Medicare Prescription Drug Coverage

Original Medicare A and B cover most of the drugs that are required during hospitalization or skilled nursing facility care. However, Original Medicare does not have provisions to cover the self-administered prescription drugs that have become so common in people's lives. Original Medicare does not cover common prescription drugs that are used to control everything from high blood pressure to diabetes. This is largely due to medical advances within the pharmacutical industry since the inception of Medicare in the 1960's.

Three Different Options For Medicare Prescription Drug Coverage

There are three main ways to have your prescriptions paid for, these are:

  • Through a retiree, military or federal employee insurance plan
  • Through Medicare Advantage
  • Through Medicare Part D

All three of these options are provided by private insurance companies. Only the last two are protected by Medicare rules and regulations. Each individual will have unique circumstances and they will need to determine which prescription drug coverage is best for them.

Prescription Drug Coverage Through Previous Employment

Generally speaking, retiree health insurance or insurance through your previous employer is the cheapest and best alternative for prescription drug coverage for Medicare recipients. However, this is not always the case. You will have to compare the cost of retiree and employer insurance and how it works with Original Medicare and then compare the cost with Original Medicare Part D and Supplemental insurance to decide which option meets your situation the best. Because your health care needs will change, this isn't always an easy calculation.

Prescription Drug Coverage through Medicare Advantage Plans

Medicare Advantage is an alternative program to Original Medicare. Advantage Plans are run very similarly to PPOs and HMOs. Some of these plans called MA-PD plans also include prescription drug coverage. Generally, these plans revolve around a Provider Network. The Provider Network limits the providers and doctors that you can see and it also limits the pharmacies that you can use. Advantage Plans can't be used with any other types of supplemental insurance plans (this normally includes retiree health plans). Overall these plans cost less every month than Original Medicare with Part D and Supplemental Insurance attached. However, when you need to use services, you will normally have more out-of-pocket expenses than with Original Medicare. There are exceptions to this, and again everyone's circumstances are unique. Another alternative is to get an Advantage Plan that doesn't include prescription drug coverage. If the Advantage Plan doesn't include drug coverage you are able to add a Part D Plan for prescription drug coverage.

Prescription Drug Coverage through Medicare Part D Plans

Medicare Part D Plans can be added to Original Medicare to provide prescription drug coverage benefits. These plans can only be used with Original Medicare and Advantage Plans that do not provide prescription drug coverage. They can not be used with MA-PD Plans. These plans have premiums, deductibles and co-pays just like the other two types of plans mentioned above. Part D Plans also have a provision known as the coverage gap or "donut hole." This provision is very important for Medicare recipients that use many different prescription drugs. Currently, once a patient has spent $2840 a year in out of pocket expenses on prescription drugs they will then receive their prescriptions at 50% less until he/she has spent a total of $4,550 for the year in out-of-pocket expenses. Once this happens the patient only pays a small co-pay for prescriptions. This $1710.00 is currently the donut hole and the amount changes every year.

In summary, currently prescription drug coverage for Medicare recipients is available through retiree health plans, through MA-PD plans and through Medicare Part D Plans. Previously, drug coverage was also available under a few Medigap Plans. These plans are no longer available. If you have one of them you can still continue to use it or switch to a Medicare Part D Plan and remove the drug coverage from your Medigap Plan.