One-third of Individuals on Medicare May be Eligible for Help with Prescription Drug Costs; Know Your Situation and Your Options Before You Leap
(RIVERWOODS, ILL., November 15, 2005) – While enrollment for Medicare prescription drug coverage under the Medicare Prescription Drug Improvement and Modernization Act of 2003 began today, Medicare beneficiaries would be wise to look before they leap, according to CCH INCORPORATED, a leading provider of healthcare law information and software (health.cch.com), and publisher of the Medicare and Medicaid Guide.
“It’s been three years since the law passed during which time a lot of effort has gone in to creating the new program,” said CCH Healthcare Law Analyst Jay Nawrocki. “Seniors, the disabled and their caregivers, don’t have three years to mull over their choices, but they do have until May 15, 2006 to decide if they want to participate in Medicare Part D. So they should not feel pressured to rush into any decision.”
Nawrocki noted that those electing a Part D plan before December 31 will have coverage beginning on January 1, 2006. Thereafter, through May 15, coverage becomes effective on the first day of the month following their enrollment.
Determine How Change Applies to You
The Medicare prescription drug program, referred to as Part D of the Medicare plan, defines a standard prescription drug benefit. For most beneficiaries, the estimated cost of participating includes a $35 monthly premium and a $250 annual deductible. Beneficiaries are required to pay a 25-percent co-payment on drug costs up to $2,250 in 2006. The beneficiary must pay for all drug coverage above this until they have incurred $3,600 in prescription drug expenses. The $1,350 in out-of-pocket costs between $2,250 and $3,600 thresholds is often referred to as the “doughnut hole.” Above that level, beneficiaries will be responsible for the greater of a 5-percent co-payment or a co-payment of $2 for generic drugs and $5 for brand-name drugs. There is some variance in the co-pay and premiums depending upon which of the many authorized Part D prescription drug providers a Medicare beneficiary chooses under the program.
However, before jumping in to do the math and determine which plan provides the best coverage for your particular situation, Medicare beneficiaries should determine whether or not they need even participate in a Medicare prescription drug plan and, if so, what type of support may be available to help them reduce or even eliminate the costs.
Retirement and Veteran Coverage
Individuals covered by a retirement plan may do better staying with that plan. While individuals who do not enroll in a Medicare Part D plan when first eligible to do so will be assessed a penalty equal to 1 percent of the base premium for each month they delayed enrollment, the fine is waived for those switching from an eligible retirement plan. Also, veterans eligible for prescription drug benefits from the Department of Veterans Affairs will likely be better off staying with that coverage.
Low-income and Dual-eligible Individuals
Low-income seniors and disabled individuals should be aware that there is assistance available to help them pay the premiums – or even avoid them all together. In fact, the Centers for Medicare & Medicaid Services estimates that nearly one in three Medicare beneficiaries qualify for help and can enroll in a Medicare prescription drug plan while paying little or nothing for the benefits.
How much help is provided is based on the Medicare beneficiary’s income and resources. For example, individuals with incomes below 150 percent of the federal poverty line and with liquid assets of less than $10,000 (or $20,000 for married couples) can receive a sliding-scale premium subsidy, pay just a $50 deductible and receive continuous coverage – with no lapse in coverage between $2,250 and $3,600 levels, subject to a 15-percent co-insurance. Also, rather than a 5-percent co-payment, they only have to pay $2 generic or $5 brand-name co-pays for prescription costs above $3,600.
Dual eligibles – or individuals who qualify for both Medicaid and Medicare – as well as those individuals who have income below 135 percent of the federal poverty line and liquid assets below $6,000 (or $9,000 for married couples) are not required to pay any premiums, deductibles or prescription co-pays under Medicare Part D. Additionally, they will have no lapse of coverage between the $2,250 and $3,600 levels. They will be subject to a $1 generic and $3 brand-name co-pay if they have income below 100 percent of the federal poverty line. If their income is higher than this, their co-pays are $2 and $5. Nursing home residents have no co-pay.
In the case of dual-eligible individuals, if they do not choose a Medicare Part D plan, the Centers for Medicare & Medicaid Services will automatically enroll them into a plan in the region where they live. Additionally, both nursing home patients and dual eligibles are allowed to change plans anytime they choose – not just during open enrollment periods.
“Historically, dual eligibles have had prescription drug coverage under Medicaid, but because how the states sometimes go about purchasing the coverage, the recipient may not even know that they were getting the coverage through Medicaid rather than Medicare,” said Nawrocki. “An elderly parent, with little or no income but living a middle-class existence in one of her children’s homes, may be very surprised to find out that she has been on Medicaid and that the government has now selected a prescription drug plan for her.”
Review Medigap Supplemental Insurance
Another important step for Medicare beneficiaries is to review their supplemental insurance in light of the prescription drug plan they choose.
Prior to the Medicare prescription drug program, one of the most common reasons Medicare beneficiaries purchased supplemental insurance was to help cover the costs of prescription drugs. Another common reason is to supplement the limited hospitalization coverage provided under Medicare Part A.
“Individuals do have the option to continue to buy supplemental insurance for prescription drugs rather than choosing to participate in a Medicare Part D prescription drug plan, however, the Medicare Part D plans are more advantageous as most drug costs are paid by Medicare and coverage does not run out at a certain level,” said Nawrocki. “ So, if you choose to go with a Medicare prescription drug plan, review your Medigap insurance. You still will want to keep the supplemental hospitalization coverage if that’s important to you, but you can cancel the supplemental prescription drug coverage as you’ll no longer be eligible if enrolled in a Medicare prescription drug plan.”
You Can Change Your Mind
With so much attention being paid to the new Medicare Part D options, many beneficiaries may feel that they’re being required to make a decision for their lifetime. However, for most eligible participants, the decision need only be for a year – until the next open enrollment.
“If you have few if any prescription drug requirements, then you can choose one of the lower cost plans. Should your situation change later in your life, you can always opt for one of the more comprehensive plans at the next open enrollment period,” said Nawrocki. “There’s some risk that you’d have some added costs until the next open enrollment if you did go on a costly prescription drug not covered under your currently chosen plan, but you should weigh these risks against the costs of paying higher premiums for years when you don’t require the higher level of coverage.”
Exceptions to open enrollment are made for dual eligibles and nursing home residents who are allowed to change their Part D plan during any time of year.
For 2006, the open enrollment runs from November 15, 2005 to May 15, 2006. In future years, open enrollment will run for approximately the last 6 weeks of the year – November 15 to December 31.
About CCH INCORPORATED
For more than 50 years, CCH INCORPORATED has regularly tracked, reported, explained and analyzed health and entitlement law for healthcare providers, insurers, attorneys and consumers. CCH is the premier provider of Medicare and Medicaid information. CCH is a Wolters Kluwer company (www.wolterskluwer.com) and part of the Wolters Kluwer Legal Unit. The CCH Health group site can be accessed at health.cch.com.
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