Medicare Part D

Medicare Part D: the NEW Medicare Prescription Drug Program

Medicare Part D is the new Medicare prescription drug program (PDP) which begins January 1, 2006.

Your Cost

Persons enrolled in Medicare Part D must pay a monthly premium in addition to the Part B premium unless they are eligible for assistance . The monthly premium is expected to be $37.00 in our area. However, this premium may vary in different regions of the country.

There is an annual $250.00 deductible which must be met before coverage begins. After the deductible has been met, beneficiaries will be responsible for a 25% co-pay of their covered prescription costs until they reach an initial coverage limit of $2250. When the beneficiary reaches this limit of $2250, he or she has a gap in coverage until reaching the total annual out-of- pocket expense of $3600. This gap in coverage is called the "doughnut hole." During this gap in coverage or "doughnut hole," the beneficiary must still pay the monthly premium amount and must pay for their prescriptions until they reach the $3600. After the beneficiary has reached the $3600 total annual out of pocket expense, the beneficiary will pay $2 for generic drugs and $5 for non-preferred drugs or a 5% co-insurance amount, which ever is greater.

Various insurance companies will offer Medicare Prescription Plans (PDPs). These companies can offer a plan that is "actuarially equivalent" to the standard Medicare Part D benefit package. For example, a PDP may create a plan that allows for tiers of coverage rather than the 25% co-pay discussed above. A tiered plan may call for a beneficiary to pay different amounts for generic, brand name, and preferred brand name drugs instead of the 25% co-pay on all covered prescription drugs.

Only the cost of drugs included in the plan formulary will count toward the beneficiary's deductible and out-of-pocket expenses. The federal government does not provide a list of drugs that must be included in plan formularies. If someone wants to get coverage for a drug not listed in the plan formulary, the person must apply for an "exception." I have heard that the exception process will be quick, and I have also heard that the process could involve a lengthy appeal process.

Enrollment period

The enrollment period begins November 15, 2005. Enrollment is voluntary, but everyone must enroll to receive coverage, including those who are eligible for limited income assistance. First open enrollment ends on May 15, 2006.

You can request an enrollment form by calling 1-800-686-1578, by obtaining the form by the internet at http://www.cms.hhs.gov/ , or from any Social Security office.

Existing beneficiaries who enroll after May 15, 2006 will have to pay a penalty for late enrollment unless they can show they had creditable drug coverage under another drug plan. This premium penalty is expected to be 1% per month.

EXAMPLE

________

*Yearly total costs $ 2,544

* This does not include drugs not covered by the plan and co-pays

after $3600 has been spent.

________

Persons with limited income and resources

Some persons with limited income and resources will be eligible for extra assistance with the monthly premiums, deductibles, and co-payments. If your annual income is below $14,355 for an individual or $19,245 for a married couple living together, you may not have to pay monthly premiums or deductibles. Also you could pay as little as $2 for your co-payments. If your annual income is higher than these amounts, you may be entitled to some assistance with monthly premiums, annual deductibles, and co-payments.

Your resources must be $10,000 for an individual or $20,000 for a married couple living together. Resources include bank accounts, stocks, and bonds, but do not include your home or car.

If you have Medicaid with prescription drug coverage and Medicare, Medicare and Supplemental Security Income, or if your state pays for your Medicare premiums, you will automatically get this extra help.

Persons who may be eligible for the extra assistance will receive an Application for Help with Medicare Prescription Drug Plan Costs (Form SSA 1020). If you receive this application, complete it and return as soon as possible. If you do not receive this form, you can obtain one by calling Social Security at 1-800-772-1213. You can also apply online at http://www.socialsecurity.gov/ .

After you apply, Social Security will review your application and notify you if you qualify for the extra help. If you qualify for the extra assistance, you still need to enroll in a Medicare-approved prescription drug plan. You can select a plan between November 15, 2005 through May 15, 2006.

* FPL = federal poverty level

Formulary

A formulary is a list of prescription medications for which the plan will provide coverage. Medicare Part D does not offer coverage for over-the-counter drugs.

Often times, the drugs listed in the formulary are listed in two or more groups. The difference between the lists is the amount that the beneficiary has to pay. The amount that the beneficiary must pay is called the co-pay. A typical formulary may include the following groups or tiers:

Group Drugs Co-pay size

Level 1 Generic drugs $

Level 2 Preferred drugs $$

Level 3 Non-preferred drugs $$$

The more dollar signs, the higher the co-pay amount.

