What Is a Prescription Drug Plan?

A prescription drug plan, otherwise known as a PDP, is a Medicare benefit available to enrollees that provides insurance coverage for prescription drugs. Created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Part D provides a prescription drug insurance benefit for Medicare enrollees.

Prescription drug plans are provided by private insurance companies. Medicare requires basic conditions for the plans regarding maximum deductible amount, the minimum number of drugs covered in each drug class, and other benefits. There several critical facts to be aware of before enrolling in a prescription drug plan:

Each prescription drug plan has its own list of covered prescription drugs called a formulary (over-the-counter drugs like aspirin or vitamins are not covered by prescription drug plans). When choosing a plan, it is critical that you review which of your drugs are covered by the formulary. If you sign up for a plan and you use a drug that is not covered by the plan’s formulary, not only do you pay full price for the drug but also your payments for that drug are not counted toward the “catastrophic coverage” threshold for drug expenses that qualify for additional government aid. Use our tool to identify plans that cover your medications.

A standard Medicare approved prescription drug plan has a deductible period where you are responsible to pay 100% of the drug costs until the deductible amount is satisfied. In 2008, the deductible amount is $275. After a plan’s deductible is satisfied, you will pay a co-payment (or in some cases a co-insurance fee representing a percentage of the drug’s full price) for a covered drug. Some prescription drug plans waive the deductible but before signing up for one of these plans it is important to review their monthly premium to verify that the plan makes sense for your circumstances. There is a government program that assists low-income individuals with deductible and co-pay expenses. The program is known as “Extra Help” or the “Low Income Subsidy” (LIS).

After the deductible is paid, 75% of drug costs up to $2,510 in a year are covered by the prescription drug plan. If this amount is exceeded, the enrollee will pay 100% of the drug costs. This absence of benefits is often referred to as the “donut hole” or “gap.” This will continue until either a new calendar year begins or the enrollee’s out-of-pocket expenses for covered drugs exceed $4,050 within the year. In this latter scenario, the government has a program called “catastrophic coverage” to assist Medicare enrollees with excessive drug costs. As stated previously, money you spend on drugs that are not covered on your plan’s formulary do not count towards that catastrophic coverage threshold.

Our PlanPrescriber tool can assist you in making an informed choice that reflects your preferences regarding issues such as monthly premium, drug restrictions, and gap coverage. This tool enables you to compare plans to find the lowest cost. After you review the comparison based on your drug needs, you can decide which plan is best for you

We provide a variety of information on Medicare Part D subjects including the following articles:

The government’s official web site for the Medicare program is www.medicare.gov. This site has information on various Medicare programs as well as detailed eligibility criteria. Another site, mymedicare.gov, also contains information on Medicare programs.