Medicare Coverage: Prescription Drug Benefits 2006

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.

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# 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.

# 3

  • You pay no deductible or premium.
  • You pay $1 - 2 per generic prescription and $3- 5 per brand-name drug.
  • The co-payment amount will rise annually after2006.

How Do I Enroll?

Anyone who has Medicare Part A and/or Medicare Part B can get the drug benefit. If you do, you should join the prescription drug plan by May 15, 2006. If you miss that date, you will have to wait until Nov. 15, 2006 to join. You will also pay a penalty - in higher premiums - if you join late.

Your coverage will begin on the first day of the first month after you joined. In most cases, you can join or change plans once a year between Nov. 15 and Dec. 31.

To get more information about joining, call (800) 633-4227 or visit the Medicare website.

How Do I Select a Plan?

You have a number of choices. Different companies will offer different plans. They will vary in their costs, the medicines they cover, and the pharmacies that they work with.

You can choose to get your healthcare benefits through:

  • The Original Medicare Plan with an added prescription drug benefit
  • Medicare Advantage plan that offers optional coverage for prescription drugs
  • A different Medicare Managed Care Plan that allows you to choose a Medicare prescription drug plan.

How does it work with my other prescription drug coverage?

If you have prescription drug coverage from an employer or a union already, you'll need to compare your current policy with Medicare's prescription drug plan to decide what to do.

  • If your current plan pays as much or more than the Medicaid plan, you might want to keep it. If you join the Medicare plan later, your monthly premium won't be higher. But if you decide to drop your current plan, you may not be able to get it back.
  • If your current plan pays less than the Medicare plan, you have several options. You can keep your current plan and add the Medicare plan to give you more complete coverage. You can also drop your current plan and switch to Medicare -- but remember that you may not be able to get your current plan back after you leave. You can also decide to stick with your current plan. But if you decide to switch to the Medicare plan later, the monthly fee will be higher.

What if I have Medicaid as well as Medicare?

If you have Medicare and Medicaid, Medicaid may have paid for some of your drug costs in the past. However, once the Medicare drug plan started, Medicaid stopped paying for medicines. Now, Medicare should pay some of these costs.

# 1 (Nursing Home Residents)

  • You pay no deductible.
  • You pay no monthly premium.
  • You pay nothing for prescription drugs while you are in a nursing home .

# 2

  • You pay no deductible.
  • You pay no monthly premium.
  • You pay $1 per generic prescription and $3 per brand-name drug.
  • Once your total spending reaches $5,100 (your payments and Medicare's combined), you pay nothing.
  • The co-payment amount will rise annually after2006.

# 3

  • You pay no deductible.
  • You pay no monthly premium.
  • You pay $2 per generic prescription and $5 per brand-name drug.
  • Once your total spending reaches $5,100 (your payments and Medicare's combined), you pay nothing.
  • The co-payment amount will rise annually after2006.

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What If I am in a Medicare Advantage Plan?

Some Medicare Advantage Plans already cover prescription drugs. If your plan is already offering good drug coverage, you may be able to keep it.

Since some plans changed in 2006, you must make sure that your plan is still giving you what you want. For instance, your current plan may not offer the new prescription drug benefit. If you want the benefit, you will have to change plans. On the other hand, your plan may have automatically added the prescription drug benefit. If you don't want that benefit, you have to change plans.

Your plan should send you information about any changes to your coverage. Compare your current plan to other Medicare prescription drug plans. See which one fits best with what you need.

What if I can't afford a prescription drug plan?

Some people who have a low income and limited assets will be granted "extra help" to pay for their prescription drug plan. If you qualify, you may not have to pay the monthly fee (or premium) and you will make smaller co-payments when you buy medications.

  • If you have a limited annual income - equal to or less than $14,355 (single) or $19,245 (married --and your resources in 2006 are $11,500 (single) or$23,000 (married), you may be qualified. People with the lowest incomes and fewest resources will get the most help.
  • If you already get help from Medicaid in paying your Medicare premiums, receive Supplemental Security Income, or have full Medicaid benefits, you automatically qualify for extra help and do not need to apply for the "extra help".

You may get an application for extra help in the mail. Or you can apply by calling Social Security at (800) 772-1213 or visiting their website.


Edited by Brunilda Nazario, MD on December 01, 2006

SOURCES: SOURCES: American Association of Retired Persons (AARP) web site. Centers for Medicare and Medicaid Services. Families USA web site. Medicare.gov web site. Medicare Rights web site. Social Security web site. National Mental Health Association web site.

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Reviewed on 8/14/2007

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