Your Guide to Medicare Part D

Know What Coverage You Have

Medicare Part D can help you pay for expensive, medically necessary prescription drugs in order for you to live a healthier, less financially burdened life. The program was created by the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA), and coverage began January 2006.

According to the Centers for Medicare & Medicaid Services, part of the U.S. Department of Health & Human Services, the type of drug coverage you currently have will determine whether you need Part D prescription drug coverage

• If you have only the original Medicare, or the original Medicare plus a Medigap (supplement) policy without drug coverage, Part D can help cover your drug costs.
• If you have the original Medicare plus a Medigap (supplement) policy with drug coverage, Part D may provide more comprehensive coverage than your present supplement, at a lower cost.
• If you have health insurance coverage from a retirement policy or your union, make sure its drug coverage is as good as what Part D offers. (If you do not have so-called “credible coverage“ that is “at least as good as“ standard Part D, and if you fail to apply for Part D as soon as you become eligible for it, the 1-percent-per-month penalty described above will apply.) If you have this type of coverage, be sure to check with your insurer on whether it meets this standard.
• If you have a Medical Advantage Plan (Medicare Part C managed care) or other Medicare Health Plan, you already have drug coverage and other benefits; so you do not have to enroll in a separate Part D plan. Medicare Advantage’s drug coverage does not require an additional premium. However, you will pay a monthly premium for the health insurance, which, as noted, includes drug coverage.
• If you have dual coverage from Medicare with Medicaid drug coverage, you automatically have Medicare prescription drug coverage and do not need to apply for Medicare Part D. However, Part D may affect how your coverage works.

The way that Medicare drug coverage works depends on your current plan. Therefore, you should review your current health insurance coverage and learn how it will work with Medicare prescription drug coverage. An easy way to compare policies is by using the Medicare PlanFinder at www.medicare.gov.

While the cost-sharing responsibilities will shift back and forth between you and the insurance provider as the tab for your drug costs adds up, there is no cap (max that Medicare will cover), and if your out-of-pocket costs exceed a certain dollar amount, the insurer will pick up 95% of the cost of your prescriptions after that for the rest of that calendar year.

What is the Donut Hole?

Don’t get caught by surprise. If you have high drug costs now, or perhaps down the road, you should know that most Part D prescription drug plans have a time gap in their coverage, and during that time, called the “donut hole,“ you still must continue paying monthly premiums even though your drugs are no longer being paid for by the plan. In 2007, your coverage for drugs will temporarily end after a total of $2,400 has been spent between you and your insurer, including your deductible. If your out-of-pocket expenses (including your deductible but not your premiums) for drugs reach $3,850, or $5,451.25 in total drug costs in a calendar year, your coverage kicks in again. After the donut hole, most plans cover 95 percent of your drug costs or require a small co-payment. This is referred to as catastrophic coverage.

Not all plans have a donut hole. The donut hole exists in those plans with the standard design. Other Part D plans, known as “enhanced“ plans, may cost more, but they provide coverage during the donut hole. These plans may also have lower deductibles or co-payments (the set amounts that you pay per prescription) instead of co-insurance (where you pay a certain percentage of the cost of each prescription).

These premium or enhanced plans may charge higher premiums, but they may turn out to be a better value if you are likely to spend more than $4,000 per year on prescription drugs.

If You Think You Can’t Afford Medicare Part D Coverage

If you have limited income and resources, you may qualify for financial aid for paying premiums, your annual deductible, and co-payments costs that can range from a few hundred dollars to much more—the average is about $2,100 per year). Depending on how low your income is, the Extra Help program offers the following:

• The amount you pay for premiums and deductibles will be significantly reduced or completely eliminated.
• The “donut hole“ provision will not apply to you and thus, there will be no gaps in your coverage
• The co-pays you pay will be $5 or less on each prescription you fill.

You may qualify if all of the following apply to you:

• your savings, investments, or real estate (other than your home) total less than $11,500 if you are single or $23,000 if you are married and living with your spouse; and
• you are not presently covered by Medicaid; and
• your annual income is less than $14,700 if you are single ($19,800 if you are married and living with your spouse).

Note: These numbers apply to the year 2006 and will increase annually. The size of your family may also affect whether you qualify. Income levels are higher if you live in Hawaii or Alaska. If your savings and investments are higher than this amount, you may still qualify for financial help through a state or other program.

Call your state Medicaid agency to find out if you qualify for financial aid. You can get an application online at the Social Security Administration at www.ssa.gov or by calling Social Security toll-free at 800-772-1213 and saying you want “help with Medicare prescription drug costs.“

If you fall into one of the following categories, you do not need to complete the application, because you will automatically get the financial help:

• You get Supplemental Security Income (SSI) and have Medicare.
• You have both Medicaid and Medicare (dual eligible).
• The state pays your Medicare premiums.

If you have not already been signed up automatically, call toll-free 800-MEDICARE.