Medicare Part D - Prescription Drug Coverage

Medicare Part D began Jan 1, 2006 after being approved by Congress by one vote. The politicians felt they needed to do something but, did not intend to provide free prescription medicines to senior citizens. They wanted to simply set up guidelines and have people buy coverage from private insurance companies.

The overall design gives some help to most people, and a lot of help to some.

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To do this the design provides for:

1- A Calender Year Deductible (optional)
For 2015, the deductible can be as much as $320, but many companies offer coverage with no deductible.
Calendar Year Deductibles re-set at zero every January 1st.

2- An Initial Coverage Period.
This period is not based on time, but instead on the gross value of medication being purchased. (The gross value adds both the portion you pay and the portion paid by the insurance company.) For 2015 the Initial Coverage Period ends when the gross amount purchased reaches $2,960.

During the Initial Coverage Period, you buy your medications at a reduced rate, which could be 25% of the total, or a flat copay amount based on which tier the medication falls in. Generally, the tier 1 medications are preferred generics with the lowest cost; Tier 2 are non-preferred generics.  Tier 3 are usually preferred brand name drugs. Tier 4 are non-preferred brand and Tier 5 are specialty drugs that usually have the highest cost.    

3- A Coverage Gap (also known as a Doughnut Hole)  
After the gross value of medicine purchased exceeds $2,960,the insurance plan stops paying any of the costs. During this period the plan member is responsible for paying 65% of the generic medications costs and 45% of the brand name drugs.

If you qualify for a low income subsidy (also known as "Extra Help" you will nobe effected by the deductible or the gap and will get reduced copays as well. To find out if you qualify, go to

4- A Catastrophic Coverage Period.
If your total out of pocket prescription costs reach $4,700 you qualify for significantly reduced prices (@ 5%).

Medicare prescription benefits can be purchased as a Part D Prescription Drug Plan (PDP) or can  be included in a Medicare Advantage Health Plan such as an HMO or PPO.

The government does not require you to get a drug plan, but they do provide a disincentive for people to opt out of the system. This is done by charging a penalty for late enrollment.
Watch the Medicare Part D Video

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Watch: An Introduction to the Basics of Medicare