Medicare Part D:
Buying Prescription Drug Coverage
In
an annual
survey conducted
by KRC Research,
90 percent of seniors
polled said that they
were satisfied with
the prescription
drug program.
I
n January 2006, when Medicare Part D was first enacted, Medicare experts expect-ed 11 million Americans would be coverexpect-ed by the program. One year later, the Cen-ters for Medicare & Medicaid Services (CMS) reported that 24 million individuals were receiving benefits through Medicare Part D.1 As we enter the 2014 OpenEnroll-ment period, more than 30 million Americans have access to affordable prescription drugs due to the program and the program’s costs are 40 percent less than expected.2
In an annual survey conducted by KRC Research, 90 percent of seniors polled said that they were satisfied with the prescription drug program. That approval rating is even higher for minority seniors. Two-thirds of all individuals polled said that they would be unable to fill prescriptions without the program and 62 percent said that they would likely have cut back on or skipped medicine without coverage. Those numbers echo previous year’s results.3
That’s not to say that all is shiny and good in the land of Medicare. There are a lot of gaps in awareness of plan comparison tools and low income beneficiaries especially find it more difficult to manage their choices than is strictly necessary but overall Medicare beneficiaries give Part D a report card grade of A. Here’s an AARP list of just some of the reasons for its high score:4
Ninety-six percent say the drug coverage gives them peace of mind;
Ninety-five percent say their plan is easy to use;
Eighty-four percent say that their
premiums and copays are affordable; and Sixty-two percent say that without Part D coverage they’d have to cut back on or do without some of their medicines.
HOW DO YOU GET DRUG COVERAGE FROM MEDICARE?
Everyone with Medicare is eligible for prescription drug coverage. Not everyone that gets Medicare chooses drug coverage but with few exceptions,
choosing to not get coverage results in a penalty. We’ll
1 Wikipedia.org. Medicare Part D. http://en.wikipedia.org/wiki/Medicare_Part_D
2 HuffingtonPost.com. Medicare Part D is Working for Seniors. Robert B. Blancato. Septem-ber 25, 2013. http://www.huffingtonpost.com/robert-b-blancato/medicare-part-d_b_3984701. html
3 KRCresearch.com. Seniors’ Opinions About Medicare Prescription Drug Coverage 8th Year Update. September 2013. http://www.hlc.org/blog/wp-content/uploads/2013/09/KRC-Survey-of-Seniors-for-Medicare-Today-FINAL.pdf
4 Blog.aarp.org AARP. Why People Love Their Medicare Drug Coverage. Tamara Lytle. September 27, 2013. http://blog.aarp.org/2013/09/27/why-people-love-their-medicare-drug-coverage/
cover penalties later in this paper.
To get prescription drug coverage, individuals must choose a Medicare approved plan offered either by an insurance company or a private company. Plan rates and coverage can vary. There are two ways to get drug coverage and within those two ways there are many options. Those options can make choosing difficult especially for people during their first time enrollment period.
Medicare Advantage Plan (also called Part C): There’s a white paper on Medicare Advantage Plans that goes into more depth as to why or why not you might choose an Advantage Plan over traditional Medicare. In brief, choosing a Medicare Advantage Plan can be a great option for people who are willing to spend time researching plans and who are healthy, not likely to move about the country much, and/or unwilling to forego additional benefits such as dental, vision or hearing. You must have both Part A and Part B to enroll in Part C. If you select a Part C plan that includes prescription drug coverage and then join a Part D plan, your Part C plan will be discontinued. Not all Advantage Plans charge an extra premium for drug plans.
Medicare Prescription Drug Plan (Part D): Sometimes called PDPs, these plans add
prescription drug coverage to original Medicare, some Medicare Private Fee-for Service Plans and Medicare Medical Savings Accounts. Unlike Part B in which individuals are automatically enrolled and they must opt out, Part D requires opting in to the plan. About two-thirds of beneficiaries are enrolled in PDPs.
Prescription Drug Plan Costs
Unlike Part B which has a single premium that most people pay, Part D premiums are set each calendar year by the drug plans. If your modified adjusted gross income is more than $85,000 (or for couples $170,000) you’ll be charged a surcharge of between $11.60 and $66.60 depending based on your income for Part D coverage on top of the premium. If for some reason your income had been above those levels and decreases due to a life changing event such as a divorce, death or retirement, contact a Medicare advisor. For specific cost information, visit MyMedicare.gov.
Comparing Plans
Medicare plans for both health care and prescription drug plans are performance rated on a scale between one star and five stars with five stars meaning excellent. You can find the ratings at Medicare.gov/find-a-plan. Medicare created the star rating system to help consumers and the individuals working with them compare the quality of care and customer service levels of plan providers. The system compares 53 quality measures and was created from member satisfaction survey, plans and health care providers. The ratings are updated each fall and can change each year.
