Most importantly, you have a choice. All Medicare plans are run by private companies, which release the details of their plans after October 1 of each year. Although all plans must meet the government's requirements, there will be differences between plans, including what drugs are covered and what pharmacies you can use. For example, some plans offer mail-order service. At the end of the year, you can re-evaluate your plan and select a different one if you aren't happy with your current plan.

Plans come in two basic types. The simplest is a prescription drug plan (sometimes called a PDP), which covers only drugs and can be used with your traditional Medicare and/or a Medicare supplement plan. The second type combines a prescription drug plan with a Medicare Advantage plan. This includes medical coverage for doctor visits and hospital expenses. This kind of plan is called a Medicare Advantage plus Prescription Drug, or MA-PD.

Part D plans are open to everyone who's eligible for Medicare in the U.S. and U.S. territories. Usually, that means people who are 65 years old or older, though some younger people with certain disabilities are eligible too. You cannot be denied coverage for health reasons and participation is voluntary. You get to decide if you want to enroll or not. If you have Medicare and Medicaid, you will be enrolled automatically, so there is no lapse in your Medicaid prescription drug coverage. The open enrollment period is November 15 to December 31, for coverage beginning January 1. There will be annual enrollment periods from then on. If you decide to join later, your monthly premiums may be higher because there's an additional fee for late enrollment.

Participation in Medicare Part D does come with a cost and you will pay a portion of it. Typically, the government pays about 75 percent of the enrollment costs of the plan and you pay the rest.

When you join a Part D plan, and use the plan's network of pharmacies, you have access to discounted prices on drugs. Plans will negotiate lower prices with drug companies and pass those savings along to you. So when you pay for drugs within the plan, even when you are responsible for 100 percent of the payment, you have access to discounted rates.

If you did not enroll when you were first eligible, you may pay more. The late enrollment fee is approximately one percent of your premium for each month you delay, and you'll pay it for as long as you stay in a Part D plan. If you're late because you were participating in a qualified prescription drug plan, such as a plan from your former employer, the fees may not apply to you. Or if you are eligible for the Low Income Subsidy, the fees may not apply to you.

If you have drug coverage through the Veterans' Administration (VA), and are enrolled in Medicare, you can still obtain your prescriptions through the VA.

Annual Election Period (AEP)
November 15 through December 31, which is generally the only time of each year that you can change plans (unless you meet certain special exceptions, such as moving out of your plan's service area or you are covered by Medicaid).

Coinsurance
The percent that you pay for a covered drug. With some plans, you do not pay coinsurance until you have first paid a deductible.

Copay
This is the set amount you pay for each covered drug. Different co-pays may apply depending on the type of drug (brand or generic) or days supply (30 or 90). See "Drug Tiers".

Coverage Gap
Amount you pay for Medicare prescription drug coverage after the initial coverage limit and until the amount you pay out of your pocket for covered prescription drugs reaches $5,726.25 for 2008. This amount changes each year and is also known as the "true out-of-pocket" or "TrOOP" limit. The Coverage Gap is sometimes referred to as a "Donut Hole."

Creditable Coverage
Drug coverage that is at least as good as Medicare prescription drug coverage.

Deductible
A set amount of dollars you must pay before you receive coverage for your benefits.

Donut Hole
See "Coverage Gap."

Drug Tiers
Drug tiers allow plans to group different types of drugs together on their preferred drug lists (such as generic drugs, brand-name drugs, or preferred brand-name drugs). For example, a two-tier pharmacy plan will have two different copay options. The lower copay may apply to generic drugs, and the higher copay may apply to brand-name drugs.

Formulary
A list of drugs covered by a health insurance plan. This list must always meet Medicare's requirements and is sometimes called a "Preferred Drug List."

Monthly Plan Premium
The payment you make to a health insurance company for your health plan.

Non-Preferred Drug
A drug that typically requires a higher copay than a preferred drug.

Penalty
The increased amount you may pay if you do not apply for Part D (Medicare prescription drug coverage) when you are first eligible.

If you don't join when you are first eligible, and you don't currently have a drug plan that is at least as good as Medicare prescription drug coverage, you may pay a penalty that increases the cost of the monthly premium by one percent for every month you wait to join.

Preferred Drug
A drug that typically requires the lowest copay.

True Out-of-Pocket (TrOOP)
Amount you pay during the "Coverage Gap." This amount changes each year and may be paid by another person, or a qualified State Pharmaceutical Assistance Program (SPAP), on your behalf.