How to Pick a Plan
Lipitor. Nexium. Plavix. Fosamax. You know that slew of pills you take every day? They're going to help drive your choice of a Medicare drug plan
Medicare beneficiaries face one of their biggest decisions ever: whether to sign up for Medicare Part D and, if so, which plan to choose. While everyone's needs are unique, there are some general things each person should consider when beginning the search for a drug plan.
Cost, of course, is a primary factor. But monthly premiums don't tell the whole story, as price tags will vary by the amount of the annual deductible, the copay (a flat rate per prescription) or co-insurance (a percentage of the prescription price), and whether the plan covers the "doughnut hole," the portion of the standard Part D plan policyholders are required to pay. A senior with annual pharmaceutical bills of, say, $3,000, would fall into that hole and might want to consider paying a higher premium for a plan that helps shoulder those costs. Someone with drug costs of $10,000 or so might be better off with a plan that doesn't cover the hole. That way, he or she will reach the threshold for catastrophic coverage quicker.
A plan's formulary (list of covered drugs) is also key. "I take six or seven prescriptions on a daily basis," says Helen Schaefer, a 77-year-old living in Wilmette, Ill., who suffers from arthritis. Getting coverage is especially important for those who are taking an essential and expensive drug that isn't in one of the universally covered categories. "If you take five medications, you need, one way or another, to find a plan that will cover all five," says Amy Bernstein, coordinator of the Health Insurance Information, Counseling, and Assistance Program in New York City. "Then you've got bingo."
People who pop a lot of pills may not find one plan that fills the bill. In that case, a senior might want to enlist a doctor's help. "Have him or her review your drugs," says Marion Aspinall, statewide director of Serving Health Information Needs of Elders, a state program in Massachusetts. Can any of the drugs be switched, or is it crucial to have the name-brand pill? Are generics an option? In short, seniors should determine the flexibility of their medications and pinpoint which drugs should steer the plan decision. Jackie Kosecoff, executive vice president of PacifiCare, one of several nationwide insurers, says some of her company's plans will include such assistance.
So far, the best way to compare plans is via the government's Medicare Prescription Drug Plan Finder (www.medicare.gov) , a Web tool that provides prescription prices for various plans. It isn't perfect--it won't be complete until early this month--but other tools on the site, like one giving a quick rundown of local plans, offer a first step. "Before you start looking at very specific options, it's a good idea to look generally and see what coverage works for you," says Mark McClellan, administrator of the federal Centers for Medicare and Medicaid Services. By the start of the enrollment period, "beneficiaries will definitely have the information they need to make a confident choice," he says.
Another important factor: the ease of getting prescriptions. "Most people are very attached to their particular pharmacy," says Hilary Dalin, Medicare coordinator at the Health Assistance Partnership, a nonprofit in Washington, D.C. Those with limited access to drugstores might want to ask their favorite pharmacist which plans they're going to participate in, and whether they'll be part of the plan's preferred or nonpreferred network (preferred pharmacies offer lower prices). Snowbirds, who may spend half the year in warmer climes, should make sure the pharmacies there are also part of the chosen plan. Mail-order is also an option.
As if the decision about which plan to choose weren't tricky enough, now comes another layer of ground rules. Here are some caveats that various categories of Medicare beneficiaries will want to keep in mind:
You have no drug coverage at all
'Anyone who does not have coverage should seriously be looking at this," says Cheryl Matheis, director of health strategy at AARP. And look now. Enrolling later may carry financial penalties. What if you're one of the fortunate few who haven't taken anything stronger than an aspirin in years? Remember that even if you aren't taking any pricey prescription drugs now, that could change very quickly if you get sick. And you would have to wait until November to sign up for the following year's coverage.
Medicare-eligible seniors with no drug coverage (except those with very low incomes) will also get slapped with a penalty if they delay signing up for a Part D plan after the first enrollment period. The penalty? One percent of the average national monthly premium for every month of delay. If you wait three years past your eligibility date, for example, you'll be paying at least a 36 percent penalty. If the average premium is $40 a month, you'll be paying more than $54. And you'll have to pay that penalty for the entire time you're on Medicare. That's why Medicare administrators are reminding people that this is an insurance program, much like buying car insurance before a fender bender. You'll want to be insured against high drug costs before they strike.
One strategy is to sign up for an inexpensive plan without bells and whistles. You can always change plans later. You won't face a penalty, but you can only do it during two specific times of the year.
You have drug coverage
Medicare beneficiaries who already have prescription drug coverage through employer or union retiree benefits may be tempted to tune out Part D. Don't. You may not end up swapping plans, but you should verify that your current coverage is at least as good as the new Medicare benefit. The official term for that is "creditable coverage," and it's the responsibility of your employer or plan sponsor to tell you whether the coverage meets that standard. Sit tight until you get that notification, which is supposed to be mailed out by mid-November. "We are telling people who have any type of employer-sponsored coverage to do nothing until they find out what that coverage will do," says Bonnie Burns, a policy specialist with California Health Advocates, a nonprofit group in Sacramento.
Under no circumstances should you sign up for a plan, just in case. Enrolling in a Part D plan will automatically boot you off your existing plan, and depending on the plan, you may not be able to get back on it. In a worst-case scenario, you might lose all your medical benefits, not just your drug plan. If your coverage meets the creditable threshold, there's no rush to decide anyway. Those who sign up at a later date won't face any penalties as long as they don't go without coverage for more than two months.
