In the United States, Medicare Part D is the prescription drug program of Medicare. Medicare patients can choose from a variety of privately run Medicare-approved plans. Prescription drug coverage is offered in two types of plans:

1. Medicare Prescription Drug Plans - plans specifically for prescription drug coverage
2. Medicare Advantage Plans - plans that cover primary care as well as prescription drugs. (Not all Medicare Advantage Plans include Part D coverage.)

If you don't already have a plan you can find one using the Medicare Plan Finder.

Each Medicare Part D prescription drug plan covers a specific set of brand-name and generic drugs. This is called the plan's formulary and in most cases can be viewed at the plan operator's website.

Each plan has its own copayment rules but the share of drug costs paid by the government is set by legislation. Prior to 2010 most patients were responsible for paying the following share of prescription drug costs (in addition to their insurance premiums):

• The first $300 (approximately) of drug costs: patients pay 100%
• From $310 to $2830: patients pay 25%
• From $2830 to $6440: patients pay 100%. This range, in which the government does not share the cost, is called the coverage gap or "donut hole". It affects about 25% of patients under Medicare.
• Above $6440: patients pay 5%. This is called Medicare catastrophic coverage.

The Health Care and Education Reconciliation Act of 2010 changed many parts of the healthcare system in the United States. One change is designed to close the Part D coverage gap. However, the changes in coverage are being phased in over an 11-year period. The Medicare Part D Calculator lets you compute the year-to-year changes based on the full price of your prescription drugs.

Under the new law, in 2010 patients who reach the coverage gap get a $250 reimbursement from the government. For 2011 through 2020, the percentage that patients pay during the coverage gap decreases each year, at different rates for brand-name and generic drugs, until to gap is finally closed in 2020:

• Up to $310: patients pay 100% of drug prescription costs
• From $310 to $2830: patients pay 25%
• From $2830 to $6440: patients pay varying percentages, from 100% down to 25%. These changes from year to year can make the new rules difficult to understand and hard for patients to budget.
• Above $6440: patients pay 5%

These graphs — for brand-name drugs on the left and generic drugs on the right — show how your share of prescription drug costs rises as the total cost of those drugs rises. The two uppermost graph lines show the Medicare Part D cost-sharing for 2009 and 2010. As you can see, your share rises at a slow rate except in the coverage gap between $2,830 and $6,440, where the rise is much steeper. The other lines show how the rate of increase (slope) decreases from 2011 to 2020.

Medicare Part D: Your Annual Share of Brand-Name Drug Costs Click for full-size image.

Medicare Part D: Your Annual Share of Generic Drug Costs Click for full-size image.

Under the Health Care Reform, generic drug costs to patients are not being reduced as quickly as those for brand-name drugs, The percentage you pay for generic drugs may be higher than the percentage you pay for brand-name drugs, but this is counterbalanced by the lower cost of generic drugs. You pay a higher percentage of a lower price. By the year 2020 your share by percentage will be the same for brand-name and generic drugs.