How to pick a Medicare drug plan

By Bankrate.com

2007 wasn't the only thing ticking away as midnight approached on New Year's Eve. So was the open enrollment period for the 2008 Medicare Part D drug benefit.

If you haven't heard about this program, you're not alone.

As a recently published Kaiser Family Foundation report noted, knowledge about the Part D benefit "has not increased appreciably among most participants," and many Americans still lack a clear understanding of how the Part D program works.

What it is

Medicare Part D offers no one-size-fits-all prescription drug plan of its own. Instead, the federal government has opted to subsidize private insurers so that they, in turn, could offer this optional drug coverage to Medicare beneficiaries. These private insurance plans must meet or exceed the drug benefit standard established by the federal government in 2003, and they potentially lower drug costs for most Medicare beneficiaries.

The good news is that everyone on Medicare is eligible to receive Part D prescription drug coverage. The bad news is that in order to obtain and benefit from it, it's up to beneficiaries to take the initiative and select a drug plan on their own and then to review that coverage annually to make sure it remains the best option for their needs. That's because premiums, deductibles, co-pays and the drugs covered in the plans change from year to year.

The annual open enrollment period runs from Nov. 15 to Dec. 31, and it's generally during this brief time frame that people can enroll in a new first-time plan or change an existing plan if they want Part D coverage in place as of Jan. 1.

You can get Medicare drug coverage in one of two ways: You can join a stand-alone Medicare drug plan, or you can join a more comprehensive Medicare Advantage plan, similar to a health maintenance organization or preferred provider organization, and get all of your Medicare health coverage from that single provider.

When else you can sign up

You can also join, switch or drop a Medicare drug plan:

• When you first become eligible for Medicare (in a time frame of three months before you turn 65 to three months after the month you turn 65).

• During the three months before to three months after your 25th month of cash disability payments, if you get Medicare due to the disability.

• Anytime if you qualify for "extra help." This includes people who have Medicare or Medicaid, who belong to a Medicare savings program or who get Supplemental Security Income benefits but not Medicaid.

In certain situations, you may also be able to join, switch or drop Medicare drug plans at other times -- for example, if you move out of a service area or live in an institution.

How it works

Once enrolled in a qualified plan, you generally have to pay a separate monthly premium as well as a yearly deductible of $275. After the deductible amount is paid, you will then pay 25% of the cost of covered Part D prescription drugs up to a coverage limit of $2,510.

In basic Part D plans, drug-related expenses above $2,510 and below $5,726.25 must be paid fully by the beneficiary. This is the program's controversial "doughnut hole," or coverage gap. Thereafter, though, Part D "catastrophic coverage" kicks in, covering 95% of prescription drug costs for the rest of the year. That means you'll pay the co-insurance amount (5%) for your drugs or a small co-payment ranging from $2.25 to $5.60 for each prescription.

What it costs

Costs vary depending on the policy you select. The premiums for a basic Part D drug plan can cost up to $25 a month, while premiums for more comprehensive policies, which pay for some or all of your drugs in the doughnut hole, can run from $50 to $75 per month.

Consequently, if you take many drugs, the additional $300 to $900 per year you pay in premiums for a more robust Part D plan could be worth the extra money because you'd likely come out ahead financially.

What happens if you don't enroll

If you have low drug costs, getting Medicare drug coverage could cost you more now, but it will protect you from high drug costs in the future. Remember, we're talking insurance here. Joining Part D when you are first eligible to do so means that you pay a lower monthly premium than if you delay enrolling in an eligible plan for a year or two.

There's a financial penalty for not joining Part D when you are first eligible: It is 1% of the monthly premium for each month you don't enroll, and it is applied to all of your monthly premiums for the rest of your life.

Continued: Do you qualify?

You may qualify for a low-income subsidy from Medicare to pay drug costs if, in 2007, your income was below $15,315 ($20,535 for a married person living with a spouse and no other dependents) and you have resources of less than $11,710 ($23,410 for a married person living with a spouse and no other dependents). To apply, call Social Security at 1-800-772-1213 or go to the agency's Web site.

You automatically qualify for extra help if you have Medicare and meet one of these conditions:

• You have full Medicaid benefits.

• You get help paying your Part B premiums from your state Medicaid program.

• You belong to a Medicare savings program.

• You get Supplemental Security Income benefits without Medicaid.

How to choose a plan

Before you examine the plans available in your area, list the medications you take and add up how much you spend on those drugs. Then go online and access the Medicare Prescription Drug Plan Finder, an online tool that allows you to compare coverage options in your area.

These online resources make it easier for you to see what kind of coverage each plan offers. They help you to identify plans that will be accepted by your preferred pharmacy (and other nearby pharmacies), as well as highlight which plans provide for additional cost savings, such as those available through mail-order prescriptions.

People taking a large number of medications might find that no one available plan's formulary will really fit their needs and, in such cases, a doctor's assistance could prove helpful.

"Have your doctor review both the drugs you're currently taking and the formularies of the two or three plans you may be considering, and ask if there are any options or changes you can make," says Deane Beebe, the communications director of the Medicare Rights Center.

Things to consider when comparing plans:

• Coverage. Check to see whether the plan covers your specific prescription drugs. Medicare plans have a list of drugs covered by the plan that must always meet Medicare's requirements. Even though a particular drug might be on the plan's list, there may be special rules for filling the prescription.

Be aware that a plan's formulary may change during the year because drug therapies change, new drugs are released and new medical information becomes available. If there is a formulary change that affects a drug you take, your plan must notify you at least 60 days in advance. You might then have to change the drug you use or pay more for it. In some cases, you can continue taking the drug you were on until the end of the year. You can also ask for an exception or appeal.

• Cost. Check to see how much your prescription drugs cost in each plan. If you currently have prescription drug coverage, compare your current costs to the costs of the Medicare plans you are considering. Your monthly premiums, deductibles and your share of the cost of each drug (co-payments and/or co-insurance) will vary with each plan. You may be able to pick a plan with or without a monthly premium, yearly deductible or coverage gap.

• Convenience. Make sure the plan's pharmacies include the ones you want to use. Some plans also allow you to get your prescriptions through the mail. And if you spend part of the year in another state, make sure you find a plan that will also cover you there.

Once you find a Medicare drug plan that best suits your medication and financial requirements, join it by either calling the plan or enrolling online.

If you need help comparing plans:

• Go to the Medicare Web site.

• Call 1-800-MEDICARE or 1-800-633-4227. TTY users should call 1-877-486-2048.

• Call your state health insurance assistance program.

Have your Medicare card, a list of your drugs and their dosages, and the name of the pharmacy you use on hand.

This article was reported and written by Kamil Z. Skawinski for Bankrate.com.