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Figuring Out Medicare Part D

Vincci Ma, PharmD Candidate 2007
Univ. of North Carolina, Chapel Hill, School of Pharmacy

Prepared during Consumer Health Information Corporation Clerkship

McLean, VA

 

Ever since Medicare Part D was introduced in 2005, all you hear is, “If you are eligible, go sign up!” But like many people, you find that signing up is not an easy process.

  • When you try to sign up, you find that although there is enough information, the information is too confusing.
  • You get on the Medicare website, but you do not know where to start.
  • You call Medicare, but you get discouraged from waiting a long time to speak to representative.

However, it is important that you take the time to learn about Medicare Part D. This article tells you what you need to know about Medicare Part D. By knowing what Medicare Part D has to offer, you can find a plan that best fits your healthcare needs. But nothing can replace the benefits of having a family pharmacist. Your pharmacist is your best tool when finding a prescription plan that works for you!

What is Medicare Part D?

Medicare Part D was started by the government to help you pay for your prescription drugs. It is offered by private insurance companies, so there are many prescription drug plans to choose from. In 2007, North Carolina alone will offer 51 prescription drug plans. The plans vary in their costs and in how they pay for your drugs. Therefore, you need to know how to compare your options and find a plan that is best for you.

Why do I need Medicare Part D?

  • Medicare Part D can protect you and your family against high and unexpected drug costs.
  • As we get older, we may need to take more drugs to maintain our health. As a result, our drug costs can increase substantially.
  • A sudden illness can lead to high drug costs that are impossible to predict.

Who can sign up?

You can sign up for Medicare Part D if you are:

  • Age 65 or older
  • Under age 65 with certain disabilities
  • Any age with End-Stage Renal Disease

When do I sign up?

You should sign up during the enrollment period, which is between November 15th and December 31st of each year. After you sign up, Medicare Part D will start paying for your medications by January 1 of the following year. You can join 3 months before you turn 65. So if your birthday is between November 15, 2006 and February 15, 2007, you should join by December 2006.

Late enrollment penalty

You may have to pay a penalty if you enroll late. If you do not sign up during the enrollment period that you are first eligible, your monthly premium may be increased by one percent each month you are late. If you turned 65 before or during January 2006 and you still do not do have any form of drug coverage, you should sign up for Medicare Part D right away. If you do not sign up, you will end up having to pay a higher premium. The longer you wait, the more expensive your premium will get.

How does Medicare Part D work?

There are two ways to get Medicare prescription drug coverage. You can join Medicare Part D or you can join a Medicare Advantage Plan that offers drug coverage. Whatever plan you choose, Medicare drug coverage can help you pay for brand-name and generic drugs at pharmacies that are convenient for you.

Costs will vary depending on the drug plan you choose. Below are few examples of costs you may have with your prescription drug plan.

  • Monthly Premium: fixed monthly cost you must pay regardless of the amount of money you spend on your drugs.
  • Yearly Deductible: a fixed amount of money that you must pay every year before your Medicare coverage will begin. For example, if your plan has a $250 deductible, you will have to pay for your drugs in full until you have spent $250. Once your drug costs have reached $250, your Medicare coverage will start.
  • Copay or coinsurance: after your total drug costs go above the deductible, you pay a discounted cost for your drugs.
    • Copay is a set amount that you pay for a drug. Insurance covers the rest. Drugs are divided into groups called tiers. A drug that belongs to a higher tier has a higher copay than a drug in a lower tier. For example, a $20 copay for a tier 2 drug means that no matter how expensive the drug originally costs, you only pay $20 for that drug. If the drug itself costs less than $20, you pay the lower cost.
    • Coinsurance is a set percentage that you have to pay for a drug. Insurance covers the rest. For example, a 20% coinsurance means that you pay 20% for a drug and the insurance pays the remaining 80%. The higher the cost of the drug, the higher the amount you will have to pay for the drug.
  • Coverage Gap is the period where you will have to pay full price for all your drug costs. You may have heard people call it the “Doughnut Hole”. You enter the doughnut hole when your total drug costs reach about $2,250. At this point, you pay full price for your drugs until your total drug costs reach about $5,100. The coverage gap cost range may be different from plan to plan. Some plans may provide some coverage during the doughnut hole.
  • Catastrophic Coverage begins after the coverage gap, or after your total drug costs go above $5,100. During catastrophic coverage, you will pay up to 5% of the total drug cost. For certain plans, you may not have to pay anything at all during this period. The percentage you pay during the catastrophic coverage may be different from plan to plan.

To better help you picture how your drug plan may work, here is an example. You find a plan that offers:

  • Monthly premium of $25 ($300 per year)
  • Yearly deductible of $250
  • Coinsurance of 20% up to $2,250
  • No gap coverage
  • Catastrophic coverage of 2% once drug costs go above $5,100

Suppose your total drug costs for the year reach $6,000, here’s how much you pay in each coverage period with Medicare Part D compared to your full drug costs without Medicare Part D:

Prescription Drug Plan Without Medicare Part D With Medicare Part D You Save
Premium - $ 300  
Deductible $ 250 $ 250  
Coinsurance $ 2000 $ 400  
Coverage Gap
“Doughnut Hole”
$ 2850 $ 2850  
Catastrophic Coverage $ 900 $ 180  
Total Cost $6,000 $ 3,980 Total savings: $ 2,020

Keep in mind that if your total drug costs do not reach $2,250 in the year, you may never fall in the doughnut hole. For example, suppose your total drug costs reach $2,000. Here is how much you will save if your total drug costs do not reach the doughnut hole:

Prescription Drug Plan Without Medicare Part D With Medicare Part D You Save
Premium - $ 300  
Deductible $ 250 $ 250  
Coinsurance $ 1750 $ 350  
Total Cost $2,000 $ 900 Total savings: $ 1,100

Which is the best plan for me?

