Making sense of the new drug plan

Which one should I pick?

Millions of people are asking that question as they consider Medicare’s new prescription drug plan, which rolls out Jan. 1. The voluntary program -- also known as Medicare Part D -- will allow seniors and the disabled who are covered under the Medicare program to get subsidized drug coverage.

Medicare beneficiaries have been bombarded with mail, phone calls and advertisements over the last several weeks from plans eager to sign them up. Enrollment starts Nov 15.

By now, they’ve probably realized it’s more confusing than anything else.

California’s 4.3 million Medicare beneficiaries have more than 60 plans to choose from -- each with its own premium, lists of covered drugs and participating pharmacies. The Bush administration estimates the coverage (which will cost the federal government at least $720 billion during the first 10 years) will save beneficiaries an average of $1,300 a year. But in fact, the savings can vary wildly depending on factors such as what kind of drug coverage someone currently has or to how much they spend on prescription drugs.

A person who spends $1,500 a year on prescriptions, for example, can save about $550 on the new plan. But another person who spends just $500 may actually pay $198 more out of pocket because of premiums and drug co-payments.

How to make a choice among the blizzard of plans? “You don’t have to understand every detail and every option,” said Dr. Mark McClellan, administrator of the federal Medicare agency. “People just need to focus on what they want.”

Following are some highlights and things to consider about the new drug plan.

Eligibility

One of the biggest misconceptions about the new drug benefit is that it’s only for low-income seniors. In fact, all Medicare beneficiaries are eligible. People won’t be automatically enrolled, however. Enrollees have to choose a plan and sign up through a private insurer or with Medicare, either on the agency’s phone or its website.

Deciding if it’s worth it

The plans make most sense for people who are already spending a lot of money on prescription drugs, and for low-income seniors, who may be eligible for financial assistance with premiums and drug co-payments.

On average, Californians will pay premiums of about $25 a month for the first year, although the actual costs for each plan can vary considerably depending on what’s offered. This year, monthly premiums vary from nothing to as high as $60 a month, although cheaper plans usually have much leaner coverage, with higher deductibles and fewer covered drugs.

Which plan to pick

This essentially boils down to what prescriptions you use and how you like to pay for them, and the kind of medical coverage you have.

Plans can look very different, because the government is allowing insurers to structure them as they want. They merely have to be “actuarially equivalent” to each other -- they must, in other words, provide the same benefit in the end. For most people, the first $250 is not covered, but the next $2,000 is -- except for any co-payments you may have to make. Following this, you will have to pay the next $1,350: Experts refer to this as a “doughnut hole” in coverage. But after that, 95% of drugs are covered, which is meant to help people with catastrophically high drug costs in any given year.

There are two classes of plans among the dozens of offerings. The one you’ll pick will depend on whether you’re buying just a drug plan or adding it to your current managed care plan.

Seniors who choose to stay in Medicare’s traditional fee-for-service plan can only buy what’s called a stand-alone prescription drug plan. Those who are in Medicare Advantage HMO plans -- about one-fourth of all beneficiaries -- will now get the drug benefit added to their current plan. Whether the premium will rise, and by how much, depends on the plan.

“People need to sit down, take a breath and figure out what is best for them,” said Bonnie Burns, Medicare policy and training specialist for California Health Advocates, a nonprofit Medicare education and advocacy group.

Employer drug coverage:

keep it or not

About 30% of Medicare recipients have drug coverage through a former employer, which is often better than the coverage the government is offering. Think hard before dumping that coverage, experts say. “Retirees who cancel their employer coverage and take the new federal benefit may not be able to go back if they later realize they’ve made a mistake,” said Tricia Neuman, director of the Medicare Policy Project at the Henry J. Kaiser Family Foundation.

Which drugs are

covered, which aren’t

Don’t automatically assume that the medications you currently take will be covered by a new plan. Each insurer will have its own list of covered drugs, known as a formulary. If you take lots of medications -- especially if they’re expensive ones -- you’ll want to carefully go over each plan and make sure those drugs are on the list. Check if your pharmacy is covered too. Something else to consider: Several plans offer discounts for people who use generic brands.

If a drug plan decides to remove a drug you use from its formulary in the future, they must notify you 60 days in advance. You will be able to switch your plan, but you may have to wait till the next enrollment period.

When to sign up

You can sign up any time from Nov. 15 through May 15, 2006. If you sign up after that, you may face a penalty of 1% a month until you enroll. That also applies to people who turn 65 after May and delay signing up. For example, the premium for someone who is 65 or older who waits four years may be 48% higher for the rest of his or her life. Remember: This is an insurance plan, and it may make sense to sign up now. Even someone who doesn’t use a lot of prescriptions today may come to use more as they get older. You can switch your plan once a year.

If the new drug plan

is too costly

About one-third of enrollees will qualify for some type of financial assistance. If your annual income is less than about $14,000 (or $19,000 per couple) and you have less than $11,500 in assets ($23,000 per couple), not including your home or car, you are eligible for additional assistance. The amount will vary depending on your exact situation. If you think you qualify, you should contact your local Social Security office or the Medi-Cal program.

Weighing the plans

against Medigap

Medigap is private insurance that seniors can purchase to pay for costs Medicare doesn’t cover, which up until now has included prescription drugs. But because the government is heavily subsidizing the new Medicare drug plan and doesn’t subsidize Medigap plans, Medigap will prove more costly for most people, and they should switch.

Medi-Cal: how it fits in

About one-fourth of all Medicare beneficiaries also receive assistance from the state’s Medi-Cal system, which has paid for their drug benefits up until now. On Jan. 1, they will be automatically assigned to one of the new Medicare drug plans. These people (known as dual eligibles) will not be required to pay premiums or deductibles, but the new plans may not cover all their medications. They should ask their new insurers about what drugs are on their formularies.

If someone doesn’t like the plan they’re automatically enrolled in, they can switch by contacting their plan. Medi-Cal beneficiaries can switch plans as many times a year as they’d like.

Demise of the drug

discount card

In 2003, after Congress passed legislation for the new drug benefit, seniors were given temporary discount drug cards to carry them over until the plan began. You can continue to use your Medicare-approved drug discount card until you enroll in a Part D plan. But whether you sign up or not, on May 15, 2006, the card will stop working.

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Where to get more information

Starting Nov. 15, seniors can begin signing up for Medicare’s new prescription drug benefit, which starts Jan. 1. But there are many plans to choose from and factors to consider before enrolling. Here are some resources to help you better understand whether the new drug plan is good for you.

* Medicare has experts available to answer questions over the phone at (800) MEDICARE. Or you can get information from the agency’s website, www.medicare.gov.

* Medicare Access for Patients RX, a coalition that helps beneficiaries with special needs, has launched a website with information on the government’s new drug plan. Go to www.maprx.info.

* Each county in California has a Health Insurance Counseling and Advocacy Program (HICAP) office that provides free one-on-one Medicare counseling. (You can even request that they come to your house.) Go to www.calmedicare.org, or locally call the Center for Health Care Rights at (800) 434-0222.

* The Kaiser Family Foundation, a healthcare policy group based in Menlo Park, Calif., offers information about the Medicare drug plan on its website, including a calculator to find out how much money the new plan will cost you. Go to www.kff.org/medicare.

* The Medicare Rights Center has a hotline for people who have questions about the new drug benefit and can also help with complaints that come up after you join. Go to www.medicarerights.org.