Medicare Prescription Medicine Benefit Part D – an Overview

Congress created Medicare in 1966. At that time, prescription medicine (Rx) was much less frequently used to treat illness. Now, nearly half of all Americans take at least one prescription medication daily. On January 1, 2006, 40 years after its inception, Medicare introduced "Part D" which allows seniors to purchase a prescription medicine benefit from private health insurance companies. Previously, Rx was only available on a few expensive Medicare Supplemental plans. Now, everyone on Medicare can obtain unlimited prescription medicine coverage for certain medications at more affordable rates.

Private insurance companies, such as Blue Cross of California, Blue Shield of California, and Humana offer the Medicare Part D prescription medicine plans. Unlike Medicare Parts A and B, only private vendors sell Part D plans - you don't buy it from the government.

Each Part D, Medicare Prescription medicine plan must offer minimum benefits. A good resource for people considering Part D options is the Medicare Drug Plan Finder, on the Medicare.gov web site. The majority of Part D plans offer more benefits than the standard or base benefits.

The standard or base Medicare Part D plan benefits for 2012 include:

• The member pays the first $320 per calendar year for prescription medicine (deductible);
• After paying the deductible, the member pays 25 percent co-insurance for prescription drugs for the next $2,930 of prescription medicine during the year;
• After the member has paid the $320 deductible and 25 percent of the next $2,610 ($652.50 = $2,610 x .25,) the member pays 100 percent of prescription medicine costs for the next $3,727.50 of Rx expenses. This is the "donut hole";
• Once a member has paid a total of $4,700 ($320 deductible + $652.50 (25% co-insurance) + $3727.50 = $4,700) per calendar year "out of pocket" for prescription medicine; the plan will pay 95 percent of the cost of prescriptions and the member pays 5 percent.

Many of the private Part D prescription medicine benefit plans pay for some of the member costs listed above, such as the $320 deductible, the 25 percent co-insurance and perhaps generic medicine during the $3,727.50 "donut hole" of no coverage. Also, keep in mind that the deductibles, co-insurance and donut hole are calculated on a "calendar year" basis. This means that everything resets to zero January 1st and you start paying deductibles, co-insurance and the donut hole again.

A person must evaluate his or her personal prescription benefit needs and either select a new prescription plan, stay on his or her current plan or not select any prescription medicine benefit. Note that the Medicare Advantage plans (senior HMOs such as Secure Horizons, presented by Pacificare of California) usually contain prescription medicine at low or no cost.

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