You can change from one type of plan to another simply by selecting a new plan during open enrollment. Your old plan will automatically end when your new one begins.
DATES OF CONSEQUENCE Between Oct 15 and Dec. 7
This time frame is called Open Enrollment. During Open Enrollment you have a chance to make changes to your Medicare Advantage or Medicare prescription drug coverage for the following year
Between Jan. 1 and Feb. 14
This time frame is called the Medicare Advantage Disenrollment Period. During this time, you can switch from Medicare Advantage to traditional Medicare; switch from one Medicare Advantage Plan to another; switch from one Medicare Prescription Drug Plan to another; or join, switch or drop a Medicare Medical Savings Account Plan. April 1 through June 30
If you signed up for Medicare Part B during its General Enrollment Period (Jan. 1 to March 31), you can sign up for either Medicare Part D or Medicare Advantage (with or without a drug plan) during this time frame.
Between Dec. 8 and Nov. 30
As mentioned before, Medicare rates plans each year. You can switch to a 5-star
Medicare Advantage Plan, Medicare Cost Plan or Medicare Prescription Drug Plan once a year.
Other times you can change your plans You Move
You can change Medicare coverage at anytime within a two month period after: a move that takes you out of your current plan’s service area or provides an option you didn’t have before; a move back into the country; or a move into or out of an institution such as a skilled nursing facility, long-term care hospital or jail.
Your 65th Birthday
For the three months prior to your 65th birthday and the three months following the month of your birthday (7 months total) you’re eligible to sign up for Medicare.
You Lose Your Current Coverage
You can lose your coverage for a variety of reasons including dropping or adding your employer’s coverage, having a plan that is no longer creditable, Medicare taking an official sanction against a plan, you become eligible for both Medicare and Medicaid, or you qualify for Extra Help. Each reason has a different time frame in which to change your coverage. That time frame usually involves either two months or anytime. Those times in which you have an open time frame are usually times in which you continue to have creditable coverage and those times when the time frame is much narrower tend to be times that would leave you without creditable coverage. It’s best to check the Medicare.gov site for any particular situation.
LATE ENROLLMENT PENALTY
Medicare Part D is not mandatory but if you don’t sign up for it or a creditable
equivalent when you are first eligible or you drop it at some point and then get it later, you will be charged a penalty (unless you get Extra Help) for however long you have Part D. The amount of the penalty fee is determined by the length of time you went without coverage multiplied by 1 percent of the national base beneficiary premium and rounded to the nearest dime. So for example, in 2014 the national base beneficiary premium will be $32.42. If Glen Thompson waited six years before signing up for Medicare Part D, he would pay 72 percent (1 percent for each of 72 months) times
$32.42 (.72 x 32.42 or $23.30 (because $23.34 is rounded to the nearest .10)). So for 2014, Glen Thompson will pay $23.30 on top of his premium for every month in 2014.5
His penalty will be refigured the next year and so it goes. You can see how putting off purchasing Part D can begin to add up.
The Donut Hole
There’s a temporary limit on what drug plans cover. That limit is referred to as the donut hole. While not everyone will enter the donut hole (you and your plan must have spent a combined total of $2,970 in 2013 on covered drugs) under the Affordable Care Act, the donut hole will continue to gradually close. What you pay for generic drugs will slowly decrease each year until it reaches 25 percent in 2020. Medicare beneficiaries in the donut hole who don’t qualify for the Extra Help program will pay 47.5 percent of the cost of brand-name drugs and 72 percent of the cost for generic drugs.
Extra Help
Individuals with limited incomes may be able to get an estimated $4,000 a year in help to pay for costs associated with monthly premiums, annual deductibles and prescription co-pays related to Medicare’s prescription drug plan.
To qualify you must: reside in one of the 50 states or in the District of Columbia; have resources limited to $13,300 for an individual or $26,580 for a married couple living together (Medicare does not count your home, vehicle or life insurance policies as resources); and your annual income must be limited to $17,235 for an individual and $23,265 for a married couple living together. Individuals who support other family members, have earnings from work or live in either Alaska or Hawaii may have additional income.
Apply for Extra Help by going to the Social Security
Administration online (at www.socialsecurity.gov/extrahelp or in person or by calling Social Security at 1-800-772-1213. Social Security will notify you if you qualify for Extra Help and you can choose a prescription drug plan then. If you do not choose a plan, the Centers for Medicare & Medicaid Services (CMS) will do it for you.
5 Medicare.gov. What’s the Part D late enrollment penalty? http://www.medicare.gov/part-d/ costs/penalty/part-d-late-enrollment-penalty.html
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