Medicare serves more than 55 million Americans, providing the primary source of support for health care expenses to those 65 and older. Almost 10 years ago, Medicare expanded to include prescription-drug coverage under Part D, and this year, the Centers for Medicare & Medicaid Services expect nearly 40 million participants in Medicare Part D.

Unfortunately, many Medicare participants find it extremely challenging to figure out the best prescription drug plan available. With dozens of plans to choose from, it can be tough to figure out even where to start. By following a few simple steps, though, you can work through the decision-making process to figure out what plan attributes to look for and how to identify the key components of the perfect prescription drug coverage for you.

1. Know what drugs you'll need.
One of the biggest variables involved in choosing the right Medicare Part D plan is figuring out what drugs are covered. Some prescription drug plans go into excruciating detail about individual drugs that are or aren't covered, and so if you already have a regular regimen of prescriptions, the last thing you want is to find out that the plan you've chosen won't pay the cost of your existing drugs.

Fortunately, this doesn't have to be as big a hassle as you'd expect. On Medicare's Part D plan finder, you can get a list of plans available in your area that will cover any prescriptions that you enter into the system. By doing this step first, you can avoid wasting time considering plans that might look attractive on their face but that simply won't work for your individual needs.


2. Do a cost-benefit analysis on premiums compared to quality of coverage.
Some Medicare participants simply pick the plan that has the lowest monthly premium. While that's a quick way to decide, it only takes into account one part of your total cost equation, and you'll often end up with a less-than-perfect result if you only look at premium cost.

In addition to premiums, you need to take into account any annual drug deductible that you'll be responsible for paying before coverage kicks in. You'll also want to consider any copayment or coinsurance amount that you'll have to pay every time you get a prescription filled.

For instance, when I looked at potential coverage in my area, I found two plans offered by the same provider. One came with a monthly premium of $27.40 and a deductible of $320, while the other had a higher premium of $48.20 but no deductible. The $320 deductible translates to an extra $26.67 per month, so for anyone who expects to have drug costs of at least that amount, paying the extra monthly premium actually ends up being slightly cheaper, all other things being equal. Yet the copayments on the no-deductible plan are also slightly higher, which could push the balance back in the other direction depending on the exact amounts you'll owe for specific types of prescriptions.


3. Revisit your decision each and every year.
Even if you do a good job of picking a Part D plan in your first year of eligibility, don't think that you're done forever. Most Medicare participants never change their Part D provider, even when changing medical needs would warrant a switch to save costs.

Each year, you'll have a chance through open enrollment to make changes to your Medicare Part D provider. If your need for prescription drugs changes, it's worth it to go through the process again to make sure you don't pay more than you need to. Whether it's going off a medication or having to start taking a new one, you might find that a plan change will save you more money than standing pat with your current provider.

Medicare is an important program, and prescription drug coverage under Medicare Part D is a complex but necessary element of your healthcare finances. By being smart about picking a plan and following these three steps, you'll put yourself in the best possible condition to get the coverage you need at the lowest possible total cost.