Prescription Drug Benefits: Year 2006

WebMD Medical Reference

On January 1, 2006, the new Medicare prescription drug plan -- also called Medicare Part D -- will be available to people with Medicare. This will give you some insurance coverage for brand name and generic prescription drugs. Medicare will work with insurers and other private companies to offer a number of different plans.

You'll have quite a few options. You will be able to:

  • Buy a plan that offers the drug benefit alone.
  • Choose a Medicare Advantage plan that has prescription drug benefits.
  • Keep an existing Medigap plan (H, I, or J) that covers prescription drugs, as long as you don't sign up for the new drug benefit.
  • Keep the prescription drug benefits you get from your employer or other health plan (instead of getting drug benefits from Medicare).

The 2006 drug benefit will replace the temporary drug discount cards issued in 2004.

How does it work?

There are many different plans, and the specifics vary. But here's one example:

  • Each month, you pay a monthly fee -- or premium -- to stay in the program. The fee will vary by plan and region. In 2006, this fee will be about $32 a month.
  • You also pay a deductible of $250. This means that you have to pay the first $250 of medication fees out of your own pocket. Once you've paid $250, your Medicare prescription drug plan kicks in.
  • Then, when you buy medications, your plan will cover some of the costs. But there is a gap in coverage. Once you've spent $2,250 on prescription drugs, Medicare stops paying a share of the cost. You have to pay the next $2,850 on your own. After that point -- when you have spent a total of $3,600 in out of pocket costs -- the plan kicks in again and pays 95% for the rest of the year.
  • You have to pay whatever is left over. The exact costs vary, depending on which drugs you need, and how much you spend on them each year. However, some Medicare drug plans might offer some assistance in this coverage gap.

But keep in mind that your plan may not be like this. Plans vary in terms of their deductibles, co-payments, and coverage in the "doughnut hole." Plans also differ in which drugs are covered, how much you pay, and which pharmacies you can use.

How much will it cost?

Certain people with Medicare automatically qualify for extra help and will pay no premiums, no deductibles, and little to no co payments ($0-$5) for prescription drugs.

  • People with Medicare AND Medicaid (full benefit dual eligibles)
  • People who get help from Medicaid paying their Medicare premiums (in a Medicare Savings Program)
  • People with Medicare who get Supplemental Security Income (SSI)
  • Other people with limited income and resources (including their savings and stocks, but not counting their homes) can apply and qualify for extra help.

# 1 (Basic Benefit)

  • You pay an average $32 premium each month.
  • For drug costs up to the first $250, you pay100% (this is the deductible.)
  • For drug costs between $250 to $2,250, you pay 25% and Medicare pays 75%
  • For drug costs above $2,251 and until you pay $3600 out of your own pocket, you pay 100% and Medicare pays nothing. This is a $3,600 gap in coverage that you pay for out of your own pocket.
  • After you have paid $3600 out of your own pocket, you pay 5% of your drug costs (or a small co-payment.) Medicare pays the rest for the remainder of the year.
  • If you have low income and limited assets, you may quality for waived fees and have to pay only a small co-payment for each prescription.
Yearly Out-of-Pocket Costs
Annual Drug Expenses Plan Pays* You Pay*
$1,000 $563 $822
$3,000 $1,688 $1,697
$5,000 $3,018 $2,367

* Figures rounded to the nearest dollar amount.

# 2

  • You pay a monthly premium based on a sliding scale -- up to $37 maximum.
  • You pay up to $50 before the plan begins to pay.
  • You pay 15% of your drug costs over $50.
  • Once your total drug costs reaches $5,100(about $800 out of your pocket), you begin to pay a co-payment $2 per generic prescription and $5 per brand-name drug after drug expenses reach $3,600 in a year.
  • The co-payment amount will rise annually after2006.