Medicare Part D Basics
The Medicare Modernization Act (MMA) was enacted on December 8, 2003 and is administered by The Centers for Medicare & Medicaid Services (CMS). The first phase was to introduce Discount Prescription Drug Card June 1, 2004 and the more comprehensive Medicare Part D Prescription drug benefit starts January 1, 2006, allowing for an employer tax subsidy.

Enrollment
Companies will begin to provide the details of their Part D plans beginning October 1, 2005, and you may enroll beginning on November 15, 2005. The enrollment deadline is May 15, 2006. This deadline is important because if you wait until after this date to enroll, your premium will be increased by one percent per month for every month you delay. The increased premium is permanent which means you will pay the higher rate as long as you are enrolled in a Part D plan.

If you choose to enroll by December 31, 2005, your Part D plan will become active on January 1, 2006. You will be able to change plans during the annual open enrollment period of November 15 through December 31 or at other times during the year under special circumstance such as moving outside your Plan's area of coverage.

Plan Coverage & Premium
Your Medicare Part D benefit is structured to share prescription drug costs between you and your Prescription Drug Plan (PDP) while protecting you from catastrophic expense. If you enroll in a Medicare Prescription Drug Plan, you will pay a monthly premium (approximately $37 in 2006) as well as a yearly deductible ($250 in 2006). After you have reached the deductible, Medicare will pay 75% of your drug costs and you will pay 25% coinsurance.

Plans may vary by PDP. However, all plans will have a cost sharing until the beneficiaries reach their "out of pocket" expense (commonly referred to as TrOOP. In 2006, TrOOP will be $3,600. Once you have reached the TrOOP amount, the catastrophic component of Medicare D is activated. At this point the cost share generally becomes 5%.

Here is an overview of the way coverage is structured*:

• You are responsible for the deductible amount of $250.
• Between $250 and $2,250 in prescription costs, you pay 25 percent and Medicare pays 75 percent.
• Up to a total of $5,100 in drug spend (or $3,600 in out of pocket expenses) you pay 100 percent of prescription costs This portion of the plan is commonly referred to as the coverage gap.
• Once the out of pocket of 3,600.00 has been reached, Medicare pays 95 percent of prescription drug costs in a calendar year.

It should be noted that there will be extra help for paying these costs for some people with limited income and resources.

* (This is the base plan as presented by the MMA, it is important to note that PDP's may offer plans that could differ in deductibles, coinsurance etc. They may also offer an enhanced benefit.)

What Drugs Are Covered?
Many prescription drugs including brand name and generic drugs are covered. Medicare has contracted with PDP's to offer this coverage. The PDP's will offer a variety of options with different covered prescriptions and different costs. Each Part D plan will have a list of generic and brand name drugs, called a formulary, approved by Medicare. Plans will also include a network of pharmacies at which you may be required to fill your prescriptions.

When shopping for a Part D plan, make sure not only that your current prescriptions are in their formulary but also that the pharmacies in their network are convenient to you. A formulary exemption process will be put in place to provide coverage for drugs outside your plan's formulary if your doctor determines this is necessary. Pharmacies within each network will be linked by a Medical Management System alerting pharmacists to harmful drug interactions in cases of multiple prescriptions.

The Medicare Prescription Drug Modernization Act will provide a safety net against the catastrophic prescription drug costs that have wreaked havoc with the finances of so many retired Americans. The enrollment deadline is nine months away, so retirees have plenty of time to compare their existing coverage with what Medicare D has to offer and to shop for the best plan for them. If your employer intends to offer creditable coverage next year, the May deadline doesn't apply to you, and you may want to delay considering Medicare D coverage, which you may do at no penalty. However, if creditable coverage is not available, you would be wise to consider enrolling in a Part D Plan before May 15 to lock in the lowest premium.

Non-Standard Prescription Drug Plans
If an employer decides to structure their retirees' Prescription Drug Plan differently from Medicare Part D, the plan must meet certain criteria to qualify for the government subsidy. Primarily, the alternative Plan must be at least as good as Medicare Part D. TrOOP will still apply to the basic prescription drug benefit. Employers may offer additional drug coverage that supplements a beneficiary's Part D plan and TrOOP will apply to the basic Part D benefit. The beneficiary must always satisfy TrOOP to reach the catastrophic coverage stage of Part D.