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Medicare's New Prescription Drug Benefit:
Part D-Mystified
By Capri S. Cafaro, Global Action on Aging
October
20, 2005
How it works?
1 2
· The Medicare Part D program is administered by private companies that are subsidized by the government.
· The Medicare Prescription drug benefit plan, commonly known as Part D, is a voluntary program in which eligible individuals have the option to enroll.
· 42 million Americans are eligible for the Medicare prescription drug coverage plan. These are seniors and disabled individuals of any income level.
· The drug benefit goes into effect January 1, 2006. Those interested in enrolling in Part D have an "open enrollment" period to sign up.
· Open enrollment starts November 15, 2005 and lasts for six months.
· If an individual fails to enroll during the prescribed open enrollment period, a 1% penalty will be added to their premium for every month they are not signed up for Medicare Part D.
· A minimum of two plans are offered in any given region. Most states have over a dozen competing private companies that are authorized to provide Medicare Part D coverage.
· Each company offers different premiums, drug types and varying partnerships with pharmacies.
· Individuals should examine each company's "formulary" or list of drugs offered by the provider. Formularies vary in content and cost, so some plans may not cover one or several of your specific medications. Formularies often are organized by different classifications of drugs, grouping the most common treatments together while bundling more specialized drugs in a more expensive tier.
· Providers typically have "preferred" drugs on their formulary list. Coverage providers negotiate special terms with drug companies to offer specific types of drugs for lower costs. Preferred drugs will vary from plan to plan.
· If an individual currently has Medigap Insurance, a plan sold by private insurance companies to fill coverage voids in the original Medicare program, that plan may currently have prescription drug coverage.
· In some cases, it is possible to save money by dropping Medigap prescription coverage from your current Medigap plan and joining a Medicare Part D plan to replace the prescription drug portion.
· One can also elect to buy a different Medigap policy without prescription drug coverage or purchase one of two new Medigap plans offered (termed K and L) that most compatible with Part D.
· It is necessary to contact the Medigap provider directly to make changes or to cancel coverage within 63 days of the start of Medicare Part D benefits.
· Alternatively, one can enroll in a Medicare Advantage Plan or a Medicare Health Plan. These are Medicare plans offered by private HMO's and PPO's in the local area, many of which include prescription drug coverage. Medigap insurance is not compatible with these plans.
· If an individual has prescription drug coverage through an employer or union,
materials will be sent out to each individual pertaining to the details of the plan.
· If an employer or union plan offers the same or better coverage than Medicare Part D, an individual can elect to stay in that plan or choose to enroll in Medicare Part D at a later date with no penalty. If Medicare Part D is superior to current coverage, individuals will incur late fees for signing up after the deadline.
1 New drug benefit challenged By ANITA KUMAR, Times Staff Writer St Petersburg Times October 19, 2005
2 www.medicare.gov
What it costs seniors? 3 4
· Premiums and drug costs will vary from plan to plan. The average premium is roughly $32 per month.
· Plans typically come with a $250 annual deductible.
· After the deductible is reached, enrolled individuals will be responsible for paying 25% of drug costs. Medicare Part D (through the individual insurance providers), will cover 75% of the drug costs, up to $2250 per year.
· At the $2550 mark, individuals fall into what is referred to as the "doughnut hole," where they are required to pay 100% of prescription drug costs until catastrophic coverage kicks in. This amounts to $3600 in out of pocket drug costs for the individual. From that point forward, an individual is responsible for only 5% of drug costs or co-payments of $2 for generics and $5 for brand names, whichever is higher. Medicare providers will then pick up 95% of the remaining drug cost.
· Some plans offered by Aetna, Cigna, PacifiCare and Unicare, for example, offer plans that fill the coverage gap left by the Doughnut hole for a higher premium.
· For those who have high drug bills, it is important to consider how patient cost is determined. This is an issue of "co-payment" versus "co-insurance". Plans offered will have varied approaches to this payment structure.
