Notes and ResourcesThe Medicare Modernization Act of 2003 (MMA) created a federally subsidized prescription drug benefit available to all Medicare beneficiaries. The drug benefit is available through private stand-alone prescription drug plans (PDPs) or through integrated health plans like HMOs and PPOs that provide all Medicare-covered services, including prescription drugs (known as Medicare Advantage prescription drug (MA-PD) plans. The law provides a basic outline of "standard drug coverage," but plans can structure their benefit differently as long as the overall value is at least as generous as the standard Medicare plan. For a drug plan offering the standard benefit, beneficiaries are required to pay a deductible, and then 25 percent coinsurance for their total drug costs until they reach an initial benefit limit. Once they reach the benefit limit, they face a gap in coverage (the so-called “doughnut hole”) in which they pay 100 percent of their total drug costs up to a catastrophic coverage threshold. Medicare then pays 95 percent of total drug costs above that amount. Dollar amounts associated with the standard benefit, including the deductible, initial benefit limit, and catastrophic coverage threshold, are updated annually. Beneficiaries who choose to sign up for the drug benefit also generally pay a monthly premium, which can vary across plans.
Additional Kaiser Family Foundation resources available here. Revised November 2006
Revised November 2006