Medicare Part D – The Medicare Reform Bill of 2005 established a Medicare Prescription Drug Program. The 43 million seniors then eligible for the program began receiving information in October 1, 2005. Insurance carriers began offering thousand of Prescription Drug Plans, PDPs. Sign-ups began November 15th and coverage began January 1, 2006. On average, seniors through out the country will pay a $32 monthly premium – with Californians paying on average a $25 monthly premium – for most of the drugs they need.

Prescription Drug Plans (PDPs) have two main variations – stand-alone PDPs and Medicare health plans that include PDPs. Most Medicare Advantage plans, whether PPO, HMO, or PFFS plans have built-in PDP coverage (MA-PDs), or have PDP coverage as an option you can select. To enroll in a PDP, you must either be either eligible for Part A, or enrolled in Part B. Part D is a voluntary program, you are not required to enroll in a PDP. However, there is a cumulative 1% per month premium penalty you must pay to enroll in a PDP plan after the date you first became eligible. It is best to enroll in a PDP plan, or a Medicare Advantage plan with drug coverage when you first become eligible. If you have an existing Medicare supplement policy with prescription drug coverage, contact your agent for advice about switching.

There is a lot of confusion about eligiblity requirements and about specific coverages and out of pocket costs. The programs normally operate like this:

  • the insured pays a monthly premium.
  • the insured has an annual deductible of about $320 in basic plans, no deductibles in preferred plans.
  • then drug costs are shared between the carrier and insured to a yearly total of $2,960 in 2015.
  • then there is a coverage gap, called the “donut hole”, where the insured pays about 1/2 the cost of branded prescriptions and 1/3rd the cost of generic drugs until reaching the 2014 annual total out of pocket maximum, including premiums, of $4,700.
  • after that, all, or most all, drug costs are paid by the carrier.

If you earn more than $85,000 MAGI as an individual or more than $170,000 MAGI as a couple filing jointly, your Part D premiums will cost from $12.00 to $69.10 per month more.