7 Steps to Medicare Eligibility: Step 3

What will the Medicare Prescription Drug Coverage cost me, and what will it pay for?

If you do not qualify for extra help with costs, you will pay:

- Medicare Monthly premiums
- Yearly Medicare deductible (if any)
- Co-pay or co-insurance for each prescription

If you do qualify for extra help with costs because of your limited income, you will pay:

- Low or no Medicare monthly premiums
- Low or no yearly Medicare deductible
- Low or no co-pay or co-insurance for each prescription

You can choose from many Medicare plans with different costs. In most cases, you should look for Medicare plans that have the lowest annual cost each year. Think about how much the drugs you take cost in each plan. Your overall annual cost includes your premiums, deductibles, co-payments or co-insurance for each prescription, and any drug costs you pay during the coverage gap.

What is the coverage gap, and what do I pay?
Medicare also cares about what they call your total drug costs. Your total drug cost is what you pay for the prescriptions on your plan’s drug list, plus what your plan pays for your prescriptions.

If your total drug costs (what you and the plan pay for your prescriptions on your plan's formulary) are greater than $2,700 in 2009, you will probably hit the “coverage gap,” sometimes called the donut hole. Then you will pay 100% of your drug costs until your out-of-pocket costs reach $4,350 (or your total drug costs hit $6,153.75). After that, you will pay either 5% of the costs of prescriptions on your Medicare plan's formulary (with your plan paying 95%) OR a co-pay of $2.40 for generic drugs and $6.00 for brand-name drugs on your plan’s formulary.

Some plans pay for drugs in the coverage gap. Those plans may pay for generic drugs, and they may even pay for some brand drugs. Premiums on these Medicare plans may be higher. Remember to choose the plan with the lowest annual costs per year.

If you qualify for extra help with costs, you will not have a coverage gap. You will continue to pay reduced or no co-pays or co-insurance for each prescription. Depending on how much income you have, your Medicare co-pays or Medicare co-insurance may get even lower when your total drug costs reach $6,153.75.