As anyone who takes prescription medications on a regular basis knows, the cost for these drugs can be astronomical, in some cases totaling hundreds of dollars a month depending on the medications. Affording those essential drugs is a particularly heavy burden for older Americans.

To ease that burden, the government is adding prescription coverage to Medicare starting in January 2006. This summary will help you understand the choices offered as part of the new Medicare Prescription Drug Benefit, how to enroll in the plan if you choose to, and how the plan works with other prescription plans you may already have.

How the Medicare Prescription Drug Benefit works
This new Medicare plan option, which is also known as Medicare Part D, is available to all Medicare beneficiaries and will provide coverage for many, though not all, prescription medications. The government has contracted with a variety of private companies and insurers to provide prescription drug benefits to Medicare beneficiaries. You are not required to sign up for a Medicare prescription plan, but you may have to pay more if you change your mind and decide to join later.

It is very important that you carefully compare the features and costs of the Medicare prescription plans you are considering because the plans are not all alike. Some offer expanded coverage while others are more bare bones. You should also find out which pharmacies in your area accept the plans you are interested in to make sure there is one that is convenient for you because not all pharmacies accept all plans.

What the Medicare Prescription Drug Benefit covers
The Medicare prescription benefit is an insurance plan you purchase from a private company. Each plan has a list of drugs it covers called a formulary. The drugs are divided into groups called 'therapeutic classes'; for example, medications that control cholesterol would form a class.

There will be at least one drug available in your plan in each class, but the medications you are accustomed to taking may not be included. If you do not want to switch to an equivalent drug, check each plan's formulary to see if you can find one that covers your current medications before you decide to join. You can also file an appeal with the plan to get a drug you prefer approved for coverage, but there are no guarantees that the plan will accept your appeal.

What you will pay
You will pay a modest premium each month to take part in the plan you choose. That premium varies from plan to plan. In Connecticut, for example, monthly plan premiums range from $7.32 to $65.58. Carefully review what benefits your premium is buying before you make your decision. Some plans may cost more but offer no more extensive benefits than less expensive plans, so being a savvy consumer is vital.

In addition to your monthly premium, there is also an annual deductible of $250 per person. You will pay that $250 out of your own pocket for prescriptions before your plan begins to share in the cost of your medications. After you reach your $250 deductible, you will pay 25% of the cost of covered drugs while your plan pays the remaining 75% up to $2,250 in total drug costs. After you reach that $2,250 threshold, you must pay 100% of your next $2,850 in prescription costs before your Medicare plan resumes coverage.

When your out-of-pocket costs total $3,600, which breaks down to $250 for the plan deductible + $500 in copayments (your 25%) + the additional $2,850 Medicare does not cover, your Medicare plan coverage will resume. The plan will then pay 95% of the cost of prescriptions and you will pay 5% of the cost or a small copay, whichever is greater. This portion of the plan is often referred to as catastrophic coverage because your prescription costs will only usually be this high if you are seriously ill or injured.

Premiums, deductibles, and other costs may change after 2006.

Amount spent on prescription drugs	Medicare pays	You pay
Up to $250	$0	$250 (your deductible)
$250 to $2,250	75% of cost	25% of cost
$2,250 to $5,100	$0	$2,850
More than $5,100	95% of cost	5% of cost or a $2 -3 copay per prescription

Other prescription drug plan options for Medicare beneficiaries
If you purchased a Medicare discount prescription card, you can continue to use it either until you join a Medicare Prescription Drug Benefit plan or until May 15, 2006, the end of the first enrollment period for the new plans.

If you have a Medicare Supplemental or Medigap policy that includes prescription coverage, you can choose to remain in this plan or drop the drug coverage portion of the plan and pay a lower premium and sign up for a Medicare Prescription plan.

Some people have prescription coverage as part of their retirement benefits plan, though that number grows smaller each year as employers cut retiree benefits to lower their benefits costs. If your employer-sponsored retirement benefits include prescription coverage, compare the benefits and costs of that plan with the new Medicare options to see which will provide you with the best coverage for the lowest cost.

You may want to consider keeping your employer-sponsored plan and adding a Medicare prescription plan to help cover the $2,850 in drug costs that Medicare does not cover. There are some complications with this option, however. Any money paid by your employer-sponsored plan will not count toward the $3,600 out-of-pocket level you must reach before Medicare begins to cover prescriptions again.

Another way to receive Medicare prescription coverage is through a Medicare Advantage plan. The plans include HMO, Preferred Provider Organizations, Point of Service Plans, and Fee-for-Service plans offered through private insurers. Beginning in January 2006, all these plans, except fee-for-service, are required to include at least one plan option with prescription coverage. Again, it's essential for you to carefully compare and assess what different plans offer you and how well each plan meets your unique needs and preferences.

How and when to enroll in the new Medicare Prescription Benefit plans
The enrollment period for current Medicare beneficiaries who would like to join one of the new Medicare Prescription Benefit plans runs from November 15, 2005 to May 15, 2006. There are a number of ways to enroll in the plan you choose:

Use the online enrollment center on www.medicare.gov starting on November 15, 2005
Call the toll-free number of the plan you have chosen
Mail your application to the plan of your choice
Go to the website of the plan you choose and enroll online

If you enroll by December 31, 2005, your coverage will begin on January 1, 2006. If you enroll after that date, coverage will be effective the first day of the month after the month you join.

If you choose not to enroll in a Medicare prescription plan during the 2005-2006 enrollment period then decide to enroll later, there may be a monetary penalty and a higher monthly premium unless you currently belong to a prescription plan with benefits equivalent to or better than the Medicare plans.

Making the decision:
Weighing the pros and cons
The decision to purchase or not to purchase Medicare prescription coverage will be different for each person. As you consider whether the coverage will offer you advantages, keep these thoughts in mind:

The cost for coverage is fairly modest, with the average cost falling around $37 per month in 2006. Compare that with the monthly cost you would pay for your prescriptions if you had no coverage.
If you are seriously ill or injured and have very high prescription expenses, the Medicare plans will pay 95% of your drug costs after you pay $3,600 in total costs.
There is a significant coverage gap in the Medicare plans. After you've reached $2,250 in total drug costs, you must pay the next $2,850 in costs out of your own pocket.
Not all medications will be covered by the plans, though there will be at least one drug per therapeutic class (for example cholesterol-lowering medications). That means the specific medications you take now may not be covered by the Medicare plans.
Not all pharmacies in your area will accept all Medicare prescription plans which may limit your choice of prescription provider.

Useful resources for more information
Here are several websites that include good information about the new Medicare Prescription Drug Benefit.

Overviews

Special situations

http://www.medicare.gov/Publications/Pubs/pdf/11107.pdf : Information for people who have prescription coverage as part of their retirement benefits
http://www.medicare.gov/Publications/Pubs/pdf/11121.pdf : Information for people in nursing homes or long-term care facilities

Support resources

https://www.shiptalk.org/shipTalkORGv2/Public/home.aspx?ReturnUrl=%2fShipTalkORGv2%2fdefault.aspx : Free state-specific phone and in-person Medicare counseling.

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