Medicare Part D: What Is It & How To Choose a Plan

Medicare Part D is the part of Medicare that covers prescription drugs. Most people that have “traditional” Medicare (Parts A & B) choose to get a Part D plan to provide prescription drug coverage. “Original” Medicare, by itself, does not cover prescription drugs. Likewise, Medigap plans do not provide drug coverage. So, in order to be covered for prescriptions you need a Part D plan.

How Does It Work?

Medicare Part D is sold through private insurance companies, but it is overseen by CMS, the governing body of Medicare. The plans sold through the private companies must be approved by Medicare prior to being sold to the public. Medicare has a set of “standard” benefits that all plans must meet or exceed. These standard benefits can change each year.

Special Implications

There are a few things that you should understand about Part D before endeavoring to compare and choose a plan.

Late Enrollment Penalty

Medicare charges a late enrollment penalty if you do not enroll in Part D when you are first eligible. Now, if you have creditable coverage (i.e. employer or retiree insurance that is considered creditable), you are exempt from this penalty. But if you turn 65, neglect to sign up for Part D, then later, decide to sign up for it – you are subject to the Medicare Part D late enrollment penalty.

This penalty is 1% of the “national base beneficiary premium” (in 2012 this is $31.08) multiplied by the number of full months that you have gone without creditable drug coverage or a Part D plan. This penalty amount is rounded to the nearest 10 and added to your premium when you DO sign up for a plan.

Annual Election Period

There is an annual election period for Medicare Part D plans. Many people mistakenly think this period also applies to Medigap plans; however, it does not. The election period currently runs from October 15 to December 7. During this time, you can add, drop or change your Part D plan. You cannot do it during the year, unless you fall in a special election period (see below).

Special Election Periods

Special Election Periods (SEP) are times that you are eligible to add or drop Part D coverage. There are many different and varying examples of this, but the most common SEPs are:

Loss of employer coverage
Loss of creditable drug coverage
Moving to a new state or out of your plan’s coverage area
Discontinuation of Medicare Advantage plan
The Part D plan that you have misled you or goes out of business

How Do I Choose a Plan?

Choosing a Part D plan is vital to financial security, long-term. In many ways, it is more important even than choosing a Medigap plan (since

coverage is the same with all of these plans). With Part D, the coverage can, and does, vary widely. Different plans have different co-pay/deductible structures, and they often cover different medications.

The most efficient and effective way to compare Part D plans is to do so based on your current medications. Doing so insures that the plan you

choose covers your medications in an effective way. Medicare’s website – www.Medicare.gov – contains a comparison tool for Part D plans for your area. This allows you to compare the overall annual cost of each plan in your area, and it is the most effective way to make an informed decision about Part D.