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Medicare Part D Update
December 19, 2005:
:: Should I just select the plan with the lowest premium?
:: How long should I wait before enrolling?
:: Should I choose a plan that has an initial $250 deductible?
:: Is Co-Insurance less expensive than Co-Payment?
:: When do I need Donut Hole coverage?
:: What coverage does my existing medical plan provide?
:: I am happy with my plan and it is "creditable" -- what should I do?
:: Warning - Medicaid Auto-Enrollment may jeopardize other coverage.
:: Should the Pharmacy List play a large role in my plan selection?
:: How to live with the Medicare Part D plan that you have selected.
:: I have change my mind - can I choose again?
:: What to do when you have not received a Welcome Packet
:: What can you expect in the future?
Should I just select the plan with the lowest premium?
In general, the goal of most Medicare recipients is to simply find a plan that most affordably covers their annual Medication costs - which includes the monthly premium.
For many people with low or no prescription costs, the monthly Medicare Part D premium cost will be the largest cost factor - and therefore, weigh heavily in the plan selection process.
For people who have larger monthly prescription drug needs, the plan's monthly premium cost may play a smaller role. In such a case, the monthly costs of your prescription drugs will be much more important factor. For instance, if one of your medications is not covered by a particular plan (or differently covered), the monthly cost difference between the plans could vary into the $100s - whereas the variation between plan premiums may only be $20 to $40 dollars per month.
Bottom line - do your math before enrolling. Check to see how much you will pay for your medications on each plan. The difference between co-insurance and co-payments can also be significant.
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How long should I wait before enrolling?
If you need coverage immediately (starting January 2006), you should enroll before the end of 2005 (preferably before December 27, 2005 to avoid the last minute rush). If you have no prescription drug needs, you may wish to delay enrollment until later in 2006 (but before May 15, 2006 to avoid any possibilities of a premium penalty) - in this way, you may save the cost of a few months premium.
Please remember: there are no "pre-existing condition" or health considerations associated with the Medicare Part D program, so during the open enrollment period, you cannot be denied Medicare Part D coverage.
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Should I choose a plan that has an initial $250 deductible?
From what we have noticed, the paying of a $250 deductible appears to be almost a matter of personal preference rather than economics. We have spoken with some people who wish to have no deductible (they want "first dollar" coverage), even when the total annual estimated plan costs would be a bit more than a similar plan with a standard $250 deductible. Other people are looking at the Medicare Part D plans as a strictly economic exercise and choose a plan only on the basis of estimated costs, rather than convenience or comfort.
Objectively, perhaps it is best to begin searching for a plan that most affordably covers your existing medications (and has a large enough plan Formulary to cover next year's potential medications) and then consider your feelings about the initial $250 deductible.
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Is Co-Insurance less expensive than Co-Payment?
The out of pocket cost differences between Co-Insurance and Co-Payment will depend on the medications that you are using. Before we look at a few examples, let us review the two "cost-sharing" options:
- Co-Insurance means that you will be responsible for a certain percent of the prescription costs (usually 25%) and the insurance company will responsible for a certain percent of the prescription cost (usually 75%). So for a covered medication costing $100 a month retail - you would pay $25 a month.
- Co-Payment refers to a fixed dollar amount assigned to a logical grouping or tier of medications, for instance, a tier may include either generics or preferred brand name medications. Companies group their covered medications into these logical classes or tiers within the Medicare Part D formulary or drug guide. This logical grouping of medication may vary from company to company. Therefore, a medication that is grouped as a Tier 2 medication on one Medicare Part D plan, may be grouped as a Tier 3 medication in another plan. Naturally, the costs of the different Co-Pays also varies from plan to plan. For instance, the Co-Pays for a Generic Medication Tier may vary from $0 to perhaps $7+, depending on the plan.
Here are a few examples of how the two "cost-sharing" options could compare:
Example 1. Lipitor: may have a retail cost of $70
Co-Insurance (25%) - you pay $17.50
Co-Payment (Preferred Brand-Name Tier) - you pay $20 to $30 (depending on the plan)
Example 2. Cellcept: may have a retail cost of $160
Co-Insurance (25%) - you pay $40
Co-Payment (Preferred Brand-Name Tier) - you pay $20 to $30 (depending on the plan)
Example 3. Premarin: may have a retail cost of $32
Co-Insurance (25%) - you pay $8
Co-Payment (Preferred Brand-Name Tier) - you pay $20 to $30 (depending on the plan)
Example 4. Linsinopril: may have a retail cost of $7.52
Co-Insurance (25%) - you pay $1.88
Co-Payment (Generic Tier) - you pay $0 to $10 (depending on the plan)
As can be seen by these four examples, although the retail price may vary, the Co-Payment for this class or tier of medication remains the same and the Co-Insurance figure fluctuates as a percentage of the retail price.
