Basics of Medicare part D

Part D – Prescription Drug Plan

The PDP provides prescription drug coverage to all beneficiaries who elect to enroll in a PDP or MA Plan that includes Part D.

Medicare beneficiaries may choose to join or leave a Medicare PDP during the following enrollment periods: The IEP for Part D is the 7-month period that surrounds the individual beneficiary’s first eligibility for Part D, beginning 3 months before the month of eligibility and ending on the last day of the third month following the month eligibility began. AEP, which occurs each year between November 15 and December 31. The Medicare PDP must accept all enrollments during this time. SEP, during which time beneficiaries in certain circumstances may change PDPs. The following are examples of such circumstances:

o He or she permanently moves outside the service area;
o He or she has both Medicare and Medicaid;
o He or she moves into, resides in, or moves out of an institution; or
o Other exceptions as determined by CMS.


Where to Find Additional Information About the Prescription Drug Plan

Additional information about the PDP can be found at
http://www.cms.hhs.gov/PrescriptionDrugCovGenIn on the CMS website.

An individual with Medicare and limited income and resources may qualify for extra help paying for Medicare prescription drug coverage costs. If the individual qualifies for extra help, he or she will receive assistance in paying for their drug plan’s monthly premium, yearly deductible, and prescription copayments. Applications for extra help may be filed at the local Medicaid office or by contacting the SSA.

Understanding Medicare Part D special enrollment periods

Most everyone knows that when you are about to become eligible for Medicare, you should choose a Medicare approved drug plan.  What many people don’t know is that Medicare Part D enrollment is not limited to first becoming eligible for Medicare or taking advantage of the Annual Enrollment Period (AEP) that takes place each year between November 15th and December 31st.

As a Medicare beneficiary, you may be able to take advantage of a Special Enrollment Period (SEP), where you are able to change your Medicare Part D enrollment. The following list defines the SEP and details the changes that can be made.

You are eligible for both Medicare and Medicaid. Also know as being dual eligible, you are able to join, change or drop prescription drug coverage anytime.
You qualify for extra help paying for your Part D coverage. You have the right to join, change or drop prescription drug coverage anytime.
You are enrolled in a State Pharmaceutical Assistance Program. You can join a prescription drug plan once during the calendar year.
You dropped a Medicare supplement (Medigap) the first time you enrolled in a Medicare Advantage Plan. Within the first 12 months of being enrolled in the Advantage Plan, you can drop that plan, return to original Medicare and pursue Medicare Part D enrollment.
You have a severe or disabling condition and there is a Chronic Special needs Plan available for you condition. You can join a Chronic Special Needs Plan that will  include Part D prescription drug coverage. You can join anytime, but have lost your ability to make additional changes until your Annual Enrollment Period.
You no longer qualify for a Chronic Special Needs plan because you no longer have the qualifying health condition. You can switch plans, but only have 3 months from losing your Chronic Special Needs Plan to do so.

2010 Medicare Part D Premiums Are Increasing

Medicare beneficiaries are scrambling to compare  2010 Medicare Part D prescription drug plans. The annual enrollment period (AEP) runs from November 15 through December 31st.
Insurance companies that offer Medicare Part D plans can adjust their plans on an annual basis. The AEP is the Medicare beneficiary’s opportunity to determine whether or not they would like to keep their current Part D plan or whether they should shop and compare Medicare Part D plans.

The “moving parts” of Medicare Part D

When comparing 2010 Medicare Advantage Plans it’s important to look beyond the monthly premium. There are several aspects that can affect how much you pay for your prescription drugs.

• The monthly premium ia an obvious contributor to cost.
• Whether or not the plan has an annual deductible can affect your prescription drug costs. 
• Co-payments can vary from plan to plan.
• What “tier” a drug is listed in can vary from plan to plan.
• The plan’s drug formulary itself can affect your overall costs.

