Tax Matters

Tax Matters

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 $5,100 is the Magic Number — If you spend more than $5,100 per year on prescription drugs out of your own pocket, you will get the maximum benefit from the Medicare program.  If you spend less than $5,100 but more than $842 annually, Medicare will help but you will still be responsible for a large share of the costs.

Medicare Enrollment is Necessary
— The program is only available if you are on Medicare.  It is not available to just anyone.

Penalty for Late Enrollment
— If you do not enroll in the prescription drug plan during your first six months of Medicare coverage (or by May 16, 2006, if you currently have Medicare), there will be a penalty of about 1% of the premium for each month you delay.  The penalty is waived if you already have prescription insurance that is at least as good as Medicare’s — your insurance company will provide information about this — and you switch to a Medicare plan after the six months.

Plans Will Vary
— Medicare contracts with insurance companies to provide different plans in different areas of the country.  In October, you should receive information in the mail about plans in your area or information will be available online at  There may be more than one plan available in your area.  Plans may offer all, some, or none of the medicines you need.  You will need to take stock of the medicines you take and then compare the plans and their prices.

Discount Drug Card — The Medicare Discount Drug Card you may have purchased this year expires at the end of 2005.  The Medicare prescription drug program takes its place.

Paying Premiums
— You may choose to have your Medicare drug plan premium deducted directly from your Social Security check, pay the premium yourself, or have the premium taken from a bank account.


For 2006, participants will pay an annual premium of about $444.  After that, your prescription costs will be:


·                   $250 maximum annual deductible

·                   25% of all prescription costs between $250 and $2,250 (Medicare pays 75%)

·                   100% of prescription costs from $2,251 through $5,100 (Medicare pays 0%).

·                   5% of prescription costs over $5,100 (Medicare pays 95%)


For more information, go online to www.medicare.gove or call 1.800.MEDICARE.

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