Therefore, the most affordable alternative between Co-Payment and Co-Insurance plans will depend on the retail costs of medication that you are using and the placement of those medications within the tiers of a plan's formulary.
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When do I need Donut Hole coverage?
The Donut Hole or Coverage Gap is the portion of the Medicare Part D plan where, after a certain point, the Medicare beneficiary is 100% responsible for the costs of the medication.
The coverage gap starts when the retail cost of the medications reaches $2,250 and continues until the retail cost of the medication reaches $5,100 (which is when you have spent $3,600 in out of pocket costs for your medications). Please Note: The monthly retail cost of your medication may be available from your local pharmacist.
You can, therefore, calculate whether and when you go into the Coverage Gap by simply working with your estimated average monthly expenses.
For example, if you spend approximately $300 per month retail, you could expect to enter the Donut Hole in mid-August: $2,250 / $300 = 7.5 months into the calendar year or mid-August.
You will therefore have 4.5 Months (12 months -- 7.5 months ) during which you would be responsible for 100% of your medication costs - that is you will pay the full $300 per month yourself.
To determine if donut whole coverage is worth while, you need to take a look at the extra premium paid for the donut hole coverage as compared to the money saved in medication costs. (Please also note the many plans only cover generics in the donut hole!)
If the monthly premium costs of a Medicare Part D plan with Donut Hole coverage costs $30 more per month than a Medicare Part D plan without Donut Hole coverage (or an additional $360 more per year), and your monthly medications costs using the plan would be $100 co-pay per month instead of the $300 in retail costs, the calculation would be as follows.
You would be saving $200 a month on your medication costs ($300 - $100), for the 4.5 months that you would be in the Donut Hole for a total savings of $900 - which is in excess of the additional $360 premium cost for Donut Hole coverage. Therefore, in our example, the prescription drug cost savings will justify the additional monthly premiums.
Please note: in some cases, you will actually come out of the Donut Hole into the area of "Catastrophic Coverage". For example, if you have retail medication costs of $600 per month you go into the Donut Hole in late-April ($2,250 / $600 = 3.75) Month and pay 100% of your medication costs until you come out of the Donut Hole in mid-September ($5,100 / $600 = 8.5). The remainder of the year (from mid-September through December) you will fall under catastrophic coverage.
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What coverage does my existing medical plan provide?
Many people have written us asking whether they need a Medicare Part D plan or if they can stay with their existing prescription drug coverage. Unfortunately, we cannot answer such a question without knowing more about their existing coverage. For example, some existing plans may offer affordable and creditable prescription drug coverage. Other existing plans may be discontinuing their prescription drug coverage. Still other plans may actually NOT work together with a Medicare Part d plan.
The important point is: please contact your existing medical or health plan administrator for specific details about your existing coverage and whether you need a Medicare Part D plan - perhaps, they can even offer you an affordable and practical alternative themselves.
Note: "Creditable coverage" is used to define a prescription drug plan that is just as good as the CMS (Centers for Medicare and Medicaid's) proposed model Medicare Part D Plan which is used in our online cost estimation examples:
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:: Click here to use our CMS Standard Plan Out-of-Pocket Cost Calculator
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I am happy with my plan and it is "creditable" -- what should I do?
As noted in earlier Newsletters, you may wish to simply stay with your current plan. Because your plan is creditable, you can always decide later to join a Medicare Part D plan without paying an increased premium. During Next year's open enrollment period, November 15, 2006 - December 31, 2006, you may want to reevaluate your options and decide then which alternative is economically and practically most advantageous.
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Warning - Medicaid Auto-Enrollment may jeopardize other coverage.
