For People on Medicare

Our advice on Medicare Part D

Signing up

You can sign up for Medicare Part D, which helps cover prescription drug costs, along with other components of Medicare starting three months before your 65th birthday. It's important to be prompt because there's a penalty for enrolling more than three months after your 65th birthday.

There are exceptions to signing up right at 65, though. If you have access to drug coverage through your job (either as an active employee or a retiree) that is at least as good as a Part D plan, you can defer signing up for Part D without penalty. Your plan administrator can tell you whether your plan qualifies.

If you are already enrolled in a Part D "standalone" plan or a Medicare Advantage plan that incorporates drug coverage, you can switch plans during the annual open-enrollment period, which this year runs from Oct. 15 to Dec. 7, 2011.

Making Part D work

You will pay an average deductible of $320 in 2012 (your actual deductible can vary depending on the plan).

During your initial coverage period, you will pay an average of 25 percent of the costs of your medications until you and Medicare together have spent $2,930. At that point, you will enter the "doughnut hole" and will have to cover a higher percentage.

Inside the doughnut hole, you will pay 50 percent of the cost of brand-name drugs and 86 percent of the cost of generics until you and Medicare together have spent $6,658. At that point, you will enter the "catastrophic coverage" period, which lasts until the end of the year, when you will pay only 5 percent of the cost of your drugs.

For more information on the closing of the doughnut hole, download this guide from Medicare.

Choosing a good plan

Depending on where you live, you might have dozens of private plans to choose from, with different premiums, co-payments, and levels of coverage, including which drugs are covered. Choosing a plan that is right for you can save you thousands of dollars per year in premiums and out-of-pocket drug expenses. It pays to review your Part D coverage every year, especially if you have started taking new drugs.

Start at Medicare.gov

You can find the basics about the benefit and Part D plans at Medicare's website. There's a link to the Medicare Part D Plan Finder, which allows you to compare offerings and coverage options in your area and includes a helpful formulary finder that allows you to compare plans based on their coverage of your personalized list of drugs. It will even show you your monthly out-of-pocket drug cost for the year.

Ignore sales pitches

Print, TV, and radio ads and plan brochures are unlikely to offer enough information for you to make a wise choice. Avoid selecting a plan just because it has a familiar name or brand. If possible, consult a trusted broker. But watch out for brokers pushing plans from just one carrier.

Learn more

We recommend consulting the website of the nonprofit Medicare Rights Center. There you can find in-depth information on Medicare Part D.

Getting financial help

Individuals with annual incomes of less than $16,335 and resources of less than $12,640 in 2011, or married couples with incomes of less than $22,065 and resources of less than $25,260, might qualify for extra financial help from Medicare to pay their Part D premiums and out-of-pocket drug costs. Download Medicare's instructions on applying for the Extra Help program.