Medicare Prescription Drug Benefit What Does It Mean To You

by David Goldfarb Goldfarb Abrandt & Salzman LLP

Including information on the Health Care Reform Provisions of 2010 Affecting the Medicare Prescription Drug Donut Hole

With great fanfare, on December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). The Act provides for the establishment of a voluntary drug benefit under a new Part D of the Medicare beginning in 2006.

This article is designed to be a summary of the provisions of the new benefit as it is currently written, but we caution our readers that you should consult counsel as to how this new benefit program will ultimately affect you.


Medicare prescription drug coverage is an optional benefit offered to everyone who has Medicare.

If you decide not to get Medicare drug coverage when you’re first eligible, you’ll likely pay a late enrollment penalty if you join later, unless one of these applies: (1) You have other Creditable prescription drug coverage  (2) You get Extra Help.

Generally, you’ll pay this penalty for as long as you have Medicare prescription drug coverage.


If you meet certain income and resource limits, you may qualify for a program called Extra Help from Medicare to pay the prescription costs, premiums, deductibles, and coinsurance of Medicare prescription drug coverage.

In 2020, prescription costs are no more than $3.60 for each generic/$8.95 for each brand-name covered drug for those enrolled in the program.

Some people pay only a portion of their Medicare drug plan premiums and deductibles based on their income level.

In 2020, you may qualify if you have up to $19,140 in yearly income ($25,860 for a married couple) and up to $14,610 in resources ($29,160 for a married couple).


To get Medicare drug coverage, you must join a Medicare plan that offers prescription drug coverage. Each plan can vary in cost and drugs covered.

2 ways to get prescription drug coverage:

  • Medicare Prescription Drug Plan (Part D) . These plans (sometimes called “PDPs”) add drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) Plans, and Medicare Medical Savings Account (MSA) Plans.
  • Medicare Advantage Plan (Part C) (like an HMO or PPO) or other Medicare health plan that offers Medicare prescription drug coverage. You get all of your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) coverage, and prescription drug coverage (Part D), through these plans. Medicare Advantage Plans with prescription drug coverage are sometimes called “MA-PDs.” You must have Part A and Part B to join a Medicare Advantage Plan.

How to join a drug plan

Once you choose a Medicare drug plan, here’s how to get prescription drug coverage:

(1)    Enroll on the Medicare Plan Finder or on the plan’s website. (2)    Complete a paper enrollment form. (3)    Call the plan. (4)    Call 1-800-MEDICARE (1-800-633-4227).

When you join a Medicare drug plan, you’ll give your Medicare Number and the date your Part A and/or Part B coverage started.


Your Medicare Advantage Plan (Part C) will disenroll you and you’ll go back to Original Medicare, if both of these apply: (1) Your Medicare Advantage Plan includes prescription drug coverage. (2) You join a Medicare Prescription Drug Plan (Part D).

Each Medicare drug plan must give at least a standard level of coverage set by Medicare. Plans can vary the list of prescription drugs they cover (called a formulary) and how they place drugs into different “tiers” on their formularies.

You’ll make these payments throughout the year in a Medicare drug plan: (1) Premium, (2) Yearly deductible, (3) Copayments or coinsurance, (4)  Costs in the coverage gap, (5)  Costs if you get Extra Help, (5) Costs if you pay a late enrollment penalty.


Most Medicare drug plans have a coverage gap (also called the “donut hole”). This means there’s a temporary limit on what the drug plan will cover for drugs.

Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. In 2020, once you and your plan have spent $4,020 on covered drugs, you’re in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.

Once you’ve spent $6,350 out-of-pocket in 2020, you’re out of the coverage gap. Once you get out of the coverage gap (Medicare prescription drug coverage), you automatically get “catastrophic coverage.” It assures you only pay a small Coinsurance amount or Copayment for covered drugs for the rest of the year.

For more information see: