Back a few years ago Part D of Medicare was introduced to provide outpatient prescription drug coverage under Medicare, providing for coverage not previously provided. For most this was a great benefit addition as previously everyone who was given a prescription had to go pay for the medicine completely out of their own pocket. (We are of course talking about those on Medicare.) There were some options to purchase coverage, but those were somewhat limited.
In a typical scenario under the old Medicare (pre 2006) if you worked to age 65 and then retired, or just chose to go from employer coverage to Medicare, you would have prescription coverage and then none. Thus, those who were really using lots of prescriptions may have kept on working to have the drug coverage. Of course that was not the reason that drug plans were added to Medicare. It just gives an example of how adding the coverage changed things. A second example is those who retired healthy and as they aged needed to begin medicine or increase the medicines they are on. In these cases getting the medicine often depended on the ability to pay, and those with no resources were not getting medicine and often getting sicker or dying.
In order to provide a full continuum of care Medicare deemed it necessary to include drug coverage as part of their overall scope of coverage. The Drug Plans like Part B of Medicare do require participation in the premium by the beneficiary. Unlike Medicare Part B though where there is generally a single premium paid by everyone to the government, Part D (Drug Plans) have various premiums and the premiums are paid to the insurer. Also, Part D plans are not run by the government but by individual insurance companies who contract with Medicare to provide these plans.
What was set up by Medicare is the opportunity for private companies to offer the Medicare Drug Plans. They each annually bid to offer the plans. Medicare updates annually a standard plan, or model plan which sets the basic level of coverage required by any plans. The private carriers then must design plans they think will capture the part of the market they want, and in doing so ensure that the plan benefits are at least as good as the model plan. Medicare does not sell to the public so unless a private carrier decides to offer exactly the model plan, and few do so, you will have to choose from one of the enhanced plans offered in your geographic area. Most of the plans do enhance the benefits offerings, especially on lower cost drugs to make them more accessible and your monthly costs more predictable.
With that background, you can see that we now for a few years have had available drug plans for the general Medicare populous. We have seen these plans stabilize in terms of their offerings, unlike in the first couple of years when they were figuring things out and trying to gain the initial market share. With more stable plans and a few kinks worked out, we have a good benefit now for the various folks taking the plans. Now, with things going generally smoothly, let’s think about why you may or may not find having a plan beneficial and answer the question is it a plan a must? The answer not surprisingly is generally yes a plan is beneficial for you.
For those who are eligible, and do not have other credible coverage, it is important to keep in mind if you later add coverage, you will be paying a monthly penalty of 1% per month from when you were eligible and the grace period ended. So if you wait a few years your penalty will be significant. I will not get into the specifics of calculating the actual penalty here because one of the parts changes each year and you would need to look at what your penalty will be at a specific time to judge does the penalty outweigh the savings of not taking coverage. Now you wonder who would be weighing this?
I often get the question out of folks who are not taking any medicine, do I really need to take coverage now or just add it when I begin medicine and need it. First, you can only add the coverage during your initial enrollment period or at the end of each year for the next year, or when you meet certain special circumstances enrollment eligibility periods. Generally though, if you skip enrollment during your initial enrollment period you must wait until the end of the year. This means you end up adding 12% of penalty for each year you skip enrolling.
Another scenario that comes up is folks who have other drug coverage, such as coverage in a retiree plan or thru the Veterans Administration. In these cases, where the coverage does provide for at least as good of coverage as is mandated in the standard Medicare Drug plan, then you do not incur a penalty if you don’t sign up for a Medicare Drug Plan when first eligible. Of course there is no requirement for you to not sign up either. In some cases despite having for example VA benefits available does not make them convenient to use and when this is the case it may be beneficial to go ahead and take a Medicare Drug Plan. Ultimately you have to balance the cost/benefit for your own scenario.
Generally there is a low-cost plan option that works well as a place saver, to prevent the penalty from kicking in. Also, these plans serve to help you in the event that all of the sudden, you are taking costly prescriptions. Again you have to balance the cost even for one of these plans against the possible costs of an unexpected prescription and future penalties.
I believe with the information above you have some insight into what you need to consider when making a decision to take or skip out on purchasing a Medicare Drug plan. We help our clients with that decision all the time. 
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