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The New Medicare Prescription Drug Program: Are You Confused Yet?
Let Us Help To Explain This Important Program
The Medicare Prescription Drug Improvement and Modernization Act of 2003, which was signed into law in December 2003, makes major changes to Medicare. One of these changes is a new voluntary prescription drug benefit.
A Two Phase Approach To Change
There are two phases of the prescription drug assistance program. The first phase begins May 2004 when people eligible for Medicare can sign up for a special discount card to help with some of drug costs. Enrollment starts in May 2004 and continues until December 31, 2005. This is a temporary program, and it ends when the second phase of the Medicare drug benefit goes into effect on January 1, 2006. After December 31, 2005, the discount cards will no longer be used.
Phase One Details
Starting in June 2004, discount cards with a Medicare-approved seal may save you around 10 to 25% on your total prescription drug costs. These discount cards are available from private companies and typically have a cost of no more than $30 per year. The card is optional. Various companies offer different plans. It is in your best interest to shop around to find the card that best meets your needs. Some really important facts are:
- You can only get one Medicare-approved discount drug card at a time.
- If you already have a different discount card, you can keep that card and also get a Medicare-approved card. You would then use the one that gives you the best deal for your prescription.
- If you have drug coverage through an employer or former employer, you may not need the discount card at all.
- If you have a low income, you can get additional help, such as up to a $600/year credit on your discount card to pay for prescription drugs and possibly even a free discount card. Low income is categorized as less than $12,569/year for a single person or $16,862/year for a couple. These income limits change each year so be sure to check with Medicare for details that may affect you. Please be aware that you can not qualify for the $600 credit if you already have drug coverage from Medicaid, TRICARE for Life, or an employer group health plan.
Phase Two Details
The second phase is the actual Medicare Prescription Drug Benefit. You may see it called Medicare Part D. It will go into effect in January 2006. The first enrollment period is from November 15, 2005 to May 15, 2006. The drug benefit is voluntary. You do not have to sign up, but there may be a penalty if you choose to sign up at a later time. Here's how the standard drug benefit will work in 2006 for each person.
- You will have a monthly premium (likely to be about $35/month).
- There will multiple plans to choose from. Premiums will vary based upon what each plan offers.
- There will be a $250/year deductible.
- After the deductible, Medicare will cover 75% of drug costs, between $250 and $2,250. You will pay only 25% of your drug costs.
- You will pay 100% of the drug costs above $2,250 until you reach $3,600 in out-of-pocket spending. This is called the "Coverage Gap".
- Once your out-of-pocket drug expenses reach $3,600, Medicare will start paying again. You will then have reached the Catastrophic Benefit level. Medicare will cover up to 95% of drug costs from that point on. You will pay either $2 for generic drugs and $5 for brand-name drugs or 5% of the drug cost, whichever is greater when you are at this level.
- Drug plans may have lists of drugs they cover. The drugs will be in groups. These lists are called formularies or preferred drug lists.
The Benefits To Come In 2006
New Medicare Drug Benefits Starting In 2006
| Prescription Drug Spending | Medicare Pays | You Pay |
| $0 - $250 | $0 | Up to $250, this is your deductible |
| $250 - $2,250 | 75% of the cost | 25% of the cost |
| $2,250 - $3,600 "Coverage Gap" | $0 | You pay 100% of the cost |
| Over $3,600 Catastrophic Benefit | 95% | After you have spent $3,600 out-of-pocket, you will pay 5% or $2 copay (generic) or $5 copay (brand name) |
Please note that the above costs do not include the premium (about $35/month) that you will pay to have medicare prescription drug coverage.
For more information call your Medicare Office at 1800-MEDICARE or (1-800-633-4227) or visit www.medicare.gov online.
Other Changes To Come
There are other changes that will take place in Medicare starting in January 2006. The biggest change is that starting in 2007, the Part B Premium will become income related. People with higher incomes will pay higher premiums for Medicare Part B. This will be phased in over five years, from 2007 to 2011.
Take Your Time To Make An Informed Choice
We recommend that you shop for the card that is right for your personal needs based on the medications that you are using. Many of the card programs may list the medications and pricing online or you can check pricing by calling their 1-800 service number.
Choose the card that offers you the best overall discount. You may find that one medication is lower with one program, but that your other medications are more expensive. Choose the program that offers the best overall discount for all your medications combined. Unfortunately this may take some research, but it will be worth it in the long run.
If you sign up for your card in the month of May, you will be able to use your card for prescription expenses as early as June 1, 2004.
Take some time to make a good choice for your personal needs as you will not be able to change providers each time that you find a program that is cheaper. We understand that this new benefit program will allow you to change your prescription drug card provider only once during Phase One of the Medicare Prescription Drug Program until the new program goes into effect in 2006.
