First be aware of some deadlines
Deadline for application is December 31, 2005 so that you can have your choice of program in effect for January 1, 2006
Deadline: May 15, 2006 to make a decision without a penalty for those who are eligible to enroll. After that date, there is a 1% per month of the premium as a penalty for every month you delay. For instance if you delay ten months, you would pay 10% more for your premium.
If you wait until after May 15th, your program starts January 2007.
Some questions to ask yourself:
"Do I want help paying for medicines?" "Do I need help paying for medicines?"
If the answer is yes, then continue.
If the answer is no, you can stop here. This is a voluntary program. You do not have to sign up. If you are eligible, but decide to sign up at some later time, you will be subject to the penalty.
"Do I have a plan now that pays for prescriptions?" "Am I relying on doctor's samples"? "Do I have a Medigap plan that covers prescriptions?"
If I have a plan, have I read the mail they sent? Was it clear to me? Did it require me to make a phone call, make a change, sign up? Did I follow up with the company to make sure I did whatever was necessary?
The next questions are about the plan:
Step 5. ELIGIBLE
Are you eligible for one of the Medicare Part D plans?
Who is eligible? Anyone with Medicare A or B or both A and B.
Who is not a right fit for the plan?
You do not need a new Medicare Part D plan if you have a plan that is as good as, or better than the Medicare Part D benchmark. This equivalent plan is called a "creditable" plan.
- As a retiree if you have a creditable plan through your union or former employee, you will not need to sign up for Medicare Part D.
- If you have a Medicare Advantage plan with a creditable prescription drug plan, you will not need a Medicare Part D plan. Also be aware that if you have such a plan, you can lose it if you sign up for Medicare Part D.
- If you are covered by the Department of Veterans Affairs or Tricare you do not need to apply for Medicare Part D.
- As an individual your income and resources are $11,500 or less. As a couple your income and resources are $23,00 or less. Seek help through Social Security. There are programs which will help you if you have limited resources.
- You are on Medicaid or Mass Health and you have already been assigned to a plan. If so, check that your medicines are covered by that plan.
- If you are outside of your service area for more than six months each year, you are not eligible for that service area. Your plan should be chosen in the area you claim as your residence for voting and where you live six months or more.
Make a list of your current medicines. This is the critical tool for evaluating which plan will make financial sense for you.
What are you paying per month for prescriptions? What are you paying per year?
Will a Part D plan help you save money? That depends on how much your medications cost and which level of plan you enroll in.
Many of the listed insurance companies offer three plans: the standard plan, which is their least expensive; a middle level plan, and a more comprehensive plan, which will be their most expensive plan but covers more prescriptions.
There are four stages is each plan. In the standard plan, which is generally the lowest cost plan from each carrier, the stages are as follows:
- Stage One is the deductible of $250, which you pay.
- Stage Two: As you purchases add up to $2,000. of total drug costs, you pay 25%, which is $500. and the insurance company pays 75% which is $1,500.
- Stage Three: As you spend the next $2,850 of drug costs, you pay it all. There is no insurance contribution with the basic, standard plan in this stage. This is called the coverage gap. It is more popularly called the donut hole.
- Stage Four: After you have spent $3,600. out of your pocket, then you pay the greater of either 5% or a set dollar amount for generic, preferred brand drugs, other drugs. If you pay 5%, then the insurance company pays 95% for the remainder of the year.
Here is an example of using the Standard Plan:
Be aware as we go through this example of the difference in the plan between the concepts "out of pocket" and 'total drug cost'. These terms are important. The versions of Medicare Part D, other than the Standard Plan, use these terms "out of pocket" and 'total drug cost' to calculate when you pay and when the insurance pays. Many insurers have three levels of plans and there is a difference in the use of these terms "out of pocket" and 'total drug cost'.
- Stage One: You pay $250. You have spent $250. The value of medicine may be many times higher. You went to the pharmacy and you paid maybe $2. for a generic, but the value of that medicine, the contracted price between your pharmacy and the insurance company may be $80. That contracted price is the total cost of the drug.
- Stage Two: You pay $500, but you have bought $2,000 of medicine. You paid 25% of $2,000 or $500. The insurance company has paid $1,500. The total drug cost is $2,000. Your out of pocket expense is $500.
- Stage Three: You pay $2,850. This is the donut hole or coverage gap. You have paid $2,850, but the total cost of the medicine may be higher. Once you have paid out of your pocket $3,600, you have come to the upper limit of the donut hole, or coverage gap. Then you enter Stage 4 and are covered again by the insurance.
- Stage Four: In this example, you pay 5% of the $900. for your medicines, which is only $45. You pay the greater of 5% or the flat fee for generic, preferred brand, etc.
