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What is Medicare Part D?

Medicare Part D provides prescription drug coverage. It is actually a separate policy you buy from a private insurer.

Each private insurer has its own plan, but the general rules work like this: You pay a monthly premium for Part D coverage and may also have an annual deductible of no more than a few hundred dollars a year, if there is any deductible at all. Once you cover the deductible, your plan will then pay some - or all - of your drug costs, but only for the first $2,830 in total drug costs per year.

Once you hit $2,830 you are officially in donut-hole land. You do not receive any prescription drug coverage for annual costs that fall between $2,830 and $4,550. That's right: You pay 100% of costs that fall within that dollar range. Once your annual costs push past $4,550 you fall back into the land of the covered: you will pay just 5% of costs above $4,550 with Medicare picking up the other 95%.