How the Plan Works
Yes, it's more government gobbledygook. But the new Medicare drug benefit--no matter how daunting it seems--can be a cost saver for many seniors
Phil Miles knows he's lucky. At 68, the retired adult education teacher has no serious health problems, a fact he chalks up to good genes and an exercise regimen that includes stationary cycling, yoga, and weightlifting. "I try to stay fit," he says. But despite his good health, he's paying close attention to the new Medicare prescription drug benefit. He's waiting to see if his existing coverage changes, and then he'll decide whether to keep his current drug plan or switch to a new one. "It's pretty complicated," says Miles. "There's a lot of fine print. I think seniors are pretty anxious about this."
That's an understatement. As the November 15 enrollment period looms, Miles isn't the only potential beneficiary trying to get up to snuff. But for anyone 65 or older (or younger people with certain disabilities) or anyone nearing Medicare eligibility, it's important to hunker down and learn the ins and outs of the new benefit, dubbed Medicare Part D. The new perk--the biggest expansion of Medicare benefits since the program's birth in 1965--is likely to save many seniors a chunk of money on prescription drugs. It will vary by individual, but the government estimates the program will cover half the average Medicare recipient's drug costs.
Multiple plans. One of the most bewildering things about the new benefit, which will replace the drug discount cards introduced last year as a stopgap, is that the plan isn't, well, a single plan. The government is subsidizing dozens of private insurers to offer their own plans (many are offering more than one), which have to meet or exceed the federal government's drug benefit standard. The plans will either be stand-alone prescription drug plans (PDP s) to supplement Medicare's existing medical coverage (or a private plan without drug coverage) or will be part of a more comprehensive Medicare private health plan like a health maintenance or preferred provider organization.
When people talk about the new Medicare benefit, what they are really talking about is the basic plan the government has created as a guideline for insurers. Here's the lowdown: In addition to a monthly premium, seniors must pay for the first $250 in annual costs for covered drugs, the standard deductible. When the year's drug costs reach $251, consumers start paying out of pocket 25 percent of the cost and keep paying until their contributions hit $2,250. Then comes the infamous "doughnut hole," in which Part D enrollees are responsible for the entire cost of drugs between $2,251 and $5,100. Above that, catastrophic coverage must kick in, whereby seniors shell out just a small portion (5 percent of the cost or a copay of a few dollars) of their annual drug costs.
Some insurers will offer plans that go above and beyond government-mandated coverage. Some will help cover seniors mired in the doughnut hole, while others will have no deductible. Humana, a large national health insurer, is offering stand-alone plans in almost every state. New Yorkers, for example, can choose from three plans ranging from the Humana PDP Standard plan, with a premium of $4.10 per month and a $250 deductible, to the insurer's more extensive Humana PDP Complete plan, with a premium of $47.93, no deductible, and coverage of drugs during the doughnut hole.
The list of drugs covered by the policy--called a formulary--will also vary by plan and insurer, though it, too, is subject to some basic requirements. A plan must cover at least two drugs in each class (a group of similar drugs addressing a medical problem, like statins for high cholesterol) and most of the drugs in six classes: antidepressants, antipsychotics, anticonvulsants, antiretrovirals to treat HIV and AIDS, immunosuppressants, and cancer drugs. The pharmacies that accept the plans will also vary.
Of course, like most things in life, you get what you pay for: The more generous the plan--the lower the deductible, say, or smaller the copay--the more likely that the plan will carry a higher price tag. Monthly premiums range from nothing to more than $80 (the average is $32), and in every state but Alaska, there will be at least one plan with a premium of less than $20 a month. Seniors with few liquid assets and annual incomes of less than $14,355 will very likely qualify for government subsidies to help make plans more affordable. Indeed, the government estimates that as many as 1 in 3 Medicare recipients will qualify for some kind of aid.
Unspoken details. With all these moving parts, variations on the basic theme are nearly endless. Seniors in some states will have nearly 50 plans to choose from. As TV ads and mailers start touting the plans, it's a good bet that they won't mention important things like coverage gaps. "I'm offering a night of drinks for any staff member who can find any mention of 'doughnut hole' in any marketing material," says Robert Hayes, president of the Medicare Rights Center, a national nonprofit group.
Katharine Roberts, a 79-year-old in Manhattan, has been an activist on healthcare issues for years, but even she is perplexed--and worried. She fears that she'll have to sign up for coverage with the Medicare HMO she's now part of, and possibly not have some of her drugs covered, or switch to a plan that does cover her drugs but be forced to change doctors. "I haven't a clue," she says. "I feel like it's been taken out of my hands."
Experts advise seniors to explore a range of plans from several insurers. "Start the process yourself, and when you've got an idea of what might help, go to an insurance counseling program to double-check," says Bonnie Burns, policy specialist with the nonprofit California Health Advocates in Sacramento. Enlisting help from a friend, family member, or Medicare counselor (800-MEDICARE, or 800-633-4227) is also a good idea. A State Health Insurance Assistance Program, or SHIP, offers one-on-one counseling. A list of programs can be found at shiptalk.org.
Timing is of the essence, as the new coverage takes effect January 1. The first enrollment period begins November 15 and ends May 15, 2006. After that, Medicare-eligible seniors will be able to sign up only during certain times and may face penalties. Part D enrollees who end up disappointed in their plans can change their minds and choose another plan once a year, as the open enrollment period will be November 15 through December 31 each year. Let the search begin.
NOV. 15,2005: The Medicare Part D enrollment period begins. Sign-up runs through May 15, 2006.
With Josh Fischman
This story appears in the November 7, 2005 print edition of U.S. News & World Report.