It’s important to understand the overall picture as it relates to your Medicare Part D costs. Just because a plan has, what seems to be a reasonable premium, it doesn’t mean that it will necessarily cost you the least amount of money.
Many 2010 Medicare Part D Plans have included an annual deductible. Deductibles for 2010 can be as much as $310.
It’s wise to look beyond the monthly premiums and c0-pays to see what drug tiers your prescriptions fall in. just because one plan categorizes a prescription as tier two, does not mean that another plan will do the same.

The dreaded donut hole

The coverage gap or donut hole can put a real dent in your budget. You reach the coverage gap after the total prescription costs paid by you and the plan reaches $2830. Some plans offer some degree of coverage in the donut hole. Be sure to take this into consideration if you expect to reach the donut hole.

Another area to compare is the mail order pharmacy benefit. You can generally save some money with a three month supply delivered through the mail.

Enrolling part D - The correct time

Enroll in Part D when you are eligible

The best time to enroll in a Part D prescription drug plan is when you first become eligible. Often, a Medicare beneficiary may mistakenly believe that they can save some money by not enrolling in a Part D Plan because they are prescribed little or no medications.
Don’t fall into this trap. You could end up with higher costs due to the late enrollment penalty. Also, it’s called insurance for a reason. Even though you are on little or no prescription medicine, that is not an indicator as to what may happen in the future.

Here are some tips from the publication “Medicare and You”

Here are a few ways to avoid paying a penalty:
Join a Medicare drug plan when you’re first eligible.

You won’t have to pay a penalty, even if you’ve never had prescription drug coverage before. Don’t go for more than 63 days in a row without a Medicare drug plan

Creditable prescription drug coverage could include drug coverage from a current or former employer or union, TRICARE, or the Department of Veterans Affairs. Your plan will tell you each year if your drug coverage is creditable coverage. Keep this information, because you may need it if you join a Medicare drug plan later. Let your Medicare drug plan know if you had other creditable coverage.
When you join a plan, you may get a letter asking if you have creditable coverage. Complete the form they send you. If you don’t tell the plan about your creditable coverage, you may have to pay a penalty

Evaluating Medicare Part D Plans

Evaluating Medicare Part D Plans

Many people make the mistake of only looking at the monthly premium and then assume that the lowest premium is the best value. But there are several factors to consider beyond the monthly premium for Medicare Part D Plans. Other factors that you should consider include:

• The Plans co-pays. Co-pays can vary from one Part D Plan to another. These differences can make a difference in your overall annual costs.
• Whether or not there is an annual deductible. Medicare Part D Plans can include an annual deductible up to $310 for 2010.
• Which tier your individual prescriptions are in. Having a low monthly premium and having some of your prescriptions listed in a higher more expense tier than another Medicare part D Plan may cost you more over the course of the year.
• Whether or not all your drugs are included in the plan’s formulary. If a drug is not in the formulary, you will be paying for it out of pocket.
• Is there some coverage in the coverage gap (donut hole)? Several plans include some level of coverage in the donut hole. These plans will normally have a little higher premium, but it may be worth the higher cost if you know that you will more than likely reach the donut hole.

As you can see, there are several other factors that need to be considered when you are trying to find the best Medicare Part D Plan. Take the opportunity to utilize the official resources that are available.
Also, evaluate the Medicare Part D Plan that is included in a Medicare Advantage Plan. If your prescriptions are a large part of you annual health care cost, you should evaluate the Part D plan in an Advantage Plan just as you would a stand alone Medicare Part D Plan.

Medicare part D - premium payment and other costs

Medicare Part D Costs for 2010

Medicare private drug plan (Part D) costs will change again in 2010, and it is important to review your Medicare drug coverage to make sure that it will still cover the medications you need at a cost you can afford in the coming year. Knowing the new rates will help you avoid surprise charges that could keep you from getting the drugs you need.

