The ABCs of Medicare: Prescription Drug Plans

Editor's note: This is the third in a series of three stories on Medicare. The first part compared the relative benefits of original Medicare and Medicare Advantage; the second part discussed the different kinds of supplemental coverage, or Medigap, available to people who use original Medicare.

Let's move onto Medicare Part D, which is the part that is entering open enrollment this month. Part D represents prescription drug coverage offered by private providers.

If you have selected original Medicare, then you will need to choose a stand-alone prescription drug plan from one of these providers. If you are using a Medicare Advantage plan, then in most likelihood your insurer includes the drug coverage as part of the plan.

While minimum coverage is mandated by Medicare, plans may offer better coverage in terms of lower deductibles, out-of-pocket limits and access to medications in the gap between the initial coverage limit and out-of-pocket threshold (often referred to as the "donut hole"). (The standard benefit parameters for 2008, as compared with 2007, are listed at the end of this article.)

If you have been using a stand-alone prescription drug plan for the last year or two, then you have enough information to make a more educated decision in choosing a plan this time around. If you spent more than $3,600 out of pocket (or if you will by year-end), then you need to look at plans that don't require a deductible to be met and have coverage in the so-called "donut-hole" or coverage gap.

While you probably selected your current plan on the basis of the monthly premium, in this case you would be better off paying a higher premium for a plan that offers more complete coverage.

You will want to use the Medicare Prescription Drug Plan comparison tool at www.medicare.gov to get a complete list of plans in your area. You can check out Terry Savage's article for more details about the tool.