Medicare Part D: How The Finances Work

Like just about all insurance plans, Medicare Part D only pays part of the cost of your prescription drugs. You pay the rest.

The basic structure of Medicare Part D payments breaks into four general parts, each of which are calculated each year:

• Part 1. A deductible -- you pay 100% of the amount of the deductible.
• Part 2. Basic coverage in which Medicare pays a large portion of the cost and you pay the differing amounts depending on the particular drug.
• Part 3. A coverage gap (the so-called "Doughnut" hole,) during which you pay 100% of the cost of your drugs. Thanks to The Affordable Care Act ("Obamacare"), the percentage you pay decreases each year until it is eventually eliminated entirely.
• Part 4. "Catastrophic coverage": After you have paid a certain amount of money out-of-pocket, Medicare takes over payment of the cost of your drugs except for a very small co-pay until December 31 of the year.

When you purchase drugs through pharmacies in the Plan's network, the pharmacies will report your drug expenses to the Plan. If you purchase covered drugs elsewhere, send copies of the receipts to the Plan. (Keep the originals in your file in case a question comes up later.)

If you need help paying the costs of Part D drugs, there is a program known as "Extra Help."

For information about maximizing use of Medicare Part D, see: How To Maximize Use Of Medicare Part D.

NOTE: There are some drugs which are covered under Medicare Part B, so you do not have to pay for them under Part D. Ask your doctor or other health care provider.

For additional information, see:

• Medicare Part D: How The Financial Structure Works
• Co-Pays
• The Doughnut Hole
• How Much Will I Pay Under Medicare Part D?
• How Part D Premium Is Paid
• Drugs Which Are Covered Under Original Medicare Part B

Basically, Part D plans cover drugs except for the following:

• An annual deductible (an amount you pay each year before there is any coverage);
• A co-pay you pay each time you buy a drug;
• There is nso coverage for the cost of drugs purchased while you are in the so-called Doughnut Hole. The Doughnut hole starts once expenses reach a certain amount each year. It ends when expenses hit a higher amount. To learn more about the Doughnut Hole, including how to minimize your expenses if you are in the Hole, click here
• Drugs which are not on the Plan's Formulary

A co-pay is a set dollar amount you pay you pay each time you obtain a drug or other medical service.

With respect to Medicare, when you purchase drugs, the amount of the co-pay generally depends on how many tiers of drug coverage a Plan has, and which tier your drug falls into. For example, under a three tier system, there would be:

• A co-pay for generic drugs
• A higher co-pay for brand name drugs
• An even higher co-pay for more rare, high cost drugs.

Each plan has different premiums, co-insurance and co-pays (the part of the cost of medications that you pay.)

You will pay:

• Monthly premiums.
• A one time annual deductible.
• A flat copayment or percentage of the drug's cost.
• The entire amount if your plan has a "doughnut hole." (For more information, click here)
• A small amount for drugs during the Catastrophic Coverage that starts after you are through the doughnut hole.

Each plan is required to send you a statement every month indicating your drug spending.

If you are receiving an income from Social Security, the premium can be deducted from your monthly Social Security check.

If you don't have such an income, you pay the premiums directly to the drug plan.

Prescription Drugs (Outpatient) Limited Coverage

Part B covers a limited number of outpatient prescription drugs, and only under limited conditions. Generally these include drugs you would not usually give to yourself, that you get at a doctor’s offi ce or hospital outpatient setting. Doctors and pharmacies must accept assignment for Part B drugs, so you should never be asked to pay more than the coinsurance or copayment for the drug itself.

The following are examples of drugs covered by Part B:

• Oral Cancer Drugs: Medicare will help pay for some cancer drugs you take by mouth if the same drug is available in injectable form. Currently, Medicare covers the following cancer drugs you take by mouth:
• • Capecitabine (Xeloda®)
  • Melphalan (Alkeran®)
  • Busulfan (Myleran®)
  • Temozolomide (Temodar®)
  • Cyclophosphamide (Cytoxan®)
  • Topotecan (Hycamtin®)
  • Etoposide (VePesid®)
  • Methotrexate (Rheumatrex®
  • Trexall®)

Medicare may cover new cancer drugs as they become available.

• Oral Anti-Nausea Drugs: Medicare will help pay for oral anti-nausea drugs used as part of an anti-cancer chemotherapeutic regimen. The drugs must be administered immediately before, at, or within 48 hours and must be used as a full therapeutic replacement for the intravenous anti-nausea drugs that would otherwise be given.
• Infused Drugs: Medicare covers drugs infused through an item of durable medical equipment, such as an infusion pump or nebulizer if considered reasonable and necessary.
• Some Antigens: Medicare will help pay for antigens if they’re prepared by a provider and given by a properly-instructed person (who could be the patient) under appropriate supervision.
• Injectable Osteoporosis Drugs: Medicare helps pay for an injectable drug for osteoporosis for certain women with Medicare.
• Erythropoisis–stimulating Agents: Medicare will help pay for erythropoietin by injection if you have End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant) or need this drug to treat anemia related to certain other conditions.
• Blood Clotting Factors: If you have hemophilia, Medicare will help pay for clotting factors you give yourself by injection.
• Injectable Drugs: Medicare covers most injectable drugs given by a licensed medical provider, if the drug is considered reasonable and necessary for treatment.
• Immunosuppressive Drugs: Medicare covers immunosuppressive drug therapy for transplant patients if the transplant meets Medicare coverage requirements, the patient is enrolled in Part A at the time of the transplant, and the patient is enrolled in Medicare Part B at the time the drugs are dispensed.

Note: Medicare drug plans may cover immunosuppressive drugs, even if Medicare or an employer or union group health plan didn’t pay for the transplant.

In 2010, YOU pay 20% of the Medicare-approved amount for covered Part B prescription drugs that you get in a doctor’s offi ce or pharmacy. In a hospital outpatient setting, you pay a copayment. However, if you get drugs in a hospital outpatient setting that aren’t covered under Part B, you pay 100% for the drugs unless you have Part D or other prescription drug coverage. In that case, what you pay depends on whether your drug plan covers the drug, and whether the hospital is in your drug plan’s network. Contact your prescription drug plan to find out what you pay for drugs you get in a hospital outpatient setting.