Medicare’s Part D drug benefit is outpatient prescription drug coverage for anyone with Medicare. Unlike Medicare Parts A and B, which can be covered under Original Medicare, Part D is available only through private companies. If you have Original Medicare, you will choose a stand-alone prescription drug plan (PDP). If you have a Medicare private health plan (such as an HMO or PPO), you generally must get Part D drug coverage as part of your private health plan’s benefits package. Each Medicare prescription drug plan has its own list of covered drugs (formulary).
Part D plan costs change every year, and each private plan has different costs, so check with plans in your area to find out what you will pay this year. If you want to change your plan, remember that most people can change Medicare drug plans only during the Annual Coordinated Election Period, which runs from November 15 to December 31. Even if you are satisfied with your current plan, you should check if there is another plan in your area that offers better coverage at a lower price.

With most Part D plans you pay a monthly premium and part of the cost of each prescription (copayments or coinsurance) until total drug costs paid by you and the plan equal $2,830 (for most plans). Then you may have to pay the full cost of your drugs during the coverage gap, or “doughnut hole.” If you spend $4,550 in 2010 in out-of-pocket drug costs, you will then pay no more than 5 percent for each prescription (plus the premium). If your income is limited, you may be able to get Extra Help, the federal program that pays for most of the costs of Medicare drug coverage.

Part D is optional. If you have drug coverage now that is at least as good as or better than Medicare’s basic drug benefit, and you like it, you probably should keep it. The company that provides your drug benefits—such as an insurance company, employer or state program—should send you written notification once a year telling you whether your coverage is as good as or better than Medicare Part D (“creditable” coverage). If you do not have other coverage that is considered to be as good as Medicare drug coverage and you do not enroll when you are first eligible, you may have to pay a premium penalty when you do enroll. (You will not have to pay a premium penalty if you qualify for Extra Help, even if you enroll after you were first eligible).


2010 Medicare D costs Premiums
$31.94/month national average (Every plan has a different premium.)

Deductible
Up to $310 annually (Plans can choose to have a lower deductible.)

Coverage Gap Threshold
$2,830 (The amount that you and the plan must spend in total drug costs in most plans before you will hit the coverage gap.)

Catastrophic Coverage Limit
$4,550 (The amount of money that you must spend out-of-pocket before your drug costs go down significantly for the rest of the year.)

Medicare part D - Deductible and out of pocket expenses

CMS Releases 2010 Medicare Part D Benefit Parameters

Medicare Part D Parameters

The 2010 parameters below were calculated using the annual percentage increase method. The 2010 annual percentage increase is 4.66%.
Standard Benefit Parameters

                                                                                                      2009                                            2010
Deductible                                                                                    $ 295                                          $ 310
Initial Coverage Limit                                                                  2,700                                          2,830
Out-of-Pocket (OOP) Threshold                                               4,350                                          4,550
Minimum Co-Pays (Catastrophic Portion of Benefit)
Generic/Preferred Drug                                                                  2.40                                           2.50
All Other Drugs                                                                              6.00                                           6.30


Total Covered Part D Spending at OOP Threshold

The amount below represents a beneficiary’s total out-of-pocket expense before catastrophic coverage commences.
 
                                                                                                 2009                                     2010
Total Out-of-Pocket Expense                                         $ 6,153.75                             $ 6,440.00


Retiree Drug Subsidy Amounts
Plan sponsors who qualify for the retiree drug subsidy (RDS) will be required to meet increased cost threshold and cost limit levels for 2010.

                                                                                            2009                                  2010
RDS Cost Threshold                                                      $ 295                                  $ 310
RDS Cost Limit                                                             $ 6,000                                  $6,300

Thus, the maximum potential subsidy per covered retiree has increased from $1,597.40 to $1677.20.


Effects of New Parameters

Plan sponsors that want to remain qualified for the employer retiree drug subsidy will need to determine if their 2010 prescription drug coverage is at least actuarially equivalent to the 2010 standard Medicare Part D coverage. Those who provide coverage directly or indirectly through a Part D plan may want to review the impact of these new parameters on their plans.
In any event, plan sponsors may want to evaluate whether to move Medicare retirees into other options for medical and/or drug coverage for 2010 as the marketplace continues to develop.

Conclusion

Buck’s consultants would be pleased to discuss the Medicare Part D parameters for 2010, and options for providing prescription drug coverage to your Medicare eligible retirees.