage/ Part C plans that include prescription drug coverage which follows the same rules as the Medicare Part D coverage. This Medicare Advantage Prescription Drug (MA-PD) coverage provides an integrated benefit covering their physician, drug, and hospital costs. To qualify for a MA-PD plan you must be entitled to Medicare Part B and enrolled in Part A. Although it’s better to use a Part C plan that doesn’t offer drug coverage and get a stand-alone Part D policy. This way, if you choose to go back to traditional Medicare or if you decide to change the Part C plan you use—your prescription drug coverage won’t be affected.