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Medicare - How Does It Work? Part D

Medicare Part D is prescription drug coverage. These plans add drug coverage to Original Medicare. Before deciding whether to sign up for Medicare drug coverage you need to understand how the program works.

Who is eligible for drug coverage?

Anyone on Medicare (with either Part A or Part B) is entitled to drug coverage regardless of income. No physical exams are required and you cannot be denied for health reasons or because you already use a lot of prescription drugs.

Do I have to sign up?

For most people, joining Part D is voluntary. However, if you get your drugs from Medicaid, you must get them from a Medicare drug plan as soon as you become eligible for Medicare.

You won't need to sign up if you have other drug coverage that is better than Medicare's. For example, benefits from a current employer with credible coverage.

But if you don't have other drug coverage that's considered as good as Medicare, and you delay signing up, you'll incur a late penalty that adds to your premium for as long as you're in the program – except in certain circumstances.

How can I get Medicare Prescription Drug Coverage?

You must enroll in one of the private insurance plans that Medicare has approved to provide it. Either through:

  • A stand-alone Prescription Drug Plan that offers only drug coverage

  • Through a Medicare Advantage Plan that covers both medical services and prescription drugs.

What Will My Premium Be?

There is no single monthly premium for Part D prescription drug coverage. Each drug plan sets its own premium for each calendar year and factors in your modified adjusted gross income. If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain limit, you'll pay an extra amount in addition to your premium. This is similar to the methodology used to calculate Medicare Part B rates.

What is the Yearly Deductible For Drug Plans?

This is the amount you must each year for your prescriptions before your Medicare Prescription Drug Plan begins to pay its share of your drug coverage. Deductible vary among plans. No Medicare drug plan may have a deductible more than $325 in 2013.

What is the Copayment/Coinsurance in Drug Plans?

Copayment, or coinsurance, is the amount you pay for each of your prescriptions after you have paid the deductible (if your plan has one). Some Medicare Prescription Drug Plans have different levels or "tiers" of copayments or coinsurance, with different costs for different types of drugs (brand name vs. formulary).

This continues until you and your plan have paid – reach a certain amount ($2,970 in 2013) from the beginning of the year.

When Should I Enroll?

Similar to Parts A and B, individuals can enroll during the 7-month Initial Enrollment Period. Generally, you must stay enrolled for the calendar year. Each year between October 15 – December 7th, anyone can join, switch, or drop a Medicare Drug Plan. This change will take place on January 1st. If you do not enroll when first eligible or you have a gap in credible coverage of more than 63 days, you will be subject to a late enrollment penalty.