The New Medicare Prescription Drug Coverage - AARP

[Pages:28]The New Medicare Prescription Drug Coverage

What You Need to Know

Contents

Medicare Prescription Drug Coverage

1

How Does Medicare Prescription Drug Coverage Work? 2

Important Dates to Remember

2

How much will Medicare prescription drug coverage

cost me and what will I get in return?

3

What are Medicare drug plans and how do they work?

6

Making a Decision About Medicare Prescription

Drug Coverage

7

Do I really need prescription drug coverage now?

7

Can I wait and sign up for Medicare drug coverage later when I

need it?

7

What if I already have prescription drug coverage or discounts? 8

Decisions, decisions--let's look at some choices

people can make

11

Choosing a Medicare Prescription Drug Plan

15

Joining a Medicare Prescription Drug Plan

17

Extra Help for People with Limited Incomes

18

How can I avoid being scammed?

20

Where to Go for More Help

21

Key Words and Definitions

22

Copyright ?2005 AARP.

Medicare Prescription Drug Coverage

Medicare will soon offer insurance coverage to help people pay for prescription drugs. The new program, known as Medicare Part D, will start January 1, 2006.

This new program for getting drug coverage is different from the way most people now get coverage for other health services under Medicare. Because it's new, it may seem strange at first. But this booklet will help you understand it and help you through the decisions you have to make.

These are some things you need to know right away:

> Everyone on Medicare can get drug coverage. No one can be denied for health reasons or level of income.

> The program is voluntary. You don't have to sign up. You may not need to if you already have good drug coverage from elsewhere.

> There is no single Medicare drug plan. To get coverage, you must enroll in one of the private drug plans Medicare has approved.

> If you have a limited income, Medicare will pay almost all your drug costs. (To learn more, see "Extra Help for People with Limited Incomes," page 18).

> If your drug costs are very high, a Medicare-approved plan will cover up to 95% of costs beyond a certain level in any one year.

> Plans will vary, including what drugs are covered and how much you will have to pay. So compare carefully.

> Medicare Part D drug coverage is not the same as the Medicare-approved drug discount cards available in 2004 through 2005. That temporary program offered only discounted prices. The new program is permanent and offers insurance protection for drug costs now and in the future.

Whatever your circumstances, it's worth checking out what Medicare drug coverage offers. In this booklet you will learn:

> how Medicare prescription drug coverage works.

> how to decide if you need it.

> how to find help picking a Medicare drug plan that meets your needs.

> how to sign up.

> where to go for help.

Extra Help

If your income is limited (less than $14,355 a year for a single person or $19,245 for a married couple living together in 2005) see "Extra Help for People with Limited Incomes," page 18. This section describes Medicare's special program that gives full drug coverage with low co-payments and low or no deductible, and explains how to apply for it. This extra help can greatly reduce drug costs for people who qualify.

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How Does Medicare Prescription Drug Coverage Work?

Anyone in Medicare can get the new drug coverage, known as Medicare Part D. Being "in Medicare" means enrolled either in Medicare Part A (which covers hospital and some home health care as well as skilled nursing facility care) or Part B (doctor visits and other outpatient care).

If you do not want Medicare drug coverage, you do not have to sign up for it. But be careful. If you don't sign up when you first can, and later change your mind, you may then have to pay more for it. (See more about this late penalty on page 7.)

To get Medicare drug coverage, you must enroll in one of the private insurance plans that Medicare has approved. The plans will vary in the coverage they offer and the payments they require, so you will have choices. But the overall value of each package must be at least as good as the "standard" Medicare prescription drug benefit, which is the minimum set by law.

How to pick a plan will be explained further on in this booklet. First you need to know how the Medicare drug coverage works.

Important Dates to Remember

October 1, 2005: Private insurers approved by Medicare will start to send people marketing information about their drug plans.

October 13, 2005: You can start comparing Medicare drug plans online at or by calling 1-800-633-4227.

November 15, 2005: First day you can sign up with a Medicare drug plan.

