Tuesday, November 9, 2010

7 Tips for Picking a Medicare Part D Plan

Beginning next week, Medicare Part D beneficiaries will have the opportunity to switch to a new prescription plan. Choosing a plan that covers your medications for a lower cost could save you hundreds of dollars in 2011. About 2.6 million beneficiaries enrolled in prescription drug plans will see a premium increase of at least $10 per month if they stay in their current plan. Current beneficiaries can choose a new Medicare Part D plan between November 15 and December 31. Here are some important factors to consider when choosing among the Part D plans in your area:

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Compare premiums. The average monthly Part D premium will be $40.72 in 2011 if beneficiaries remain in their current plan, which is up 10 percent from $36.90 in 2010, according to a Kaiser Family Foundation analysis. Average premiums vary considerably by location, ranging from $29.01 per month in New Mexico to $46.51 per month in Idaho and Utah. "We have seen plans that have had pretty substantial increases in premiums over the years," says Jack Hoadley, a health policy analyst at Georgetown University's Health Policy Institute. "What may have been the cheapest plan for you three or four years ago when you first signed up may not be good for you now." For the first time, in 2011 there will additional premium increases for high-income retirees. Part D enrollees with annual incomes above $85,000 ($170,000 for couples) will have a monthly adjustment automatically deducted from their Social Security check. If that amount is more than the amount you receive from Social Security, you will get a bill from Medicare.

Evaluate cost-sharing provisions. Premiums aren't the only prices you need to evaluate when choosing a Part D plan. Include the deductible or amount you must pay before your coverage begins in your calculations. Also consider the copayments or coinsurance you will need to pay for covered drugs. The Centers for Medicare and Medicaid Services has an online tool that allows potential and existing Medicare beneficiaries to enter the drugs they expect to take next year and compare expected out-of-pocket costs under various local plans.

Scrutinize the formulary. Each Part D plan has a list of covered drugs called the formulary. Most Medicare drug plans separate the covered medications into tiers, each of which has a different out-of-pocket cost. "Many plans are changing the amount they change for prescription drugs and adding and subtracting drugs from their formula," says Juliette Cubanski, a policy analyst at the Kaiser Family Foundation. "Even if you are happy with the coverage you have, it's important to know that your coverage might be changing between 2010 and 2011." If you are considering changing medications in the coming year, make sure a plan covers the potential new prescriptions as well.

Find out what authorizations are required. Some prescription drug plans require you to jump through a few hoops before your medication will be covered. A Part D plan may require prior authorization before paying for a drug, which means you or your doctor must contact the drug plan before you can fill certain prescriptions. "It's really important to look at whether a plan imposes certain utilization restrictions such as prior authorization that can affect a beneficiary's access to the medicines that they take," says Cubanski. Some plans also limit how much of a medication you can buy at a time and may require you to try one or more similar lower-cost drugs before they will cover the prescribed drug.

Get ready for more gap coverage. Most Medicare drug plans have a coverage gap called the "donut hole". The coverage gap begins after an enrollee incurs $2,840 in total drug spending and lasts until catastrophic coverage kicks in after an enrollee has spent $4,550 out-of-pocket. Beneficiaries who reach the coverage gap in 2011 will see lower costs this year as a result of changes made by the Affordable Care Act of 2010. Brand-name drugs purchased in the gap will be discounted by 50 percent in 2011 and plans will pay 7 percent of the cost for generic drugs in the gap. "If you are using brand-name drugs and reach the coverage gap, you are going to pay only about half the cost that you did last year for those same brand name drugs," says Hoadley. However, nearly three-quarters of plans will offer little or no gap coverage beyond what is now required by law, KFF found.

Some plans will be eliminated. New regulations aimed at getting rid of plans that are duplicative or with low enrollment have resulted in fewer Part D plans being offered next year. A record low of 1,109 prescription drug plans will be offered nationwide next year, down 30 percent from the 1,576 plans in 2010, KFF found. But you're still likely to have a wide variety of plans to choose from in your area. The average Medicare beneficiary will have a choice of 33 prescription drug plans in 2011. If your current plan will be eliminated in 2011, you will be automatically assigned to another plan with the same provider unless you choose a new one on your own.

Watch out for late enrollment penalties. It's best to sign up for Medicare Part D when you reach age 65 or lose your employer-sponsored prescription drug coverage. Those who delay their start date or go without prescription drug coverage for 63 days or more in a row will have to pay a late enrollment penalty. "It's an incentive so that people don't wait until they are really sick and then buy in," says Elizabeth Hargrave, a senior research scientist at the University of Chicago's National Opinion Research Center. "The longer you wait, the more your penalty will be once you are finally enrolled." The late enrollment penalty will be calculated in 2011 by multiplying 1 percent of the national base beneficiary premium ($32.34 in 2011) times the number of full months that you were eligible for but didn't join a Medicare drug plan. The final amount is added to your monthly premium for as long as your participate in any Medicare drug plan. For example, if you became eligible for Medicare Part D on May 15, 2006, but didn't sign up until 43 months later on Jan. 1, 2010, you will be charged a monthly penalty of $13.90 in 2011. The penalty amount could increase in future years as the national base beneficiary premium amount used in the calculation rises.

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