About Medicare Part D prescription drug plans

Medicare Part D is prescription drug coverage run by private insurance companies approved by and under contract with Medicare. They help to lower your prescription drug costs. While they're offered through private companies, the benefits are based on a minimum set of benefits set by the government and will be similar in how they are set up with an initial coverage period and catastrophic coverage.

Medicare Part D coverage is administered year-to-year and may include up to three coverage periods.

Initial coverage period

At the beginning of each plan year, you start in the "initial coverage period" during which the plan pays a portion of your drug costs and you pay the appropriate copayment. Your cost-sharing amount depends on how the drug is classified (such as Tier 1, Tier 2, etc.), where you obtain the medication, such as from a network retail pharmacy or by mail order, and the copayments the plan you purchase requires.

Coverage gap

The initial coverage period ends when the total amount spent on your drug claims reaches $2,930 (this is the 2012 amount and could change in future years). This amount includes your copayments combined with the amount paid by the plan on your behalf.

At this point, you enter the second segment called the coverage gap. This is also sometimes referred to as the "donut hole." During this period, you may have to pay almost the entire cost of your prescription drugs. Some plans include extra coverage in this gap, usually for generic drugs.

Catastrophic coverage

When your total out-of-pocket spending reaches $4,700 (this is the 2012 amount and could change in future years), the coverage gap closes, and you enter the catastrophic coverage segment. Under catastrophic coverage, the plan resumes paying a portion of your drug claims, and you pay a copayment.

As you consider your prescription drug plan options, these are features you will want to consider:

• Whether the drugs you take are included on the plan's formulary, the list of drugs the plan covers
• The copayments and coinsurance you will pay when you need to purchase drugs
• What annual deductible, if any, is required
• The monthly premium you will pay for your coverage
• If there is extra coverage for the coverage gap

You might qualify for extra help to pay for your prescription drug benefits. If you do, you'll pay a reduced monthly premium or no premium for your prescription drug coverage. The amount of extra help you get will determine your total monthly plan premium. You may still need to pay your Medicare Part B premium.

To see if you qualify for extra prescription drug help, call:

• Medicare, 1-800-MEDICARE (1-800-633-4227), 24 hours a day, seven days a week. TTY users should call 1-877-486-2048.
• Social Security Administration, 1-800-772-1213 between 7 a.m. and 7 p.m. Monday through Friday. TTY users should call 1-800-325-0778.
• Michigan Department of Human Services, 1-517-373-2035, between 8 a.m. and 5 p.m. Monday through Friday. TTY users should call 711.

The Social Security Administration sends a letter to those who are eligible for a low-income subsidy. If you feel you are eligible and have not received a letter, call Social Security or Medicare at the numbers above or contact one of the following:

• Michigan Department of Community Health, 1-517-373-3740 between 8 a.m. and 5 p.m. Monday through Friday. TTY users should call the Michigan Relay Service at 711.
• Benefits Checkup, a Web-based service of the National Council on Aging. It can help older people — especially those with limited incomes — find help paying for prescription drugs, health care, utilities and other basic needs.

Am I required to join a Medicare drug plan?

No. Joining a Medicare drug plan is your choice. However, to have Medicare help pay for your drugs, you must join a plan that provides Medicare prescription drug coverage. If you don't use a lot of prescription drugs now, you should still consider joining. As we age, most people need prescription drugs to stay healthy. For most people, joining when you're first eligible for Medicare means you won't have to pay a penalty if you choose to join later. Your premium will be higher if you wait to join because of the penalty.

When can I join a Medicare drug plan?

You can join a Medicare drug plan when you first become eligible for Medicare and each year from Oct. 15 through Dec. 7. Should you have and lose creditable prescription drug coverage through no fault of your own, you will also be eligible for a two-month Special Enrollment Period to join a Medicare drug plan. For more information about enrollment periods, visit When to apply for a Medicare plan.

Could I have to pay a penalty to join a Medicare drug plan?

If you don't join a Part D drug plan when you first become eligible or have creditable coverage, you may pay a higher premium (a penalty) to join a Medicare drug plan later.

If you go 63 continuous days or longer without creditable prescription drug coverage, your monthly premium may go up by at least 1 percent of the Medicare base beneficiary premium per month for every month that you did not have that coverage. For example, if you go 19 months without creditable coverage, your premium may consistently be at least 19 percent higher than the Medicare base beneficiary premium. You may have to pay this higher premium (a penalty) as long as you have Medicare prescription drug coverage. In addition, you may have to wait until the following November to join a Medicare prescription drug plan.