As we had mentioned before, enrolling in a Medicare Part D may mean that you may jeopardize existing coverage from your existing employer's health plan. Some existing plans will simply "dis-enroll" a person from the existing health plan coverage when they enroll in a Medicare Part D plan. All Medicare beneficiaries must be aware of this mechanism - however, the possibility of losing existing benefits is extremely important to Medicaid beneficiaries who may be automatically and randomly enrolled into a Medicare Part D plan - thus possibly ending their existing coverage under a previous employer's plan. If you or someone you know is on Medicaid and enrolled in an existing Medical plan - please be sure that the automatically granted Medicare Part D plan does not eliminate another form of coverage - check with your plan administrator.
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Should the Pharmacy List play a large role in my plan selection?
Most national Medicare Part D plans have a relatively large network of participating pharmacies ranging from 40,000 to 50,000+ locations. So, for most Medicare Part D participants, finding a participating pharmacy will not be a challenge.
However, we have spoken with people who are choosing a Medicare Part D plan based solely on a single participating pharmacy. One person noted that she lived in a rather remote area and there was truly only one pharmacy to be found nearby. She was also not particularly interested in receiving prescription via mail order. In this case, she had to consider a Medicare Part D plan that, not only most affordably covered her medications, but included this local pharmacy.
If you find that you are in such a situation, you may wish to consider asking your local pharmacy if they would join into a particular Medicare Part D plan's pharmacy network.
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How to live with the Medicare Part D plan that you have selected.
Perhaps one of the greatest challenges - after selecting the "optimal" Medicare Part D plan - is to prepare or budget for the use of the plan. Many Seniors appear to have developed a budget with respect to their medication costs - allocating a certain portion each month for prescription costs. For some people, the new Medicare Part D may take additional planning because the prescription costs (depending on the plan) may vary greatly from month, simply due to their choice of Medicare Part D coverage.
For instance, let us assume that someone has selected a Medicare Part D plan with a $15 per month premium, a $250 deductible and 25% Co-Insurance (you pay 25% of the retail price of drugs) and their average monthly retail cost of medication is also $250. Their monthly costs would be as follows:
January: $15 (premium) + $250 (medication costs toward deductible) = $265 total costs
Feb-Sept: $15 (premium) + $65 (25% co-insurance) = $80 total monthly costs
Oct-Dec: $15 (premium) + $250 (medical costs in Donut Hole) = $265 total monthly costs.
This person would meet their deductible in the first month of coverage (January). Starting in February, this person would pay 25% of $250 or $65 per month for medication. This Co-Insurance coverage would continue until the Donut Hole is reached: in Month 9 ($2,250 / $250) or the end of September. Starting in October and continuing through December, the Medicare beneficiary will be again responsible for 100% of their medication costs or $250 per month.
Therefore, this person must be prepared for an initial period (January) where they would pay 100% of their own medication - a second period where they received Co-Insurance coverage - and a third period where they must once again pay 100% of their medication costs. In addition, this person would also be responsible for the monthly premiums for this Medicare Part D plan.
Our suggestion is to plan out your 2006 prescription drug budget now so that you can plan for highs and lows in your prescription drug spending. Once again the key is to eliminate or, at least minimize, the surprises in 2006.
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I have change my mind - can I choose again?
During this initial open enrollment period, you will be able to change your mind once and enroll in a different Medicare Part D plan. How does this work? If you have questions please feel free to contact the Medicare Part D plan's administration. In general, if you are already enrolled in a plan and wish to enroll in another plan, you can simply complete another enrollment form. The Medicare Part D plan that you enroll in second (dated last) will be your plan for 2006.
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What to do when you have not received a Welcome Packet
We have heard from many people who have enrolled relatively late (or are still in the enrollment process) and wondering what to do if their Proof of Coverage (or Medicare Part D plan Card or Welcome Packet) does not arrive before the beginning of January 2006.
As could be expected, the procedure may vary slightly from plan to plan. In general, those Medicare Part D beneficiaries who have not received any Medicare Part D card should contact the company's customer service center to determine how to use the prescription drug benefits before receiving a plan card. Some plans that we have spoken with will provide the caller with their ID number which they can then use when purchasing medications. Other plans will enter the person's information into the system directly so that they could immediately have use of their prescription drug coverage. Alternatively, Medicare Part D beneficiaries may also be able to purchase the medications without a discount and seek reimbursement from their Medicare Part D plan once the person's enrollment information is on file.
Again, the key is to contact your plan to determine the proper procedure for purchasing prescription medications while awaiting the arrival of a Welcome Packet or Medicare Part D card.
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Last updated on: 07/18/2008
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