Medicare is a federal program that provides health insurance coverage for people who are age 65 or older. Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD). Medicare is comprised of four parts—Parts A, B, C, and D. Over the past few weeks, Capitol Health Record has dewonkified each of the four parts.
Definition: Medicare Part D is a voluntary benefit that provides outpatient prescription drug coverage to beneficiaries. The Part D benefit is operated through private plans; beneficiaries have the option of choosing either prescription drug coverage as part of their Medicare Advantage plan (more information is available here) or as a stand-alone prescription drug plan (PDP) which can be purchased in addition to traditional Medicare (Part A and Part B).
Used in a Sentence: “The Medicare Part D benefit provides seniors a way to afford their medications when they do not have other affordable drug coverage options.”
History: The Medicare prescription drug benefit was added to Medicare as part of the Medicare Modernization Act of 2003 (MMA). Prior to the passage of the MMA, many Medicare beneficiaries lacked access to prescription drug coverage.
When it was enacted, the standard benefit structure was as follows: the beneficiary paid a deductible. Once the deductible was met, the beneficiary paid 25 percent of the costs of his/her drugs and the plan paid the other 75 percent of the costs, up to the initial coverage limit (which, in 2010, was $2830 in total drug costs). At this point, the plan stopped covering the costs of the beneficiary’s drugs (otherwise known as the “doughnut hole” or “coverage gap”) until the beneficiary’s drug costs exceeded the catastrophic coverage limit (which was $6440 in total drug costs in 2010). At this point, the beneficiary would pay 5 percent, the plan would pay 15 percent, and Medicare would pay 80 percent of the costs for medications. This unusual benefit design was meant to provide some drug coverage for all beneficiaries.
Many beneficiaries were very frustrated with the gap in coverage (doughnut hole). The Affordable Care Act (“ACA”) contained provisions to incrementally address the gap in coverage, and by the year 2020, beneficiaries will no longer experience such a gap. More information about the doughnut hole and the ACA provisions is available here.
When the benefit first launched in 2005, the then-Bush Administration encountered some initial issues related to the launch of the website and enrollment. While much different in scope, some politicians have compared problems with the launch of the Part D program to the problems currently being experienced with the ACA rollout (more information is available here).
Premiums: Medicare Part D premiums vary depending on the beneficiary’s plan choice and geography. Some plans, called “enhanced plans” provide greater coverage for prescription drugs, but usually have a higher premium. In 2014, the standard average Medicare Part D monthly premium is estimated to be $31.
Like Medicare Part B, individuals who lack prescription drug coverage either through a former employer, Medicaid, or some other source, will face a late enrollment penalty if they delay signing up for Part D. (More information on the Part D late enrollment penalty is available here.)