So the cost to you in each stage in this example is $250, $500, $2,850, $45 for a total out of pocket of $3,645. Remember if a drug is not covered, and you can not get it covered, you may be paying for that drug in addition. The medicines themselves cost more than what you paid.
In the past you had paid $6,000 for the medicines, now you paid maybe only $3,645. out of your pocket.
Your savings will be reduced by the amount you pay for the premium on for the insurance coverage. The range of the cost of standard plans currently offered in Massachusetts is from $7.32 a month to $37.61. With the least expensive standard plan, your yearly premium would be $87.84, for the most expensive standard plan it would be $451.32. Even after paying the premium for the plan, you would have saved money in this example.
There are about 20 insurance companies in Massachusetts which are offering Medicare Part D plans. Many of them have three plans starting with the Standard plan which matches the benchmark Medicare established. To find out which companies in your state offer plans go to www.medicare.gov or call Medicare at 1-800- 633-4227. TTY users should call 1-877-486-2048.
The premiums for the Medicare Part D plans may change.
Remember that if you are on Medicare B that you will continue to pay your Medicare Part B monthly premium which is $78.20 in 2005, and $88.50 in 2006.
Now that you have figured out in Step 7 what your medicines cost, you can apply those costs for each level of coverage. Some insurance companies have two plans in addition to the Standard plan which pay more of the prescription cost and as you would guess, the premium you pay for those plans is higher. However, such plans may be right for you. You need to do the arithmetic. You need to watch for the terms "out of pocket" and 'total drug cost'.
The example in Step 8 showed the cost and savings with the standard plan for a individual with $6,000 in costs. Maybe you are better off --depending on your situation with a more comprehensive plan. It takes a few minutes with a pencil and paper to figure that out.
Either do the calculations yourself, or call Medicare to help you, or call one of the insurance carriers to help you, or talk with an insurance agent who sells Medicare Part D. Each of them has a drug cost calculator.
Now if you have determined that a plan can help you save money, which company will you apply to?
One resource is www.medicare.gov which lists the companies in your state that are offering plans. You can also call Medicare 1-800- 633-4227.
First check that the medicines you are taking are on that insurance company's list of medicines that they pay for, their formulary.
Is there any extra charge for the medicine you take? Is it at a higher tier of cost? There categories are: generic, preferred brand, non-preferred brand and specialty. The discount you get or the co-pay varies with each tier.
If all of your medicines are not on that company's list, look at other companies. Which company covers your most expensive medicines and/or those that you expect to take for a long time?
Talk to your doctor about a substitute medicine.
If a particular medicine is uniquely helpful to you and has fewest side effects, you have a right to have your doctor petition that it be included. As you can imagine this is a harder course of action and does not guarantee that the insurance company will decide to cover that medicine or cover it at a favorable cost.
Many of the insurance companies offer some extra benefit to attract you as a customer. What are the special benefits that they offer?
Are those benefits of real value to you? If you are signing on with an agent of that company, do you feel that agent will be helpful to you in an ongoing way? That may be a benefit if the agent will help you figure out the costs and be available to answer questions.
This is a new program for agents and consumers and the government agencies. Everyone is learning and some questions do not have clear answers yet. We all have to be patient and learn.
Make a choice of plan and get started to avoid the 1% penalty on your insurance premium. If you wait for five years or 60 months you would pay a 1% penalty for each month you could have joined and did not. That would be 60% increase for waiting. That penalty is permanent. One way to figure out the effect of waiting is to compare what the premium would be for 20 years with and without the penalty. This does not take into account the cost of medicines; just the cost of the insurance and it assumes the premium stays the same for 20 years. We do not know what future premiums will be.
But for the sake of the example of the person waiting for five years or 60 months to apply, let's say the insurance costs $30 a month for 60 months that would be $1,800. If the person waits, there is a one percent charge on the $30 so that is 30 cents. that becomes a penalty in 60 months of $18. Now that person would be paying $48.00 a month for the insurance ($30. plus $18 penalty).
Compare starting now and waiting for five years to sign up.
If you sign up before the penalty would be imposed (May 15, 2006) and paid 20 years which is 240 months times $30, you would have paid $7,200 in premiums. If you had the penalty and started paying in five years and paid for 20 years, you would have paid $11,520. If you paid for 15 years, you would have paid $8,640. Waiting could cost you more especially since future premium costs are not known.
Remember you can change plans again before the end of open enrollment May 15, 2006. The next open enrollment will be November 15, 2006 to December 31, 2006. A plan will not start January 1, 2006, unless you apply by December 31, 2005.
Consider the fact that the decisions you make now are for one year at a time. You don't know how your health will be in a year or two. Your health may improve or decline. The Medicare Part D plans may change their premiums. A lot may change, but if at this time, as you look at the year ahead, if the calculations in Steps 6-8 show that Medicare Part D will help you, then sign up.
There are many places to turn for help. Just ask questions and be patient.