Insurance Under Medicare Part D

Medicare was originally enacted in 1965 to provide senior citizens and those with disabilities access to affordable health care that was subsidized by the American taxpayer. The idea of the program was to make it possible for seniors and other eligible individuals to have health care they could afford. The original program consisted simply of Medicare Part A (for hospital coverage) and Medicare Part B (for general medical services). Medicare has undergone many changes over the past 45 years, one of the most significant being the addition of Medicare Part D Insurance.

Under Original Medicare, prescription drugs used to be covered within Part A and Part B services. The Medicare Prescription Drug, Improvement, and Modernization Act was approved by the U.S. Congress in 2003 which created Part D of the government funded health insurance program, providing eligible individuals with access to prescription drug coverage. The new Medicare Part D Insurance took effect on January 1, 2006. The goal of the program was to subsidize the cost of prescription drugs for Medicare beneficiaries.

Millions of Medicare beneficiaries are eligible for Part D coverage. There are two ways that individuals can achieve eligibility for Medicare Part D Insurance. The simplest way is for individuals to have Medicare Part A and/or Part B. Those who collect their Medicare coverage through a Medicare Advantage Plan must have both Part A and Part B in order to enroll in Part D coverage. Individuals, who have dual eligibility, meaning they are eligible for Medicare and Medicaid, no longer have prescription drug coverage through Medicaid but are instead automatically enrolled in a Part D prescription drug plan (PDP) in their local area.

Medicare Part D Insurance is far from a simple system. Like Medicare Advantage Plans or Medigap Plans, PDPs offered through Part D coverage are provided by private insurance companies who are contracted through Medicare to offer beneficiaries with coverage. As of 2010 Medicare Part D consisted of 1,576 different PDPs available to a beneficiary, which is actually down from 2009 when there were 1,689 different plans offered. PDPs offered under Part D vary widely in the drugs they cover and the costs associated with them. The number of plans available to any one individual depends upon their region of the country. Residents in Alaska and Hawaii have the “fewest” to choose from with 41 plans available while Pennsylvania and West Virginia residents have 55 plans to choose from.

However, not all drugs are covered under Medicare Part D. The program will not pay for drugs that lack Food & Drug Administration approval, drugs prescribed for off-label use, drugs that are not available for purchase within the United States, and drugs that would be paid for by Part A or Part B.

Examples Part D’s excluded drugs include those used for:

- Anorexia, weight loss, and weight gain
- Fertility
- Erectile dysfunction
- Cosmetic purposes
- Cough and cold relief
- Barbiturates
- Benzodiazepines
- Vitamins and mineral products
- Drugs requiring testing and monitoring services from the manufacturer

There are some cases in which these drugs can be covered under supplemental benefits in Part D plans, however the costs directly associated with them may not be passed on to Medicare for payment.

Medicare Part D’s payment system has been the focus of intense scrutiny in its four short years. Standard benefit Part D plans require a $310 deductible (as of 2010) after which point a 25% coinsurance fee is paid up until the coverage limit of $2,830 is met. When this limit is met, individuals are left to pay for the full cost of their drugs until reaching the catastrophic coverage limit, which is $4,550 as of 2010. This gap in coverage under Part D has been referred to as the “Donut Hole” and has brought a good deal of scrutiny on the program. Individuals enrolled in Part D plans face an average premium of $35.09 each month (as of 2009), a number which has been rising since 2006 when the program started. There are Part D plans that offer gap coverage to prevent “Donut Hole” problems, but these plans come with much higher premiums.

Despite criticisms and out of control costs for some users, Part D has been increasing in popularity for many Medicare eligible individuals. When the program began in 2006 an estimated 11 million Americans were covered by Part D coverage. As of April 2010, some 27.6 million Medicare beneficiaries were taking advantage of Medicare Part D prescription drug plans.