· Under a co-payment, an individual is responsible for a flat fee per prescription. Co-insurance requires patients to pay a percentage of the total cost which could result in higher costs to the consumer. Fees of both kinds are derived from the kind of drugs the patient needs. For example, there may be a different co-payment or co-insurance percentage for generics or highly specified drugs.
· Beginning in 2007, co payment amounts will increase to reflect the costs of the new Part D program for the previous year. By the year 2013, Part D costs are projected to rise to $58 per month in the case of the premium, and to $445 per year in the case of the deductible.
3 How to Choose a Medicare Drug Plan By Barbara Martinez and Sarah Lueck, The Wall Street Journal
October 4, 2005
4 www.ncpssm.org
What about low- income seniors? 5 6 7
· Some low-income individuals will qualify for drug cost assistance in the form of a subsidy.
· The Social Security Administration mailed out nearly 19 million applications this year for the Medicare prescription drug benefit's low-income drug subsidy.
· Prescription drug cost assistance for low-income seniors will be administered by the individual state's Medicaid program. This means there could be variation in services from state to state.
· Low-income seniors with incomes under 135% of the poverty level ($12,569 for individuals and $16,862 for couples in 2004) will pay no premium and no deductibles, and will have no "gap" in coverage. They will pay $2 for each generic prescription and $5 for all other prescriptions.
· Seniors with incomes between 135% and 150% of the federal poverty level ($12,569 - $13,965 for individuals and $16,862 - $18,735 for couples in 2004) will pay a sliding-scale premium and a $50 annual deductible. They will have 85% of costs covered up to the $3,600 out-of-pocket limit, after which they would pay $2 for each generic prescription and $5 for all others. Those with assets over $10,000 for individuals and $20,000 for couples (indexed for inflation) are ineligible for this assistance.
· Seniors who are eligible for Medicare and Medicaid, known as "dual qualifiers" will have their drug costs paid by the new Medicare drug plan.
· However, states still administer the drug coverage through Medicaid. State Medicaid programs are prohibited from supplementing benefits provided under Medicare Part D using joint federal state Medicaid funds, though they are allowed to spend state-only money to expand benefits.
· Prohibiting state Medicaid plans from using federal dollars towards enhancing low income prescription drug benefits may result in less attractive coverage than the state offered before Medicare Part D.
· Those with assets worth more than $6,000 ($9,000 for couples) in 2006 will not be eligible for this aid, regardless of their income levels.
· Assets generally include real estate (but not your primary residence); bank accounts such as checking, savings and certificates of deposit; stocks; bonds, including U.S. savings bonds; IRAs and mutual funds; and cash at home and elsewhere.
· Cost assistance programs for low income individuals offered directly by drug manufacturers may save more money for those with incomes higher than 150% of the poverty line and do not qualify for subsidies.
"Eligibility for
Medicare Drug Subsidy is Key"
By Tony Pugh, Contra Costa
Times , October
1, 2005
www.ncpssm,org
"Drug Companies Programs May Be Better Than Medicare" By
Amy Norton, Reuters October
18, 2005
Where can prescriptions be filled? 8
· Most Medicare Part D providers have established exclusive networks with
drug retailers to fill prescriptions of those covered under a provider's plan.
· Check the provider's list of partner retailers to make sure your local drug store is part of the provider's network.
· Medicare Part D makes it possible for seniors to fill 90 days worth of prescriptions in advance to cut down on pharmacy visits.
· Some plans offer mail delivery options.
8 How to Choose a Medicare Drug Plan By Barbara Martinez and Sarah Lueck, The Wall Street Journal
October 4, 2005
Additional Medicare Resources
· Official Medicare site www.medicare.gov
· Center for Medicare and Medicaid Services www.cms.hhs.gov
· Alliance for Retired Americans www.retiredamericans.org
· Institute for America's Future www.ourfuture.org
· National Committee to Preserve Social Security and Medicare www.ncpssm.org
· AARP www.aarp.org
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