To find a plan that is best for you, you can:

  • Visit www.medicare.gov on the web,
  • Call 1-800-MEDICARE (1-800-633-4227).
  • Contact the North Carolina Division of Medical Assistance Program at 1-800-662-7030
  • Call the North Carolina Senior’s Health Information Program at 1-800-662-7030

The Medicare website is a good place to get help if you know where to look. It can help you compare different plans available in your area. It can also help you calculate how much you will spend on your drugs. You can even enroll in a prescription drug plan on the Medicare website.

Here are some important things to follow when signing up online:

  • On the Homepage www.medicare.gov, click on “Compare Medicare Prescription Drug Plans.”
  • Uncheck the box that says “Use lower cost generics when available”. You want to first find a plan that covers the drugs you are currently taking regardless if generics are available for the brand-name drugs.
  • You should skip the step that tells you to select your preferred pharmacies. If you select a pharmacy, you may limit the plans that are available to you. However, if you have a family pharmacist that you want to continue getting prescriptions from, select the pharmacy from the preferred pharmacies list.
  • For your top 5 plans, follow these steps to learn how your drugs will be covered:
    1. Check the far left box next to the plan name for each plan you want to compare then click “Compare Plans”
    2. Compare their yearly premiums
    3. Compare their yearly deductibles
    4. Compare how much you will spend in copays or coinsurance with each plan
    5. If you reach the doughnut hole, find out the amount of money you will need to spend with each plan
    6. If you reach catastrophic coverage, find out how much you will spend in copays or coinsurance for the remainder of the year
    7. Find out if there’s any limitations or restrictions in getting your drugs
    8. Click on “Lower my Cost Share” to see if switching to a similar drug can help you lower your drug costs. However, only your doctor can switch you to another drug. Depending on your health status or other medications that you are taking, another drug may not be right for you.

Keep in mind:

  • Certain plans may have $0 deductible but require high monthly premiums.
  • Other plans may cover some costs at the coverage gap or all costs during catastrophic coverage but have higher copays. If your total drug costs in the year are not going to reach the doughnut hole, then you may want to choose a plan with lower copays or coinsurance but no coverage in the doughnut hole.

What if I already have prescription drug coverage through my employer or union?

If you already have prescription drug coverage through your employer or union, chances are you may want to stick with that plan. If Medicare Part D offers better coverage for your drugs, you can choose to drop your employer’s drug plan. If you decide to drop your employer’s coverage, there are a few things to keep in mind:

  • Sometimes you are not able to just drop the drug coverage without dropping the health (doctor and hospital) coverage.
  • If you drop your employer or union coverage for yourself, you may also have to drop coverage for your spouse and dependents.
  • You may not be able to re-enroll in the plan if you decide you want to switch back.

You should contact your insurance company before you make any changes to your drug coverage.

What if I decide to change my plan?

There are times when you may want to consider changing your drug plan. When your medicines change, another plan may be better able to cover your drugs. When you get a new medicine that your original drug plan does not cover, you may also want to consider changing to another plan. You can change your drug plan every year between November 15th and December 31st. If you have Medicaid, you can change your drug plan whenever you want.

What if I have a limited income and resources?

You can get extra help if you have limited income and resources. If you have Medicaid, you don’t need to sign up for extra help. You are signed up automatically. However, extra help is also available for people with limited income who do not qualify for Medicaid. If you qualify for extra help, you may not have to pay a premium or deductible. Medicare may also help you pay for your drugs once costs reach the coverage gap. In 2006, if your yearly income is below $14,700 for a single or below $19,800 for a couple, you can apply for extra help. The income cutoff is different every year. You can apply by filling out the application on the Social Security website at www.socialsecurity.gov or by calling Social Security at 1-800-772-1213 (TTY 1-800-325-0778).

Almost everyone, even those who do not currently take medications, can expect to benefit from Medicare Part D. However, since there are so many different plans out there, you need to sign up for a plan that best covers your prescriptions without any unnecessary costs. If you need any help, do not hesitate to call Medicare. Also, talk to your pharmacist. Your pharmacist knows what drugs you are taking and can help you find the best drug plan. Take control of your prescription dollars. That money is yours, so spend it wisely.

This article provides a summary of information about Medicare part D and does not contain all possible information about the insurance plan. If you have any questions or want more information, below are some important sources.

Important sources

Medicare: www.medicare.gov 1-800-633-4227

Social Security: www.socialsecurity.gov 1-800-772-1213 (TTY 1-800-325-0778)

NC Division of Medical Assistance: http://www.dhhs.state.nc.us/dma/ 1-800-662-7030

NC Senior’s Health Information Program: www.ncshiip.com 1-800-443-9354

Reference

Centers for Medicare and Medicaid Services. Medicare & You 2007. Available at: http://www.medicare.gov/publications/pubs/pdf/10050.pdf. Accessed November 2006.

© 2006 Consumer Health Information Corporation. All rights reserved.