For Your Benefit: Picking the Wrong Medicare Drug Option Can Be Costly. Here Are Tips for Choosing Wisely

By Jane Zhang, The Wall Street Journal

December 1, 2008

Medicare's prescription-drug benefit is designed to help older Americans reduce drug spending. But for many, the program's complex structure and varied options can lead to costly mistakes.

Begun in 2006, the drug benefit provides government-subsidized coverage of prescription drugs through private insurers such as Humana Inc. and United Health Group Inc. The benefit is available through drug-only plans or health plans that cover drugs. Like most private insurance, these plans usually charge premiums, deductibles and other co-payments.

About 26 million of the 44 million beneficiaries of Medicare, the federal health-insurance program for the elderly and disabled, had signed up for the drug benefit as of April, up 1.5 million from June 2007. Most of the rest receive drug coverage through private sources, such as their former employer, or through another government program.

Each year, drug-benefit enrollees have the option of changing plans during a six-week open-enrollment period that ends Dec. 31. In previous years, most people have chosen to stay put. But for 2009, seniors might benefit by shopping around because some of the most popular plans are raising premiums -- sometimes more than 60% from 2008 -- and adding or increasing deductibles and other cost-sharing.

Here are six tips from health-policy analysts and advocates on how to choose a drug plan that is most advantageous to you:

1. Enroll in a Medicare drug plan as soon as you are eligible.

Medicare beneficiaries can enroll in the drug benefit up to three months before or after the month they turn 65. Late enrollees may have to pay a penalty and wait until January of the next year to receive the benefit.

Seniors should enroll when they become eligible, even if they don't take prescription drugs, says Cheryl Matheis, senior vice president for health strategy at AARP, an advocacy group for older Americans.

"It's an insurance program," Ms. Matheis says. "I may get sick, but if I don't sign up, I'll have to wait till next year."

2. Determine the type of coverage that is best for you.

Beneficiaries can choose traditional Medicare with a stand-alone drug plan or a private Medicare plan, known as Medicare Advantage. Advantage plans wrap physician and hospital services into one, often with extra benefits such as drug and vision coverage.

Consumers should know what they are getting into if they choose an Advantage plan. Such plans often charge lower premiums than traditional fee-for-service Medicare and supplemental coverage, but they may require higher cost-sharing for services such as hospital stays and nursing-home care. Unlike Medicare, most Advantage plans restrict patients' access to physicians and hospitals.

In addition, joining an Advantage plan can affect retiree health benefits, which tend to be more generous than government plans, says Tricia Neuman, vice president and director of the Medicare Policy Project at the Kaiser Family Foundation. She suggests that retirees ask their employers that question before switching to an Advantage plan.

3. Shop around even if you like your 2008 drug plan.

Major insurers are raising prices so much in 2009 that seniors should re-evaluate their options, says Dan Mendelson, president of Avalere Health, a Washington-based consulting firm. "They can't assume that next year will be the same as this year," he says. "The biggest mistake is being passive."

The 10 most popular plans will raise their average premiums by 31%, and many will raise deductibles and co-payments as well, according to an Avalere analysis of Medicare data. For example, the average monthly premium for Humana's basic plan will increase to $40.83 in 2009 from $25.52 this year and $9.51 in 2006. UnitedHealth's AARP Preferred plan, the nation's largest plan by enrollment, will raise beneficiaries' average co-payment for preferred brand-name drugs by $8, to $38, according to the Avalere analysis.

Medicare officials say most beneficiaries will have access to a plan in 2009 that won't cost them more in premiums than 2008. Though not as common, some plans will lower premiums and cost-sharing here and there -- which could make a difference, depending on the drugs a beneficiary takes.

"People in Medicare tend to think that plans are basically the same, but there are big differences across plans, which could have a big impact on what people pay for their prescriptions, or if they can get them at all," Ms. Neuman says.

4. When choosing a plan, don't just look at premiums.

Beneficiaries also should look at factors such as deductibles, co-payments and whether their favorite pharmacy is affiliated with the plan. In particular, seniors should look at the list of drugs a plan covers and what their cost-sharing will be under each plan.

Ms. Matheis suggests that seniors gather a list of drugs they take and note their dosages. Then, they can log onto Medicare's Web site at www.Medicare.gov and compare plans at the Plan Finder.

Where your medications fall on a plan's drug list can make a big difference on your bottom line. Each plan has various "tiers" of drug types -- such as generics, preferred brand-name drugs, nonpreferred brand-name drugs or specialty drugs -- with the lower tiers requiring smaller co-payments. Each plan can define those tiers differently, so while one plan may place a drug on a lower tier and require only a $5 co-pay for it, another might have the same drug on a higher tier and charge $50, says John Gorman, chief executive of Gorman Health Group LLC, a consulting firm in Washington.

Even if the drug is covered, it may come with conditions such as dosage limitations. For example, a plan may cover a 20-milligram pill but not a 30-milligram pill of the same drug, says Judith Stein, executive director of the Center for Medicare Advocacy in Mansfield, Conn. In addition, some plans, before they start covering a drug, may require consumers to get documentation from a physician saying similar, less-expensive medications weren't effective at treating their condition.

Seniors "have to be very wise shoppers," Ms. Stein says. "Don't assume a drug will be covered this year."

5. Navigate the coverage gap.

There is a gap in coverage in Medicare's drug plans known as the "doughnut hole," and in 2009 it begins after seniors and their drug plans have spent $2,700. Beneficiaries then must bear all costs until their out-of-pocket expenses reach $4,350. After that, the plan covers most drug costs for the rest of the year.

Plans often charge higher premiums in return for covering drugs during the gap, but fewer will cover the gap in 2009, according to Ms. Neuman.

No plans will cover all brand-name drugs during the gap and only a few will cover any brand-name drugs at all, she says. Even those that promise to pay for generics during the gap may cover some, but not all, of those medications.

For that reason, consumers should weigh whether the extra cost is worth the extra coverage, Ms. Neuman says.

There are different strategies for dealing with the coverage gap, and picking the right one depends on your drug spending, Ms. Matheis says. If you hit the coverage gap before June, that means your drug spending is high and the best strategy may be to spend your way out of the hole as quickly as possible, so you can get coverage for the rest of the year, she says.

But for others, the best strategy may be to try to reduce spending to delay reaching the gap until as late as possible in the year, Ms. Matheis says. For example, a patient who normally spends $166 on a brand-name drug may be able to get a generic version for $4 at Wal-Mart or with a $1.25 co-pay. "The differences are astounding," she says.

Seniors also can talk to doctors about cheaper alternatives to the drugs they are taking, such as generics, other brand-name drugs or older-version drugs that may treat their conditions just as well, Ms. Matheis says. "Physicians are not wedded to the same medications that they prescribe for you," she says.

Seniors can research what drugs treat their conditions at their local libraries, or tap into online tools such as Consumer Union's Best Buy Drugs (crbestbuydrugs.org).

6. Go online, get help.

Medicare's online Plan Finder tool is indispensable for choosing a drug plan, yet many seniors aren't used to going online. Ms. Neuman suggests that these seniors turn to family, friends or advocates for help.

Seniors can also seek free, one-on-one help from counselors at their state's Health Insurance Assistance Program. They are listed at www.Medicare.gov.

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