Medicare Part D is a prescription drug subsidy for Medicare beneficiaries. Medicare D went into effect on January 1, 2006, but was voted into law in 2003 as part of the Medicare prescription drug, improvement and modernization act. Though Medicare Part D is a subsidy provided by the federal government, it is administered instead by private plans the recipient signs up for. These plans are numerous and vary from state to state. Medicare D was hailed as a savior for seniors by many, but problems became apparent soon after its introduction. The most obvious problem is the so called “Donut Hole” in Medicare Part D, a large gap in coverage where a recipient is responsible for 100% of prescription drug costs after an initial dollar amount of coverage has been met. Some private plans include gap coverage to help cover these costs.

The Medicare Part D deductible is $295 initially for 2009. After this deductible is met recipients are required to pay 25% of the cost of their prescription drugs up until a total of $2,405. The beneficiary is then required to pay 100% of their costs for the next $3,453.75. After the beneficiary has spent a total of $4,350 out of pocket, catastrophic coverage is offered which requires the member to pay 5% of any additional drug costs. The large out of pocket expense after the initial $2,405 figure is known as the “Donut Hole” and has been much debated. Some private plans offer coverage that typically eliminates the Medicare Part D deductible for the recipient, instead implementing a co-pay system for prescription drug costs. This has been popular due to the fact that it eliminates the initial out of pocket expense at the beginning of every year. Some private plans also offer gap insurance to help lessen the impact of the “Donut Hole.” The monthly premiums for plans with gap coverage tend to be roughly double the cost.

The Medicare D enrollment period runs from November 15th until December 31st of the proceeding year. Thus for Medicare D enrollment in 2010, the recipient must enroll between November 15th, 2009 and December 31st, 2009. In 2008 there were an estimated 1,824 stand alone Medicare D plans available. This does not include plans for Medicare Part C, which also includes the prescription drug benefit offered by Medicare Part D.

Medicare D was a welcome program for seniors struggling with rising prescription drug costs. However, there is room for improvement both in the structure of the government benefit itself, and in the way the private plans offer access to it. Seniors continue to look to the government to provide a better solution for their needs. Until then, many take advantage of the limited coverage offered by Medicare Part D.

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