by Cassie Brill
The good news is that seniors can now get prescription drug coverage through Medicare. The bad news is that figuring out which plan to select is a very confusing process, but a few simple guidelines will make it easier for you to make a decision.
– Step 1 Determine if you are eligible for Medicare prescription drug coverage, which is also called “Medicare Part D.” That is easy because if you are eligible for Medicare you are eligible for Medicare prescription drug coverage. The eligibility period to enroll spans seven months, the three months before you turn 65, the month of your birthday, and three months after your 65th birthday.
If you don’t sign up for a prescription drug plan (PDP) when you first become eligible for Medicare, you may have to pay a penalty if you later change your mind. If you are already enrolled in Medicare and did not sign up for a PDP, your next opportunity to enroll will be from November 15, 2007 to December 31, 2007.
– Step 2 Decide if Medicare Part D is right for you. Most experts agree that you should sign up for a Medicare prescription drug plan, even if you don’t have very many drug expenses now. That way you avoid the 1% premium penalty that you will incur for each month that you delay if you later decide to enroll in a PDP.
Over the short term, a 1% penalty on the national monthly premium average of $27.35 may not seem like much. But, suppose you decide not to sign up for Medicare drug coverage when you turn 65 because you are in good health and don’t need many prescriptions. You save money now, but that 27-cent penalty for each month you delay can balloon in five years into about a $190 a year increase on the premium. You will pay that increased premium for the rest of your life, which will add up to nearly $1,000 if you live just another five years after you finally enroll.
Most seniors find their need for expensive prescriptions goes up as they age. So signing up for Medicare Part D when you first become eligible will probably save you money in the long run.
– Step 3 Decide what Medicare prescription drug plan to choose. This is where it gets confusing. In many areas of the country there are more than 25 PDPs to choose from, plus a lot of Medicare Advantage plans that also offer prescription drug coverage in addition to other health coverage.
With so many different plans that vary by what drugs are covered, deductibles, coinsurance, and pharmacy networks, there are some very important things for you to consider to choose the right plan for you. Important features include:
The Monthly Premium
The monthly premium is what you pay each month for your Medicare prescription drug coverage. There are two ways to go when you choose Medicare Part D – a stand-alone plan or a Medicare Advantage plan that includes a prescription drug plan along with other health care coverage. The cost of the monthly premium depends on what plan you choose.
“Donut Hole” Coverage
Depending on what plan you choose, there may be a “coverage gap” which is often referred to as the “donut hole.” If so, you will have to pay out-of-pocket for your all prescription costs between $2400 and $3,051.25 in 2007. After you meet the out-of-pocket limit, you will only pay a small co-payment which usually amounts to less than $5 for each prescription for the rest of the year.
Some Medicare prescription plans pay for generic but not brand name drugs after you reach the “donut hole.” Premiums may be higher for those plans.
Each plan uses a formulary (a list) that defines exactly what drugs are covered and how much you will have to pay for each prescription. There is a wide variation in the cost of drugs between the different plans and which pharmacies are in the network. The network consists of pharmacies that have been approved by the Medicare prescription drug plan that you choose.
If you use an out-of-network pharmacy, your Medicare Part D plan may not pay for your prescription. If your plan does pay for out-of-network prescriptions, you will likely pay a lot more than the in-network price. So, it is very important that you choose a plan that has a convenient network pharmacy near your home. If you travel a lot, make sure the plan has a network pharmacy in the area where you will be spending part of the year.
The deductible is the annual amount you pay for your prescriptions before your Medicare drug plan will pay anything. The most you will have to pay in the form of a deductible is $265 in 2007. Some plans do not have a deductible.
– A co-payment is a fixed fee that you have to pay each time you get a prescription filled.
– Coinsurance is a percentage amount that you pay for a prescription after you satisfy the deductible. Coinsurance can vary depending on what tier level the drug has been assigned.
The standard co-payment for the Medicare Part D drug benefit is 25%. However, the amount of the co-payment and coinsurance varies depending on the plan .
Most of the Medicare Prescription Drug Plans and Medicare Advantage Plans that provide prescription coverage have drug tiers as part of their formulary. The tiers are usually structured as follows:
Tier 1 Generic drugs.
Tier 2 Preferred brand-name drugs.
Tier 3 Non-preferred brand name drugs.
Your co-payment will be higher for the higher tier drug. Not all drugs are covered, but you can usually request an exception be made if your doctor considers a particular prescribed drug to be medically necessary.
– Step 4 Narrow down your choices by using a tool on the Medicare website called the Prescription Drug Plan Finder.
You can also call the help line at 1-800-633-4227 and ask a Medicare customer representative to help you compare prescription plans.
– Step 5 Enroll