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As Deadline Nears, Sorting Out the Medicare Drug Plan
By Robert Pear,
New York Times
October 11, 2005
In the next few weeks, millions of Medicare beneficiaries will make decisions that could affect their out-of-pocket medical costs for years to come.
They have to decide whether to sign up for a prescription drug plan, sorting through dozens of options with radically different costs and benefits.
Information issued by the government, while generally accurate, tends to give an upbeat assessment of the new benefit, emphasizing the advantages. But the new program is so complex that the government, by its own account, has made two significant errors in explaining it to the public.
Federal health officials incorrectly described the standard minimum drug benefit in an advertisement that appeared on Sept. 25 in Parade magazine, the Sunday newspaper supplement with a circulation of more than 37 million. In addition, the official Medicare handbook, sent to all beneficiaries, significantly overstates the number of prescription drug plans that will be available without any premiums for low-income people.
The Bush administration has notified Congress of the errors and says they will be corrected in future brochures and on the Medicare Web site.
Drug plans began marketing activities, including unsolicited telephone calls to beneficiaries, on Oct. 1. People can sign up on Nov. 15. Coverage begins Jan.
1. And May 15 is the last day to sign up in 2006.
A person who spends $2,000 a year on prescription drugs could save $928 next year under a drug plan offering the standard benefit with average premiums. A Medicare beneficiary who spends $4,850 on medicines would save $1,116. But people with only $530 in drug costs would pay one-third more than they do now.
Here are questions and answers about the program, gleaned from the 2003 Medicare law, federal regulations and interviews with health officials and Medicare experts who counsel beneficiaries.
QUESTION To whom is the drug benefit available?
ANSWER Everyone on Medicare. It should be particularly useful to people with low incomes or high drug expenses. But the government says that all beneficiaries should consider signing up because most will eventually need prescription drugs, and if they delay enrolling, they will generally be subject to financial penalties.
Q. Do beneficiaries have to do anything to get the new coverage?
A. Yes. In general, people will not automatically receive the drug benefit. They need to sign up for a specific plan, offered not by the government but by a private insurance company, which is subsidized and regulated by the government.
Q. Can people put off a decision until they really need help with their drug costs?
A. Yes. But they face higher premiums, with a 1 percent surcharge for each month of delay. If a person delayed enrollment for two years, the premium could be permanently increased by 24 percent.
Q. How much will the new drug coverage cost?
A. Premiums, co-payments and other costs vary from one insurance plan to another. Premiums will average $32 a month, but range from less than $2 to more than $100. Every state but Alaska will have at least one plan with a premium less than $20 a month.
Q. Should people sign up even if they spend very little on drugs?
A. It might be worthwhile to do so, experts say. Even if healthy beneficiaries do not immediately save money, they can obtain protection against unexpected or catastrophic costs, just as people do when they insure their homes against fire and storm damage.
Q. How does a person decide which drug plans are best?
A. This will not be easy. In almost every state, more than 40 free-standing prescription drug plans will be available. One plan may cover 1,300 drugs, while another covers 2,500. The first plan may have lower premiums. But total out-of-pocket costs may be lower under the second plan.
Under many plans, the beneficiary will have to pay 20 percent of the cost of each prescription. Under other plans, the beneficiary will have to pay $5 for a generic drug, $25 for a preferred brand-name drug and $45 for other brand-name medicines.
Over all, the government says, the new benefit will pay about half of drug costs for a typical person with Medicare next year. But savings will vary widely, depending on a person's circumstances.
Q. If a Medicare beneficiary signs up for a particular drug plan in 2006, will it be available in later years?
A. Not necessarily. The company can pull out of Medicare in 2007. With federal approval, it can raise premiums, cover different drugs or fundamentally change the structure of the benefit. Beneficiaries can then shop for other plans.
Q. Many retirees already have drug coverage from former employers. How does the new Medicare drug benefit work for them?
A. In many cases, retirees will want to keep their current coverage because it is more generous than Medicare's standard drug benefit. Many employers have said they intend to maintain drug coverage for retirees next year, with the help of federal subsidies.
By Nov. 15, every employer who provides drug coverage to retirees is supposed to send them notices stating whether the coverage is at least as good as the standard Medicare benefit. Employers are supposed to send the same type of notice to active workers eligible for Medicare. Retirees who do not receive such notices should check with their former employers.
At some companies, retirees may lose all employer-sponsored health benefits, including coverage for doctors' services and hospital care, if they enroll in a Medicare drug plan. Other employers will supplement the Medicare drug benefit or help pay the premiums.
Q. Neighborhood drugstores are giving out information on the new benefit. Can people enroll there?
A. In some cases, yes. Many drugstores will allow licensed insurance agents to enroll people on the spot. For example, CVS says it will allow sales representatives from Aetna, Humana and UnitedHealth Group to sign up Medicare beneficiaries in its stores. Humana says it will have sales representatives in more than 3,200 Wal-Mart stores around the country.
Pharmacies can distribute marketing materials, including enrollment application forms, for Medicare drug plans. But they are forbidden to steer people to a particular plan.
Q. Many people have private insurance that supplements Medicare. Some of these Medigap policies cover prescription drugs. Can people keep that coverage?
A. Yes. But in many cases, people will save money and get better coverage if they sign up for the new Medicare drug benefit. People cannot have drug benefits from a Medigap policy and a Medicare drug plan at the same time.
If people keep a Medigap drug policy that is less generous than the standard Medicare drug benefit, they may face a late enrollment penalty if they decide to sign up for Medicare drug coverage in the future. Those who sign up for a Medicare drug plan next year can buy a separate Medigap policy to help pay for doctors and hospitals, but not drugs.
In many parts of the country, Medicare beneficiaries have other options. They can get all Medicare benefits, including prescription drugs, from a health maintenance organization or a preferred provider organization. In some plans, like H.M.O.'s, beneficiaries may save money, but face restrictions on their choice of doctors and hospitals.
Q. What about people who cannot afford drug coverage under Medicare?
A. One-third of all Medicare beneficiaries may be able to qualify for extra financial help. The assistance will be available to an individual with annual income less than $14,355 and assets less than $11,500. The same type of aid will be available to couples with incomes less than $19,245 and assets less than $23,000. Assets include savings, investments and real estate other than a home.
The extra assistance, worth an average of more than $2,000 a year, will reduce premiums, deductibles and co-payments for those who qualify.
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