The Straight Facts

Here's what you need to know -- whether you're on Medicare yourself or are helping your parents with their decisions.

What's changing?

This will be the first time that Medicare provides coverage for most prescription drugs. Medicare will regulate the coverage, but private insurance companies will administer the individual policies. You'll be able to buy either a standalone Part D policy (just drug coverage) or sign up for a Medicare HMO (called Medicare Advantage) that includes prescription-drug coverage. Participation is voluntary. top

When can I sign up?

Medicare beneficiaries can sign up for the plan anytime between Nov. 15, 2005, and May 15, 2006. But it would be best to sign up by the end of the year so that your coverage will begin as soon as the plan launches on Jan. 1. top

What if I miss the deadline?

If you already qualify for Medicare and sign up after May 15, 2006, you may have to pay a penalty -- 1% of the average national premium for every month you delay. And you would have to wait for the next Part D enrollment period -- each Nov. 15 to Dec. 31.

So, for example, let's say you take a wait-and-see approach now, but five years from now require an expensive prescription and decide to sign up. If you qualify for a policy with a $50 monthly premium and the national premium average is, say, $60, then you would have to pay $89 per month -- $50 plus a $39 penalty, or 0.6 times 65 months (if you sign up in November 2011).

One exception to the penalty is switching to Part D coverage from another plan that is considered at least as good as Medicare's (called "creditable coverage" in government jargon). For example, say you don't switch now because you want to keep your retiree drug benefits from your former employer, which is deemed creditable by Medicare. If your former employer later trims the benefit or halts it altogether, you would not be penalized for making the jump to Medicare. top

What's covered and what will it cost?

The coverage and cost will vary from company to company, but the plans have all been approved by the Centers for Medicare & Medicaid Services.

The standard plan has a $250 deductible, then will cover 75% of the next $2,000 of your drug costs. After that, you pay up to $2,850 in additional drug costs yourself. Medicare pays up to 95% of any drug costs above that.

Some plans will fill in those coverage gaps in return for a higher premium.

The average premium for the standard plan is about $32 per month, although some are charging less than $20. top

Should I sign up?

Whether you should sign up for the plan depends on the type of coverage you have now.

If you have employee or retiree benefits considered better than Part D, then that's generally your best bet. You should receive a notice from your employer explaining how the coverage might change next year and how it compares to Medicare's plan -- the official "creditable coverage" determination made by an actuary.

Remember, you won't get penalized if your employer lowers your benefits later and you switch to Medicare's plan.

If you don't have prescription coverage now or if your employee coverage isn't considered as good as Medicare's plan, consider signing up for the Medicare plan even if you don't have many drug costs now. That way you'll avoid the penalty, and it's likely that you'll take more drugs as you get older. You may want to start with a low-cost basic policy, then switch to more robust coverage later (you'll generally be able to switch once a year).

If you have Medigap drug coverage -- Medicare supplement plans H, I or J -- then it's a good idea to sign up for Part D, too. The government subsidizes Part D, so you should get more drug coverage at a lower cost. Also, Medigap drug plans aren't considered "creditable coverage." If you change your mind later, you'll pay the penalty.

If you have H, I or J, drop their prescription drug coverages to lower your cost (which could save as much as $80 to $110 per month, says Jim Pogue, president of Insurance Solutions for UnitedHealth Group, one of the largest Medigap companies). Or switch to another Medigap plan.

Another option: Take another look at Medicare HMOs (Medicare Advantage) plans. After years of leaving the business and raising premiums, many Medicare HMOs are now expanding their business and lowering their costs, thanks to more money from the government.

On the flip side, if you currently have a Medicare HMO primarily for the drug benefits, you now have more options. For example, you could sign up for a standalone Part D plan and supplement it with another Medigap policy. top

What if I don't like my insurer? Can I switch plans?

Yes, you'll be able to change your plan once a year. top

What should I look for in a Part D policy?

People in many regions will have more than 20 plans to choose from. Compare plans based on premiums and coverage. Some key questions to ask:

  • Are the drugs I use covered?
  • If the plan charges different amounts for different drugs (often three tiers of prices), which tiers are my drugs in? Consider meeting with your pharmacist or doctor to review your medications and see if you can switch to drugs that are less expensive under the plans you're considering.
  • Am I willing to pay extra to use a wider range of drugs at a level price?
  • What are my drug costs? Do you have few drug costs and want the lowest premium, or do you have more expensive drugs and want to pay extra to fill the coverage gaps?
  • Is my local pharmacist covered by the plan?
  • Does the company have a good customer service record? top

Where can I find more help?

Call Medicare Oklahoma at (405)607-0058 to talk to a trained counselor, or attend one of our free seminars.

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