Medicare Part D
Coverage under the Medicare prescription drug program, or Medicare Part D, began on January 1, 2006. Open enrollment will continue until May 15, 2006. When you enroll in Medicare Part D, you should choose a prescription drug plan that meets your individual needs.
Like other insurance plans, Medicare Part D plans require you to pay monthly premiums and meet an annual deductible in order to receive prescription drug benefits. Currently, the average monthly premium is around $35, and the deductible can be up to $250 a year.
Once the $250 deductible is met, Medicare will cover 75% of your prescription drug costs up to a maximum of $2,250 in total expenditures (not counting the premium). Between $2,250 and $5,100 you are responsible for 100% of prescription drug costs. This difference between the $2,250 and the $5,100 is called the Coverage Gap, and beneficiaries with very low incomes may qualify for additional assistance in paying for prescription drugs within the Coverage Gap.
Once your total spending reaches $5,100 Medicare will pay 95% of prescription drug costs. You will be responsible for paying $2 for each generic drug and $5 for each brand name drug, or 5% of the cost for each prescription, whichever is higher.
Late Enrollment Penalty
Enrollment is currently open for Medicare Part D, and will continue until May 15, 2006. Although you do not have to enroll for Medicare Part D during the open enrollment period, if you wait to enroll, you will be charged a penalty. The penalty equals 1% of the current premium for each month past eligibility for Part D.
For example, a beneficiary is eligible to enroll now in a Medicare Part D plan. However, he decides to wait 30 months to enroll. Consequently, he will have to pay the premium plus an additional 30% of the premium per month. If the premium when he enrolls is $49 per month, that means he will pay $63.70 per month.
In addition to paying the late enrollment penalty, after May 15, 2006, you will only be able to enroll once a year during a designated enrollment period.
The Exception to the Late Enrollment Penalty
If your current health insurance covers prescription drugs, and is an equal or better plan than those offered through Medicare Part D (or "creditable"), you will not have to pay the late enrollment penalty if you later decide to enroll in Medicare Part D. You should have received a letter from your insurance company informing you whether or not your current coverage is creditable to Medicare Part D. The Centers for Medicare and Medicaid Services have said that a prescription drug plan is deemed to be creditable if it:
- Provides coverage for brand and generic prescriptions;
- Provides reasonable access to retail providers and, optionally, for mail order coverage;
- The plan is designed to pay on average at least 60% of participants' prescription drug expenses; and
- Satisfies at least one of the following:
- The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or
- The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 per Medicare eligible individual in 2006.
- For entities that have integrated health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1,000,000 lifetime combined benefit maximum.
Examples of creditable coverage are:
- Department of Veteran's Affairs
- Federal Employee Health Benefits
- The Local Choice
- University of Virginia Health Plan
- Maryland State Employees and Retirees Health Benefit Program
Should You Sign Up for Medicare Part D?
The Centers for Medicare and Medicaid Services (CMS) recommends that every person who is eligible for Medicare Part D, and who does not currently have creditable prescription drug coverage through another health plan, should sign up for Medicare Part D. The following are some things to keep in mind depending on your individual situation:
- If you are insured through an employer, a union, or the military and your health insurance includes drug coverage, look over your current plan to determine whether it is creditable to a Medicare Part D plan. If your current health insurance does not include prescription drug coverage, you can add drug coverage by enrolling in Medicare Part D.
- If you are insured through regular Medicare, you can either enroll in a Medicare Part D plan, or switch to a Medicare Advantage plan with drug coverage. However, if you have a Medigap policy with prescription drug coverage, you will need to determine if it is creditable to Medicare Part D. If your Medigap policy does not have prescription drug coverage, you can add it by enrolling in Medicare Part D.
- If you are insured through a special Medicare plan such as Medicare Advantage or a Medicare Cost plan that includes prescription drug coverage, you can stay in the plan and receive Medicare Part D coverage starting January 1, 2006, or you can switch to another plan. If your current plan does not have prescription drug coverage you can add it.
- If you are enrolled in both Medicare and Medicaid and Medicaid pays for your prescription drugs, beginning January 1, 2006, your prescription drug costs will be covered by a Medicare Part D plan. You will automatically be enrolled in a plan if you do not enroll to ensure that your coverage continues. You can switch to another plan at any time.
- If you get help with your Medicare premium (your premium was less than $78 in 2005), or you receive Supplemental Security Income, you will automatically be enrolled in a plan to ensure that your coverage continues. You can switch once to another plan.
Which Plan Should You Pick?
There are dozens of plans to choose from in the Washington, DC area. You should consider the following factors when choosing your prescription drug plan:
- Formulary: The "formulary" is the roster of drugs the plan covers and will pay for. Check to make sure the plan includes the particular prescription drug that you need – as well as any you might anticipate needing – and check to see how much they cost. Also, bear in mind that plans may discontinue coverage or increase the cost of any particular drug after giving 60 days notice.
- Exceptions process: A plan may grant an "exception" to its formulary if a beneficiary is using or is prescribed a medically necessary drug that is not on the plan's formulary. You will want to make sure you know the plan's process for granting an exception in case you need one now or in the future.
- Transition process: Find out the plan's rules for temporarily providing drugs not covered by the plan during a "transition" period, and how long the transition period will last.
- Utilization management tools: You will want to know if the plan attempts to steer beneficiaries to lower-cost drugs. The plan can do this by requiring you to try certain medications before covering a costlier drug prescribed by your doctor, or by charging a different co-payment for generic and brand-name drugs or for different drugs.
- Quantity limitations: Find out if the plan has any sort of limitation on the number of prescriptions you can get in a month. Also, does the plan limit the number of pills or other dosages that you can receive in a single prescription?
- Deductible: It is important to know the annual deductible of the plan you choose. The deductible may be the standard deductible of $250, or it may be less. Figure out if the total cost of the drugs you take at least meets the deductible plus a year's worth of premium payments. AARP has a calculator to help you determine your personal drug costs.
- Pharmacy: You will want to make sure the plan you choose covers prescriptions at your regular pharmacy. In addition, the plan may have "preferred" and "non-preferred" pharmacies within its network and may require you to pay more if you use a non-preferred pharmacy. If the beneficiary is in a long-term care facility, make sure the long-term care facility's pharmacy is included in the plan's network.
- Mail order option: Determine if the prescription drug plan allows or requires you to use mail order, and if there is a price difference for mail-order purchases.
- Plan sponsor: Make sure the plan sponsor is a known, reliable entity.
- Coordination with a state program: Find out how the plan coordinates benefits with any programs in your state.
For more tips and information, see AARP's bulletin The New Medicare Prescription Drug Coverage: What You Need to Know (PDF), or contact the Elder & Disability Law Center for a consultation.