Even if your current drug plan meets the minimum standard, you might be able to find a Part D plan that is better. It can't hurt to take a look at some of the plans available in your area and compare them with your current coverage and out-of-pocket costs. Again, as long as your plan is creditable, you can do this at your leisure. Try asking friends in six months or a year and seeing how they like their plans.
For those covered by Veterans Affairs or Federal Employee Health Benefits plans, your coverage won't be affected and you'll not likely need to enroll in the new plan because your coverage is already comprehensive. If you already have drug coverage through a Medicare private health plan like an HMO, you can stay in that plan if the coverage meets your needs.
You have a Medigap policy
If you have Medigap, a supplemental Medicare insurance policy, and it covers drug costs, you have choices. You can keep your plan, though in most cases it won't meet the government creditable hurdle. Many people may have to pay a penalty if they enroll in Part D later on. Other options: Keep your Medigap policy and cancel only the drug benefit, then sign up for Part D. You can also leave your plan and join a Medicare private health plan that includes Medicare drug coverage. Those with Medigap should receive a letter this fall about what the new drug benefit means for their existing plans.
You receive state assistance
Some seniors receive help through a state pharmaceutical assistance program, or SPAP, like EPIC in New York or Circuit Breaker in Illinois. How those programs mesh with Medicare Part D is up to individual states. Some may opt to discontinue their programs, while others will work with the primary Medicare benefit (filling in gaps in coverage, for example) or continue to offer existing coverage. If you're part of one of these programs, your state should notify you of any change in benefits.
You have a very low income
Seniors with incomes below 150 percent of the poverty level and few liquid assets should definitely sign up for a plan, say consumer advocates. That's because these folks qualify for so-called extra help, which means they will have low or nonexistent premiums and deductibles and lower copays, though they're often restricted to basic plans. Trouble is, tapping into the extra help isn't effortless. Those on some government aid programs like SSI automatically qualify, and if they don't sign up for a drug plan by May 15, 2006, they'll be randomly assigned one next spring.
Others can apply for the extra help (remember, this is separate from signing up for a Part D plan) with the Social Security Administration (ssa.gov or 800-772-1213) or their local Medicaid office (cms.hhs.gov/medicaid/consumer.asp) . SSA, in fact, sent out about 17 million letters this year to those it deemed eligible for extra help and has received more than 3 million responses, McClellan says. The letter might have been misunderstood, as were some of the responses. "Some people applied for extra help, got a mailing that said they weren't eligible, and assumed that meant they weren't eligible for the benefit," says Laura Caruso, director of medical health policy at the Gay Men's Health Crisis in New York.
Low-income seniors need to be proactive. Save every piece of government mail you receive, and contact a State Health Insurance Assistance Program (SHIP) or a community group, which can provide information on both the extra help and Part D plan choice. A portion of income and liquid assets like a home are excluded from the government cap, so even if your income is more than the cap, you may qualify for the extra help.
You have Medicaid
The group that has consumer advocates most worried consists of "dual eligibles," people who are eligible for both Medicare and Medicaid. Medicaid coverage varies from state to state but is quite comprehensive. But dual eligibles are being funneled into the new Medicare benefit, which doesn't have the same protections. And this change will happen literally overnight. "The faucet's off December 31," says Robert Hayes, president of the Medicare Rights Center, a national nonprofit. "And the issue is whether Medicare coverage will be as good as Medicaid."
Dual eligibles will have very low copays and low or no premiums at all. Depending on the state, Medicaid may step in to pick up other out-of-pocket costs like drugs not covered by the plan. Dual eligibles will be automatically assigned a plan this fall if they don't sign up, and there's no guarantee their specific drugs will be covered. Advocates worry that on January 1, there will be pandemonium about the switchover, and some people will lack necessary drugs. Caruso says that dual eligibles need to understand that Medicare will be their primary coverage and Medicaid or other assistance programs, like AIDS Drug Assistance Programs (ADAP s), will be secondary. "Do they know to take out their Medicaid and ADAP cards if Medicare Part D is denied?" she wonders.
Some people who have studied Part D have already decided to stick with what they've got. Jim and Jackie Shelton are keeping their supplemental insurance policy, because it helps make up the difference between their medical costs and what Medicare covers--and it also pays for some of their prescription drug expenses. "They negotiate a pretty substantial discount from thousands of pharmacies, national chains, and local ones," says Jim, a retired printing industry executive in Pennington Gap, Va. That's important, since Jim has diabetes and prostate problems and Jackie suffers from arthritis. He doesn't think the Medicare drug plan would be cost-effective for them.
While all the ins and outs of this new benefit are confounding, experts urge seniors not to become overwhelmed. "We don't want people to agonize over making the perfect decision," says AARP's Matheis. "A number of different plans will meet the person's need." A lot of choice can go a long way.
JAN. 1, 2006
The new Medicare Part D prescription drug coverage takes effect.
MAY 15, 2006
The first Medicare Part D enrollment period ends. Later sign-up may incur a penalty.
With Josh Fischman
This story appears in the November 7, 2005 print edition of U.S. News & World Report.