January 1, 2006: First day you can use Medicare's drug coverage if you have already joined a plan.

May 15, 2006: Last day you can join a drug plan without paying a penalty, unless you qualify for an exception. (People not yet on Medicare will be able to sign up for drug coverage later when they first join the program.)

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How much will Medicare prescription drug coverage cost me and what will I get in return?

The standard Medicare drug benefit offers insurance that will pay some of your drug expenses and will protect you against very high costs. If you have additional drug coverage--from an employer or a state pharmacy assistance program, for example--this will reduce your out-ofpocket expenses more.

During a calendar year, here's how the standard plan works:

Monthly Premium

The premium is the amount you pay each month to a Medicare drug plan sponsor to purchase drug coverage. The actual amount will depend on which plan sponsor you choose. The average premium for standard drug coverage in 2006 is expected to be about $32. But some plans will charge more and some less.

This premium will be in addition to your monthly premium for Medicare Part B. You can choose to have the drug premium taken out of your Social Security check or pay it directly to your Medicare drug plan sponsor. Each person must pay a premium as an individual. There are no discounts for married couples.

Annual Deductible

The deductible is the amount you have to spend on drugs at the beginning of the calendar year before your coverage kicks in. In 2006, the deductible can be no higher than $250, though some plans may set a lower limit.

Initial Coverage

In 2006, if you have signed up for Medicare's prescription drug coverage, you will pay a $250 deductible toward the cost of your drugs. After you have paid this deductible, the plan will cover 75% of the next $2,000 of your drug costs, and you will pay the remaining 25%. In other words, the plan will cover $1,500 toward this amount, and you will pay $500. At this point, you will have paid a total of $750--your $250 deductible, plus the $500 just explained.

Coverage Gap

After the initial coverage limit described above, there is a gap in Medicare's coverage (also known as the "donut hole"). This means that in 2006 you could pay up to an additional $2,850 before Medicare's coverage continues. While you are in this coverage gap, the plan will pay nothing toward your drug costs.

However, if you have extra coverage from a state program or elsewhere that adds to Medicare's, this may narrow or eliminate the gap. Some drug plans may offer similar extra coverage, probably for a higher premium. If you have limited income and qualify for Extra Help, you will not be affected by the coverage gap (see "Extra Help for People With Limited Incomes," page 18.)

Catastrophic Coverage

If you have drug expenses that go above the coverage gap, the plan covers up to 95% of the rest of your prescription costs until the end of the calendar year. There is no limit to

3

this coverage in any one year. It is called "catastrophic" because it is intended to protect you against very high drug bills. Under the standard drug benefit for 2006, catastrophic coverage begins after you've spent $3,600 on drugs out-of-pocket over the course of the year, not including premiums. ($3,600 = $250 deductible + $500 in copayments + $2,850 in the coverage gap.) At this level, you will pay only $2 a prescription for generic drugs and $5 a prescription for brand name drugs, or 5% of the cost of each prescription--whichever is higher.

Who tracks my out-of-pocket expenses in the Medicare coverage gap? If you continue to get drugs through your Medicare drug plan during the gap, the plan will keep track. If you buy any from elsewhere, you must send the receipts to your plan. But only drugs that are covered by your plan will count toward the $3,600 out-of-

pocket maximum (unless your plan has allowed you an exception for a drug it doesn't usually cover). Also, any drugs bought from Canada or other foreign countries do not count. Once the maximum is reached, your plan automatically starts your catastrophic coverage.

