Examples

Mary, age 68, has prescription drug costs of $400 each month ($4,800 for the year).

Several years ago, Mary was diagnosed with breast cancer. She has had no recurrence, but she takes an anti-cancer drug as a precaution. She recently developed urinary incontinence and has trouble sleeping. All together, she takes six medications, including four generic drugs. At the end of 2008, Mary is losing her retiree drug coverage. Her retiree medical coverage will continue.

Mary decides to enroll in a stand-alone Medicare Prescription Drug Plan. She will not have to pay a penalty for late enrollment in the Medicare drug benefit because her retiree coverage for drugs was considered to be, on average, at least as good as Medicare’s (creditable coverage).

Mary chooses a stand-alone drug plan that includes:

	A $100 annual deductible
	A monthly premium of $60
	Copays of $5 per generic drug; $40 per brand-name drug
	Coverage for generic drugs in the coverage gap
	Catastrophic coverage of 95%
	A formulary that includes her drugs
	A national pharmacy network so she can get her prescriptions filled when she travels to visit her children

In January, Mary fills her first prescriptions and pays $100 to meet her annual deductible. After this, Mary pays the copays for her prescriptions and her plan pays the rest of the cost of her drugs. In July, Mary’s total drug costs (what she has spent plus what the plan has paid) go over $2,700. At this point, Mary enters the coverage gap. Because she has coverage for generic drugs during this period, Mary will continue to pay just $5 for each generic drug, but she must pay 100% of the cost of her brand-name drugs. Even though she pays for her brand-name drugs in the coverage gap, Mary still saves $1,200 over what she would have paid without any insurance, and her savings are about the same as she had under her retiree plan.