Prescription drugs can be a major cost as you age and they are NOT covered by Original Medicare.

There are two ways to get Medicare prescription drug coverage:

1. Medicare Prescription Drug Plans (sometimes called "PDPs"). They can be added to Original Medicare and Medicare Supplement (Medigap) Plans.

2. Part D coverage may also be included in a Medicare Advantage plan (sometimes called MA-PDs).

When purchasing a stand-alone Part D insurance plan to go along with a Medicare Supplement (Medigap) plan, it provides protection against catastrophic health care costs.

Part D plans are offered through private insurance companies. Plans vary widely, as do prices. How specific drugs are covered also differs among plans, too. So when you shop for a plan, compare these benefits and features:

  • How are your drugs covered through the initial period, the coverage gap (donut hole), and catastrophic coverage?
  • Is your local pharmacy in the network and a preferred pharmacy?
  • Is there a mail order service?
  • Are your drugs on the formulary?

Generally, you will pay a monthly premium, and you could pay a yearly deductible. You will also pay a part of the cost of your prescriptions, including a copayment or coinsurance. Costs will vary depending on which drug plan you choose. Most plans have a coverage gap (donut hole) during which you will pay a percentage of the costs of most brand-name drugs and a percentage of the cost of generic drugs until your yearly True Out-of-Pocket costs (not including premiums) equals the stated Medicare amount.

What is the Coverage Gap (Donut Hole) and Does it Affect You?

The government says just over 25% of beneficiaries on Part D plans will enter the coverage gap (donut hole) at some point each year. This "gap" period begins when the total of the drug plan's full cost of your drugs reaches the current year's gap threshold, including your deductible, if any, and continues until the beneficiary has spent enough to reach the "Catastrophic Coverage" level at which point, the copays for the prescription drugs will generally be less and no more than 5% of the drug's full cost.

Penalties for Delaying Enrollment in Prescription Drug Coverage

If you wait to enroll in Medicare prescription drug coverage after you are first eligible, and you do not have any other credible prescription drug coverage, you may have to pay a penalty of 1% per month, 12% per year, to enroll later depending on circumstances. If you are subject to the penalty, you may have to pay the penalty each month for as long as you have Medicare Prescription Coverage.