ASK KIM
Medicare Drug Plan Available Soon
by Kimberly Lankford

I've been hearing a ton of talk about the social security debate but haven't heard anything about the new medicare changes for a long time. Are they still scheduled to go into effect soon?

Yes, the new medicare prescription drug plan will still become available in January 2006, and a lot has been going on behind the scenes over the past few months.

From November 15, 2005, to May 15, 2006, everyone older than age 65 will need to decide whether to buy medicare's new prescription drug coverage, called Part D. The coverage will be available either as a stand-alone plan, costing about $37 per month, or as part of a medicare HMO.

The plans will be available from several private insurers -- Aetna, United Healthcare (which is teaming up with Walgreens) and some Blue Cross/Blue Shield plans, among others, are interested in offering the plans -- and the prices and coverage can vary a bit. But every plan must cover the following:

• First you will have to fulfill a $250 deductible.
• Once that is met, Part D will cover 75% of your drug costs up to $2,250.
• You pay 100% of your drug costs from $2,250 to $5,100.
• The plan would then cover 95% of your prescription costs above $5,100. (See the illustration below.)

The Centers for Medicare & Medicaid Services are currently reviewing the insurers' plans, which can be marketed starting in October. At that time, you'll also be able to get a lot of helpful information about choosing a plan from the Medicare.gov Web site. The site will compare plans available in your area; some will be offered nationally and some just regionally.

Until then, though, you can start to think about whether you're interested in Part D. Our Estimate Your Prescription Drug Savings calculator can help you run the numbers. It's essential to consider not only your current prescription-drug costs but also the bills you may have over the next few years. If you don't sign up for the plan by May 15, 2006, but change your mind later, you could be hit with a penalty that tacks on 1% per month to your premium for the rest of your life.

You can avoid that penalty for delaying only if you currently have a prescription drug plan that's considered better than medicare Part D, which includes some people with military or retiree health insurance. But not all retiree health insurance is considered better. So it will be important to ask your former employer if your coverage qualifies.

People with medigap prescription drug coverage (plans H, I and J) need to be particularly careful. Medigap companies can no longer sell plans H, I and J with prescription drug coverage to new customers after January 2006, but current policyholders can keep their coverage instead of going with Part D.

However, this coverage is not considered to be better than Part D. So if you keep the drug coverage through your medigap policy and don't sign up for Part D by next May, you will still be hit with the penalty if you change your mind and switch to Part D later. (You can't have both Part D and medigap prescription drug coverage.)

In most cases, Part D provides better coverage for the price than medigap's prescription plans do. Plans H and I only pay 50% of your drug costs after a $250 deductible, up to a $1,250 annual benefit limit. Plan J raises the benefit limit to $3,000.

Considering that the average price of these plans tops $3,000 per year, according to Weiss Ratings, you're paying a lot of money for limited coverage. And these premiums will probably increase because insurers can no longer sell new plans H, I and J with prescription drug coverage after January 2006.

If you decide to switch to Part D, you can either get that coverage through a medicare HMO (also called Medicare Advantage) and drop your medigap policy, or you can switch to another medigap policy that doesn't include prescription drugs (A through G now, plus K and L in 2006). Tell your insurer that you had a medigap prescription drug plan; otherwise, insurers could raise your rate or reject you because of your health.

There's another key step you can take now. If you qualify for medicare, earn less than about $14,364 per year ($19,248 for couples) and have assets of less than $11,500 (or $23,000 for couples), then you could qualify for a low-income subsidy to help pay some of the medicare drug plan premiums and deductibles. You should be receiving a letter from the Social Security Administration over the next few months with an application for the subsidy. If you have elderly parents who fit in that category, make sure they fill out the application.

For more information about the subsidy -- or anything about the new prescription drug plan -- contact your State Health Insurance Assistance Program (you can get the local number from the medicare help line at 800-633-4227). The New York State Office for the Aging also includes phone numbers and links to medicare-assistance pages at the SHIP in most every other state. The Medicare Rights Center also has a lot of helpful information about the new law.

Part D Described