What is Medicare Part D?

Medicare is a federal social insurance plan in the United States. Its benefits are restricted to people aged 65 and over who meet special criteria. Medicare Part D is the portion of that insurance scheme that pertains to prescription medications. A good way to distinguish Medicare Part D from the other parts is to remember "D = drugs."

To enroll in Medicare Part D alone or to receive Part D benefits through a Medicare Advantage Plan, the interested person must already be enrolled in Medicare Part A and Medicare Part B. Eligibility for enrollment begins three months before a person’s 65th birthday and extends until 3 months after the person’s 65th birthday. Missing the initial enrollment period does not disqualify an eligible person from receiving Medicare Part D benefits.

If a person misses the initial enrollment window, however, he or she will have to wait for open enrollment, which takes place between November 15 and December 31. Enrolling for Medicare Part D benefits during this open enrollment period instead of during the initial eligibility period involves a penalty. That penalty will result in the beneficiary paying higher premiums for medications.

There is not a set payment plan for Medicare Part D, but various plans with each plan having varying costs. Once a person has been deemed eligible to receive Medicare Part D benefits, an annual deductible will be set. The beneficiary must pay all medication costs up to the amount of the deductible. It is important to remember that not all medications are covered by Medicare Part D. The costs of uncovered medications cannot be included when figuring whether the annual deductible has been met.

After the annual deductible has been reached, Medicare Part D benefits will begin to cover a portion of drug costs. The beneficiary will only be responsible for a co-pay. This arrangement continues until the beneficiary meets an annual coverage limit.

Once the beneficiary spends an amount that equals the annual coverage limit, he or she becomes subject to another deductible known as a coverage gap. During this time, the beneficiary must pay all costs for drugs up to an annually set threshold. Once the beneficiary reaches this threshold, known as catastrophic coverage, generic and preferred drugs are available at set prices for the remainder of the year. Beginning January 1st of the following year, deductibles and limits must be met again.