What if another plan pays for my drugs in the coverage gap? Whoever provides your other drug insurance will work with your Medicare drug plan to ensure that you receive the correct coverage. However, not all kinds of extra coverage count towards the out-of-pocket maximum. If they don't, it means it will take longer to qualify for catastrophic coverage. Drug costs that do count toward the out-ofpocket maximum include those that are paid for by a family member and some state pharmacy assistance programs. Those that do not count include costs

Medicare Drug Benefit At-a-Glance (Calendar Year 2006)

Prescription Drug Spending--(if you have no Medicare-Approved Plan drug coverage other than Pays Medicare)

$0-$250

$0

You Pay--(if you have no drug coverage other than Medicare)

Up to $250 Deductible

$250-$2,250

$2,250-$5,100 Coverage Gap/Donut Hole

75% of drug costs-- Up to $1,500

0% of drug costs--$0

25% of drug costs-- Up to $500

100% of drug costs-- Up to $2,850

Subtotal:

Up to $1,500

Up to $3,600 out-of-pocket

Over $5,100 (Catastrophic Benefit)

95%

5% or $2 copay/generic $5 copay/brand name

Note: Your premium (about $32 per month/$384 per year in 2006) is not included in what you pay as shown in the chart above.

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paid by other insurance, including from employers, unions, workers compensation or any government programs such as veterans and military retiree benefits.

Can I delay reaching the Medicare coverage gap? Yes. Using lower-cost drugs will stretch your $2,000 initial coverage. Ask your doctor if a generic drug or lowercost brand name drug would work just as well for you as the one you now take.

Using these kinds of drugs could also reduce your copayments.

The chart on the previous page and below show the relationship of your drug expenses and Medicare prescription drug coverage. They describe only the standard coverage. Medicare drug plans may offer something different, but they must have at least the same overall value.

Your prescription drug spending* Over $5,100 5%

$2,250?$5,100

$250?$2,250

25%

0?$250

95% 100% 75% 100%

Note: Premiums not included. * If you have no other prescription drug coverage.

You Pay Medicare-Approved Plan Pays

Catastophic benefit

Coverage gap

Deductible

Up to $3,600 out-of-pocket spending

5

What are Medicare drug plans and how do they work?

To get Medicare drug coverage, you must enroll in one of the private plans that Medicare has approved. A wide range of plans will be offered. Some will operate nationally, others only in certain regions of the country. You will be able to compare details of each plan available in your area, starting October 13, 2005.

Broadly, there are two kinds of Medicare plans offering drug coverage:

> A "stand-alone" plan that offers only prescription drug coverage. This type may suit people who wish to stay in (or change to) the traditional Medicare feefor-service program for their other health care coverage.

> A Medicare Health Plan that offers comprehensive coverage for medical care plus coverage for prescription drugs. This type may suit people who prefer managed care.

Medicare Health Plans are alternatives to the traditional Medicare program. They have been in Medicare for several years and used to be known as Medicare+Choice plans (or Part C of the Medicare program). Now they are known as Medicare Advantage plans or just Medicare Health Plans.

Among the different kinds of health plans are: Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Point of Service (POS) plan, private fee-for-service (PFFS). Most are variations of managed care. In some, you may use doctors only from the plan's network--that is, doctors who have a contract with the plan. In others, you can also choose doctors from outside the network,

but you'll likely pay more to do so. Starting January 1, 2006, all Medicare

Health Plans (except PFFSs) must offer at least one option that includes prescription drug coverage. If you select a PFFS Plan that does not include drug coverage, you can choose to get drug coverage separately from a stand-alone Medicare drug plan.

There will be a lot of variations among the plans in the drug coverage they offer. By law, it must be at least as good as the standard Medicare coverage in overall value. But there will be differences in the premiums and copayments they charge, which drugs they cover, what prices they charge for drugs, and which pharmacies they use. Those differences are important to know when you want to choose a plan (see page 15).

If you sign up for a plan, you'll receive its prescription drug card. When you need to fill a prescription, you will show the card at the pharmacy (or send its number to a mail order pharmacy service). The pharmacist will use the card to access your information electronically. That's how the pharmacist will know what to charge you--whether you still have part of your deductible to pay, whether or not you have extra coverage that affects what you will pay, what your copayment should be, and, finally, whether you are in Medicare's coverage gap.

Now that you know how the new drug coverage works, you need to make a decision--sign up for it or not? Only you can make this decision, but you need to think it through carefully. These are things to consider.

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