Medicare members are about to be bombarded with information and sales pitches. You have a decision to make that could have a significant effect on your finances and health. You need to start preparing now.
The Medicare prescription drug benefit that was enacted in 2003 takes effect in 2006. November 2005 begins the sign-up period for the benefit, officially known as Medicare Part D.
The prescription drug benefit is different in several ways from traditional Medicare and from most government programs. The benefit is optional. If you already have satisfactory prescription drug coverage or do not want to pay for Medicare’s benefit, you do not have to sign up for Part D.
Another difference is that the benefit program will be administered by a number of private firms. Medicare will not administer it or contract with only one or two firms. Instead, any provider can apply and be approved to offer a Medicare prescription drug benefit plan.
This last factor, in particular, will require Medicare members to use some gray matter to make a decision. Let’s look at the details we have now.
Medicare prescription drug plan members will be charged a monthly premium. The premium will depend on the plan but is expected to average $37 ($444 annually). Then there is a $250 deductible. So, you pay $694 annually (the average monthly premium plus the deductible) before the plan begins to help with payments. After the member pays for the first $250 of drugs, the plan covers 75% of medicine costs up to $2,250 in annual drug expenses (including the $250 deductible). That is another $500 out of pocket for you (25% of costs from $251 to $2,250). (The premiums and deductibles are not charged to those earning less than $9,000. Also, the breakpoints for the different deductible and copayment levels are indexed for prescription drug price inflation after this year.)
After your prescriptions for the year total $2,250, you hit the gap in coverage, also known as the doughnut. The member pays all prescription medicine costs until his out-of-pocket drug cost (not including the monthly premiums) reaches $3,600 for the year. You already have spent $750 (excluding premiums), so the plan does not pay any more until your gross medicine cost for the year exceeds $5,100.
After that, catastrophic coverage kicks in. Members pay only 5% of each prescription after the $3,600 out-of-pocket threshold is reached. The law prohibits you from purchasing additional insurance that covers the doughnut, copayments, or deductibles.
The table nearby displays the amounts paid by the member and the plan at different spending levels, excluding the premiums.
The first decision you need to make is whether the prescription drug plan is worth while for you. The law contains financial incentives for employers to continue medicine plans they have in place, though not all will do so. If you already have a plan that is equal to or better than the Medicare plan, you might want to stay with it. Likewise, if you are not a heavy user of prescription drugs, the plan might not be worth your while.
Keep in mind, however, that there is an incentive for you to join now. Those who do not sign up for the plan when they are first eligible will pay higher premiums if they join later (unless they were receiving coverage from another provider, such as a former employer, that later is discontinued). The penalty is 1% for each month joining is delayed. That, of course, is to prevent adverse selection. Otherwise, people likely will not join until they have started to incur high prescription drug costs or anticipate doing so. The point is to take the long-term perspective when deciding whether or to join now.
If you decide to consider joining the program, remember there is not one Medicare prescription drug plan. Instead, private providers who want to will be offering the benefits. There likely will be both locally-offered plans and national plans, so not all plans will be available in your area.
Those who want to stay in traditional Medicare will have to join a stand-alone drug benefit plan. Others also will be able to choose from plans that will provide all their medical coverage under Medicare in addition to the medicine coverage, such as HMO plans.
When shopping for a plan, it is important to obtain and compare details.
Plan sponsors are given a fair amount of flexibility. It is expected that they will experiment with different combinations of drug offerings and other coverage. Those who live in populous areas with a lot of Medicare beneficiaries might have to sift through a wide number of options. Others might have a small number of plans available. As I said, the drug coverage could be combined with HMO and PPO coverage, among other possibilities.
It will be important to discover exactly which drugs are covered under each plan. Some plans might not cover certain types of drugs or medicine covering certain conditions. Others might limit the specific drugs they will cover. For example, a plan might pay for only one brand of antidepressant. This is especially important if you already are taking prescription medicine regularly or believe it is likely in the future.
Medicare is pressuring providers to cover a broad range of drugs, according to The New York Times. For certain medical conditions, the government wants all available drugs covered before it will approve a plan. The Times said the government insists that all drugs be covered in six areas: antidepressants, antipsychotics, anticonvulsants, HIV drugs, cancer medications, and immunosuppressants. Other conditions also are said to be part of the negotiations.
The Times said hundreds of firms applied to offer plans, many more than anticipated.
In addition, some plans might impose conditions for covering a drug. Find out if there are any steps to be taken or conditions that must be met before a drug is covered.
Many plans probably will restrict where drugs can be purchased to be covered. Drugs for chronic conditions might have to be ordered by mail. Or drugs might have to be purchased from a pharmacy with which the plan has an alliance.
There will be some interesting alliances in plan offerings. For example, AARP is said to have joined with insurer UnitedHealth Group to offer a plan that will be managed by a unit of Walgreen.
The Medicare web site, 800-MEDICARE, and your local Area Agency on Aging (www.n4a.org) should list plans available in your area. AARP also is planning to help. The web site at www.medicare.gov already has some educational materials to get you started.
Do not wait until November. Start now by learning the details of your current medicine coverage and listing your current medications. If family or personal history indicates other medications are likely in the future, make a list of those or the conditions they will treat. Consider any other details that might be important to you. For example, are you willing to switch out of traditional Medicare into an HMO or other arrangement in order to get more attractive medicine coverage along with other benefits? What restrictions on pharmacies are you willing to accept?
By October 13 you should be able to compare the different plans in your area on the Medicare web site. Remember to check for details such as whether the choice of medications is limited for some conditions and whether preconditions are required for coverage.
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|*excludes monthly premiums|