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The ABCs of Medicare: Prescription Drug Plans

If you use original Medicare, you'll need to choose a stand-alone prescription drug plan.

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 to get a complete list of plans in your area. You can check out

Terry Savage's article for more details about the tool.

I searched the database myself for plans that had no deductible and covered all generics in the gap. The two lowest-cost plans, in nearly all the states, were offered by

SilverScript Insurance Company, a


(CVS) - Get CVS Health Corporation Report

company, and

MemberHealth, a prescription benefit management company.

The monthly premiums on Silverscript Plus and Complete plans range from $28 to $56, depending on the state you live in. Community CCRx Gold by MemberHealth premiums ranges from $20 to $85. By way of example, in New York, the Plus plan is offered at $34.10 and Community CCRX is $46.50, while a person in Florida would be paying $37.50 or $41.90, respectively, for these plans.

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If you live in Colorado or Hawaii, check out Pennsylvania Life Insurance Company's plan, Prescription Pathway Platinum, for competitive premium rates. UPMC Health Plan in Pennsylvania and West Virginia, Amerihealth in New Jersey and Paramount Prescription Drug Plan in Ohio also offer a low-cost plan with no deductible and generic coverage in the gap.

These plans all charge a competitive rate for a no-deductible plan with gap coverage, but that doesn't mean you want to eliminate the other choices right off the bat. Use the Medicare tool to further investigate the details such as what the co-pay and coinsurance amounts are and the estimated total monthly/annual cost to you.

You can find even cheaper plans if the prescriptions you use are considered "preferred," since some insurers offer "preferred" generics coverage in the gap.

On the other hand, if you use brand-name drugs, then paying a higher premium for a plan that does not cover such prescriptions during the gap won't be worthwhile.

If you are lucky enough to use little or no prescription drugs than you will want to stay away from the higher-cost plans. The Centers for Medicare and Medicaid Services estimates that the average premium paid for Part D coverage will be roughly $25 in 2008. But you can find many providers, including some of the largest insurers in the nation, selling below that amount if you don't expect to need coverage in the gap.

In Florida,

Health Net's


plan cost $12.10 per month

, United Healthcare

(UNH) - Get UnitedHealth Group Incorporated (DE) Report

offers one in Maine for $16.30, in Georgia you can purchase a plan for $18.40 from



, and


(HUM) - Get Humana Inc. Report

even offers a plan in Wisconsin for $14.40 that includes no deductible.

For more information, check out Ratings'

Consumer Guide to Prescription Drug Plans.

Donna O'Rourke joined Weiss Ratings, now Ratings, Inc., in 1999, and is the senior analyst responsible for assigning financial safety ratings to health insurers and supporting other health care-related consumer products including Medicare supplement insurance, long-term care insurance and elder care information. She conducts industry analysis in these areas. She has more than 10 years experience in credit risk management and analyses. Previously she served as an assistant vice president at the Union Bank of Switzerland, where she analyzed hedge funds, insurance companies and structured products in support of the derivatives and foreign exchange businesses. She holds a bachelor of science in management from Binghamton University and a master's of science in health systems administration from the Rochester Institute of Technology.

While O'Rourke cannot provide investment advice or recommendations, she appreciates your feedback;

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