Medicare Part D: Who Should Join?

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Medicare Part D: Who Should Join?



By Peggy Peck , MedPage Today Staff Writer

Reviewed by Jasmer, MD; Assistant Professor of Medicine,

University of California, San Francisco

Source News Article: CNN, Wall Street Journal

MedPage Today Action Points

Advise patients that all beneficiaries can get some benefit from the

new drug coverage plan, but for many patients the benefit may be less

than expected.

Remind eligible patients that enrollment for Medicare prescription

drug plans begins Nov. 15 and continues until May 15, 2006. Eligible

patients who delay enrollment will pay higher premiums after the May

15 deadline.

Review

BALTIMORE - The new Medicare prescription-drug coverage plan doesn’t

cover all of the expenses for all of the people, but it may make the

difference between meals and medicine for many fixed-income retirees.

Clearly Medicare Part D is better than nothing for many of the

estimated 43 million elderly and disabled Americans who are enrolled

in the program. That said, Medicare’s new prescription-drug coverage

will never live up to its hype as a comprehensive prescription drug

plan.

In the words of Ron Pollack, executive director of Families USA, a

Washington-based lobbying group that is a frequent critic of both

Medicare and Medicaid, the “euphoria at the White House contrasts

very vividly with the disappointment, even anger, among America’s

seniors.â€

Pollack said that one cause of seniors’ anger with Medicare is what

he called “the bizarre and sparse drug benefit.â€

But while Pollack has harsh words for the new program, its supporters

contend -- with some justification -- that this new benefit will

enhance Medicare because it will provide at least some coverage for

outpatient prescription drugs, something Medicare has not done in the

40 years since it was created.

Briefly, all Medicare beneficiaries, irrespective of income, are

eligible for prescription drug coverage under Medicare Part D.

Medicare patients can sign up for coverage through a regional

Medicare PDP or one of the 10 Medicare-approved national PDPs.

Patients will be billed a monthly premium that can cost as little as

$20 a month for plans that cover brand-name and generic drugs. On top

of the monthly premium, enrollees will be charged a co-pay of roughly

25% of the price of drugs. In addition to the co-pay there is a

standard $250 annual deductible on covered drugs. And this covers

just the first $2,250 of prescription drugs.

After the $2,250 limit is reached, the beneficiary has to pick up

100% of the tab for the next $2,850 in prescription drug expenses.

This is the coverage gap, known as the donut hole, in Medicare Part

D. However, coverage returns after a patient’s total out-of-pocket

expenses for prescription drugs reaches an annual threshold of $3,600

($250 deductible plus 25% of costs from $500 to $2,250, which equals

$500, plus the $2,850 donut hole).

Because of the donut hole, some characterize Medicare Part D as a lot

like the horse designed by a committee, which ended up as a camel. In

the case of Part D, it is drug insurance coverage with a beginning

and end but no middle.

But a camel can be a pretty useful animal.

Once the out-of-pocket annual threshold is reached, Part D picks up

the tab for prescription drugs and this time the coverage offers some

real savings because the co-payment drops to $5 for brand-name drugs,

$2 for generics, or 5% of drug cost, whichever is lower.

Simple? Wait, that’s not all.

Many Medicare patients purchase Medigap insurance to help them pay

deductibles or co-payments associated with hospital or physician

charges (Medicare Part A and Part , but Congress specifically

barred these Medigap plans from covering the donut hole -- that

$3,600 in out-of-pocket expenses that is built into Part D. Patients

should be made aware of this limitation.

There is, however, some relief for the estimated one-third of

Medicare beneficiaries who have prescription drug coverage from their

former employees. These patients are permitted to keep that coverage

and sign up for Part D. So, for this subset of Medicare patients the

law does allow the employer health plan to supplement the Part D

coverage. But there is a caveat -- when a patient enrolls in Medicare

Part D, Medicare becomes the primary provider of coverage.

Of note, the Medicare drug benefit may actually prove to be the

salvation of some employer plans. In recent years many employers have

cut back on benefits to retirees, but included in the Medicare

prescription drug law is a provision that offers subsidies to

employers that continue drug benefit plans for retirees -- as long as

those plans have the same actuarial value as the standard Medicare

Part D plan.

So, who should enroll in Medicare Part D?

One school of thought says everyone who is eligible because each

enrollee will get some benefit.

Moreover, that benefit is likely to add up to more than the annual

premium cost of one of the bare-bones PDP plans. For example, a plan

with a $20 monthly premium will cost $240 a year. Medicare actuaries

are estimating that the average benefit per enrollee will be $1,300.

That is probably a high-end estimate, but even if the savings are

considerably lower odds are that seniors will save more than they

spend on the premium.

The key to maximizing benefits lies in the fine print found in the

drug plan marketing materials that are now flowing into the mailboxes

of the nation’s seniors. It is there that Medicare patients will

find crucial information about the exact coverage being offered.

Plans are required by law to cover at least two drugs in each

therapeutic class or category of covered Plan D drugs, which means

that it is very possible that a plan may cover some but not all of a

patient’s prescription drugs. For example, a PDP could offer two

statins, say Pravachol (pravastatin) and Zocor (simvastatin) but not

Lipitor (atorvastatin).

And it is important to note that payment for drugs not covered by the

patient’s PDP, in this example Lipitor, will not be counted toward

the Part D deductible -- either the $250 basic deductible or the

$3,600 annual out-of-pocket limit.

The Medicare regulations give plans broad discretion to design a

variety of formulary options as long as they still stay within the

broad two-drug parameter. That means that plans will typically cover

most but not all of the top 100 drugs on the Medicare approved

formulary. For example, in Alaska and New York three Cigna plans will

cover 99 of the top 100 drugs, while one Coventry AdvantraRx in

Alaska and New York will cover 73.

And when should patients join? Here the answer is simple -- the

sooner, the better.

Enrollment starts on Nov. 15 and this initial enrollment period will

continue until May 15, 2006. Coverage will begin January 1, 2006, for

those who sign-up by December 31, 2005. For those who sign up after

December 31, 2005, coverage will start the following month, so

someone who signs up on January 10, 2006 will get coverage beginning

February 1, 2006.

But there is an important sticking point included in the Plan D

regulations. Seniors who were eligible for coverage before May 15,

2006, but delay enrollment until after the May 15 deadline will have

to pay premiums that are higher -- the premium price goes up 1% per

month for every month they delay. So an eligible senior who delays

enrollment until August 15, 2006 will pay a monthly Part D premium

that is 3% higher than those who signed on the Part D dotted line by

May 15, 2006.

Next: Medicare’s Medicine Chest, the Part D Formulary

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