Medicare Part D

Medicare Part D, also called the Medicare prescription drug benefit, is a United States federal-government program to subsidize the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries. It was enacted as part of the Medicare Modernization Act of 2003 (which also made changes to the public Part C Medicare health plan program) and went into effect on January 1, 2006.

Individuals on Medicare are eligible for prescription drug coverage under a Part D plan if they are signed up for benefits under Medicare Part A and/or Part B. Beneficiaries obtain the Part D drug benefit through two types of plans administered by private insurance companies: the beneficiaries can join a standalone Prescription Drug Plan (PDP) for drug coverage only or they can join a public Part C health plan that jointly covers all hospital and medical services covered by Medicare Part A and Part B at a minimum, and typically covers additional healthcare costs not covered by Medicare Parts A and B including prescription drugs (MA-PD). (NOTE: Medicare beneficiaries need to be signed up for both Parts A and B to select Part C.) About two-thirds of all Medicare beneficiaries are enrolled directly in Part D or get Part-D-like benefits through a public Part C Medicare Advantage health plan. Another large group of Medicare beneficiaries get prescription drug coverage under plans offered by former employers.

Generally, not all drugs are covered at the same out of pocket cost to the beneficiary. This gives participants incentives to choose certain drugs over others. This is most often implemented—as is the case for drug coverage for those not on Medicare—through incentives to use generic drugs over brand-name drugs. The incentive is also often implemented via a system of tiered formularies in which some brand-name drugs are less expensive than others and not subject to step therapy.

Medicare beneficiaries must enroll in a Part C or Part D plan to participate in the federal-government-subsidized drug program. They can enroll directly through the plan's administrator, or indirectly via an insurance broker or the exchange run by the Centers for Medicare and Medicaid Services (CMS) for this purpose; the beneficiary's subsidy and other assistance payments and rights are the same no matter which enrollment channel they choose. Beneficiaries already on a plan can choose a different plan or choose to drop Part C or Part D during an annual enrollment period or during multiple other times during the year. Currently, the annual enrollment period lasts from October 15 to December 7 of each year. Low-income seniors on Social Security Extra Help/LIS and many middle-income seniors on state pharmaceutical assistance programs can choose a different plan or drop Part C or Part D (or join Part C or Part D plan for that matter) as often as once a month. Other special enrollment circumstances apply.

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