Creditable coverage

If a person already has coverage for prescription drugs and it is considered to be actuarially equivalent to the Medicare Prescription Drug plans, the coverage is considered to be "creditable." If a person has creditable coverage, he or she may choose to keep this plan rather than sign up for a Medicare Part D plan without penalty. If later the person loses coverage through the plan, he or she will have a special enrollment period to enroll in Medicare Part D without a penalty in premium. The person also can enroll in Medicare Part D while he or she still has creditable coverage and not pay a premium penalty. However, if the creditable coverage ends and the person fails to enroll during the special enrollment period, he or she will be subject to the premium penalty. The penalty is 1% per month for every month that he or she delays past the open enrollment period.

If the person's current prescription drug plan is not creditable and the person does not sign up for Medicare Part D prior to the open enrollment period and he or she later signs up for Medicare Part D, he will have a premium penalty of 1% per month for every month he has delayed in signing up past the initial open enrollment period.

Medigap Policies

Beginning on January 1, 2006, Medigap policies with prescription drug coverage will no longer be sold. Existing policies can be renewed at the option of the insurance company and the plan member. If you purchase a Medigap policy with a prescription drug benefit, make sure you have the option to later switch to a Medigap policy without a prescription drug benefit so that you have the option to enroll in a Medicare PDP.

What should you do now that you know the basics?

If you are already enrolled in a plan with prescription drug coverage, you will be notified by letter from the plan whether the plan is considered to be "creditable coverage." Compare your coverage with Medicare Part D coverage to determine which plan is best for you. As long as the plan is considered "creditable," you may continue coverage through this plan without a Medicare Part D premium penalty if you later sign up for Medicare Part D as long as you enroll within the special enrollment period. If the plan is not considered "creditable," you must enroll in Medicare Part D within the first enrollment period to avoid a premium penalty.

If you decide it is best for you to enroll in Medicare Part D, do so within the first enrollment period. The premium penalty for late enrollment is 1% per month. So for example if a person signs up for Medicare Part D one year late, this person will pay a premium that is 12% higher than someone who signed up within the first enrollment period.

If you are currently taking prescription drugs, look at the formularies of any PDP in which you are considering enrollment. If your drug is not listed in the formulary, contact the PDP and ask for their written procedure to obtain coverage for drugs not listed on the formulary. This procedure should give you some idea of the process involved with obtaining an exception to the formulary.

If you purchase a Medigap policy with a prescription drug benefit, make sure that the policy provides the option to later switch to a Medigap policy without a prescription drug benefit so that you have the option to enroll in a Medicare PDP.

Terminology

Co-pay or co-payment - A fixed fee that subscribers to a medical plan must pay for their use of specific medical services covered by the plan.

Deductible - This is an amount contained in a clause of an insurance policy that relieves the insurance company or Medicare for an initial loss of the kind insured against. This amount is the responsibility of the person covered under the policy.

Federal Poverty Level - These are poverty guidelines issued each year by the Department of Health and Human Services. They are used for administrative purposes including determination of financial eligibility for certain federal programs.

2005 HHS Poverty Guidelines

SOURCE: Federal Register, Vol. 70, No. 33, February 18, 2005, pp. 8373-8375.

Formulary - This is a list of prescription medications for which a plan will provide coverage.

Medigap Policy - This is health insurance that pays for some of your costs in the original Medicare Program and for some care which it does not cover. If you are covered by a Medicare + Choice Plan, you don't need a Medigap policy.

Medicaid - This is a program that pays for medical assistance for certain persons and families with low incomes and resources. This program is jointly funded by federal and state governments. The program includes medical long-term care assistance and assistance to low-income pregnant women and poor children.

Medicare - Medicare is the national health insurance program for:

• Persons age 65 and older;
• Some persons under age 65 with disabilities; and
• Persons with end stage renal disease (ESRD) which is permanent kidney failure and requires either dialysis or kidney transplantation.

Medicare Part A - This is the Medicare program that pays for hospital and related services. It also covers limited stays in nursing homes, home health care, hospice care, inpatient psychiatric care, and blood transfusions. It does not pay for assisted living facilities, but may cover the costs of some services such as home health care and doctor visits.

Medicare Part B - This is the Medicare program that pays for some outpatient hospital and mental health services, doctor services (not routine physical exams, but many preventive screenings), laboratory fees, and medical equipment.

Medicare Part D - This is a Medicare plan which provides coverage for prescription drugs for eligible persons. This program begins January 1, 2006.

9/2005