Medicare's Prescription Drug Plans
What does Part D means for you?
Medicare's prescription drug plans (Part D) began January 1, 2006. Everyone covered by Medicare is eligible, regardless of income and resources, health status, or current prescription expenses. Most prescription drugs are covered.
For people already on Medicare, the open enrollment period for 2008 begins on November 15th and ends December 31, 2007. The next open enrollment period begins November 15, 2008 and ends on December 31, 2008.
If you are NOT YET on Medicare, or if you just turned 65, you can apply for a Part D prescription drug benefit at any time beginning 3 months before the month of your 65th birthday, or you can delay your decision for up to 3 months after the month of your 65th birthday. For example, if your 65th birthday is August 20th, you can apply for Part D at any time from May 1st to November 30th without any penalty.
Medicare's Prescription Drug Plans are provided by several insurance companies, HMOs, and other health-related companies. To receive approval from the federal government, each prescription drug plan must meet the following minimum requirements. (Note: The dollar amounts are increased on January 1st every year based on inflation.)
Premium. The average Part D premium is approximately $25 per month. This premium is in addition to the Part B premium you now pay (for most people, it can be automatically deducted from your Social Security check each month). Your actual premium may be higher or lower depending on where you live and the plan you select.
Annual Deductible. Your annual deductible under Part D will be no more than $275 in 2008. Actual deductibles vary from plan-to-plan and from company-to-company. Some plans have no deductible.
Coinsurance. Medicare will pay approximately 75% of the cost of your prescriptions after your annual deductible. You will pay the other 25% out-of-pocket. That's your coinsurance payment, often referred to as your "co-pay." This arrangement will continue until a total of $2,510 (your share, including your annual deductible, plus Medicare's share) has been spent for your prescriptions during 2008.
Coverage Gap (the infamous "doughnut hole"). After the total cost of your prescription drugs reaches $2,510 in 2008, Medicare pays nothing more during that year until you have spent a total of $4,050 out of your own pocket during 2008. The $4,050 includes your annual deductible and coinsurance payments.
Important Note #1: Your monthly premiums for Plan D are not counted toward your out-of-pocket costs; they are in addition to the money you spend out-of-pocket for your prescriptions. Also, you must continue to pay your premiums while you are in the doughnut hole even though you receive no benefits during that time.
Catastrophic Protection. After you have spent $4,050 during 2008, Medicare's catastrophic protection will kick in for the rest of the year. During this time, your co-pay will be $5 per prescription, or 5% of your prescription's cost, whichever is higher.
How does this all work? Say, for example, that your prescription drug costs (Medicare's share plus your share) average $600 a month, your annual deductible is $275, and your coinsurance amount averages 25%. Here how your out-of-pocket costs work out, month-by-month, for 2008.
Important Note #2: The $4,050 out-of-pocket expense before Medicare's catastrophic coverage begins is a huge amount for most seniors. If you enter the doughnut hole, you may be tempted to use another company's discount prescription drug card, or to buy your prescriptions from Canadian pharmacies.
This would be a costly mistake. The only prescription drug expenses that Medicare counts toward the $4,050 doughnut hole are for prescriptions purchased through your Part D prescription drug plan. Anything that you purchase through another company's discount prescription card or from a Canadian pharmacy won't count.
It can pay to shop around. A prescription drug plan may offer options with offer benefits such as lower deductibles, lower coinsurance amounts, and/or full or partial coverage of the donut hole. Pick the plan that's best for you. You don't have to use the same HMO or Medicare Supplement insurance company that you use for your other Medicare benefits.
Low-Income Assistance. People eligible for both Medicare and Medicaid will pay no premium, no deductible, and have no gap in coverage. Their copayment can be as low as $1 per prescription for generic drugs, and as low as $3 per prescription for brand name drugs. Other subsidies will be available for low-income seniors who are not eligible for Medicaid.
There are several potentially nasty surprises you need to be aware of:
Nasty Surprise #1 "inflation increases"
The $275 annual deductible, $25 average monthly premium and other coverage amounts described above apply only to 2008. As indicated above, these amounts are adjusted for inflation every year on January 1st. However, copayment amounts for people who are eligible for low-income assistance will not be adjusted for inflation.
Nasty Surprise #2 "separate enrollment"
Most people must enroll separately for the Plan D prescription drug benefit if you wish to participate, even if you are already enrolled in Medicare Part A and B (the government loves paperwork!).
Nasty Surprise #3 "freedom of choice"
If you have better prescription drug coverage from your union or employer, or if you qualify for coverage from TRICARE, the VA, or the Federal Employee Health Benefits Program, you do not have to enroll in Medicare's new Part D prescription drug plan until you are no longer eligible to participate in one of those plans.
For everyone else age 65 or older, Medicare's Part D prescription drug plan is voluntary you don't have to enroll if you don't want to. For many seniors, it might cost more than you could expect to receive in benefits, especially if you are healthy. Or, you might put off enrolling because you simply can't afford it.
But, if you delay enrolling for more than 3 months after you first become eligible, you will be penalized for the rest of your life! The penalty will permanently increase your premium 1% for every month you delay. For example, if you delay 10 months, you will pay 10% more than almost everyone else. If you delay 2 years, your premium will be nearly 25% higher.
How to Enroll
If you are already on Medicare, you can join a plan between November 15th and December 31st in the following ways:
By paper application. Contact the company that offers the drug plan you want and ask for an application. After you fill out the form, mail or fax it back to the company.
On the plan's website. Visit the drug plan company's website. You may be able to join online.
On Medicare's website. You can also join a drug plan at www.Medicare.gov by using Medicare's online enrollment center. You can find more information about all of the plans that are available in your area by using Medicare's online tool, the Medicare Prescription Drug Plan Finder.
By calling Medicare. Call 1-800-MEDICARE (1-800-633-4227) and talk to a customer service representative. TTY users should call 1-877-486-2048.
For more information, including a description of people who do not have to enroll in the new Part D benefit, visit the Medicare.gov website.
If you are NOT YET on Medicare, you can apply for the new Part D prescription drug benefit at any time beginning 3 months before the month of your 65th birthday, or you can delay your decision for up to 3 months after the month of your 65th birthday. For example, if your 65th birthday is August 20th, you can apply for Part D at any time from May 1st to November 30th without any penalty.
For more information about Medicare, including how you can contact your local State Health Insurance Assistance Program (SHIP) for more information, visit Medicare's Web site, or call Medicare toll-free at 1-800-633-4227.
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