Coming Soon: The New Prescription Drug Program - Medicare Part D

by Jeanne Finberg

The biggest change in our health care system in 40 years, the new prescription drug bill, entitled Medicare Part D, begins on January 1, 2006. Medicare Part D is an outpatient prescription drug plan for Medicare beneficiaries. On October 1, 2005, the different companies offering Medicare drug plans will begin to market those plans so consumers may receive a barrage of information very soon describing some of the plan choices. Plans cover different regions and will have different options for people to select from. Large states or regions, may have as many as 40 or 50 plan choices; some are stand alone prescription drug plans; some are part of Medicare managed care plans.

For most Medicare beneficiaries, participation in Part D is optional. For people currently on Medicaid, however, it is not really optional, because existing Medicaid coverage for most prescription drugs ends on January 1, 2006, and is replaced by Medicare Part D.

Beginning in October 2005, the lowest income Medicare beneficiaries and those who are on Medicaid (known as "dual eligibles") will be automatically enrolled in one of the new Medicare drug plans. However, they may change plans if they want.

For other Medicare beneficiaries, participation in Part D is truly voluntary, but they may have to pay a penalty in the form of higher premiums if they enroll later than May 2006. People with other equivalent coverage will not be penalized. General enrollment for Medicare beneficiaries begins on November 15, 2005 and continues into May 2006.

There are a number of costs associated with each Medicare Part D drug plan for those who are not low-income. Beneficiaries must pay a monthly premium. The actual amount will vary by region, but the average cost will be $32.20 per month in 2006. In addition, there is a yearly deductible of approximately $250, and then a beneficiary must pay 25% of the cost of their prescription drugs until they have spent $2250. At this point, they must pay the entire amount of their prescription drug costs until they have spent $5100 per year on covered formulary drug costs. (This feature has been nicknamed the doughnut hole.) After they have spent more than $3600 out of pocket on covered drugs, Medicare will pay for 95% of the rest.

Low-income Medicare beneficiaries not on Medicaid may qualify for additional assistance in paying for a Medicare drug plan. People whose income is below $14,355 per year ($19,245 per couple) and who have a limited amount of assets will qualify for assistance. If you fall within this category, you can apply for what is called a Low-Income Subsidy, or "Extra Help." You can now apply at your local social security office, your state Medicaid office, or online at www.ssa.gov. If you qualify for a full subsidy, you will not have to pay monthly premiums, you will have no deductible, and your co-payments may be as low as $1 for generic drugs and $3 for brand name drugs. If you qualify for a partial subsidy, you will pay a sliding scale premium of 25-75% of the full premium, you will have a $50 deductible, and you will make co-payments up to a set out-of-pocket amount per year. For more information on the Low Income Subsidy, see http://www.ssa.gov/organizations/medicareoutreacy2/.

Certain categories of drugs, including benzodiazepines, barbiturates and other over the counter medications are specifically excluded from coverage under Medicare Part D. It is up to each individual state whether or not to continue providing coverage of those drugs for dual-eligibles.

To help you decide how to choose a Part D plan, you may want to make a list of the medications you use and check the Center for Medicare and Medicaid Services (CMS) website (www.cms.gov). By mid-October, the CMS web tool is supposed to be operational and useful for comparing plans. The "Medicare and You 2006 Handbook" with plan information for all plans within a beneficiary's region should be sent to each Medicare beneficiary soon.

Jeanne Finberg is a staff attorney with the National Senior Citizens Law Center in Oakland, CA. She specializes in senior health issues, particularly Medicaid and long term care, and works to protect seniors from financial abuse.

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Published: September 15, 2005