Convoluted as ever, Medicare's patchwork system of prescription drugs and health coverage is at least becoming more familiar as it enters its fifth year. Starting Nov. 15 and running through Dec. 31, people 65 and over and those with disabilities have their annual opportunity to pick coverage from dozens of insurance plans. Most will probably stick with the plan they chose last year, Medicare officials say. But that can be costly. Plans often shuffle formularies, premiums and copayments year to year. One that served you well last year could cost hundreds of extra dollars this year. This special annual report of LifeTimes can help you navigate the possibilities, whether you prefer traditional Medicare or a private health plan.
Our comparison charts are a good starting place, but they don't take into account your specific drug needs. Even plans that rebate your monthly Part B premium can prove very costly if they charge an arm and a leg for the drugs you need.
For a detailed analysis of your specific costs, you have to have access to a computer to search Medicare's Web site. Our step-by-step instructions on the following pages can guide you through it. If you aren't computer-savvy, ask a friend or family member to help. It can save you hundreds of dollars.
Before you make any choice, it's important to understand how Medicare's health coverage and drug benefits fit together. Here are the basics:
Understand different types of Medicare
"Traditional'' Medicare is managed by the government. Its premiums, copayments and deductibles can cost more than a private managed care plan, but you get to pick and switch doctors and hospitals at will.
Parts A and B are the health care components of traditional Medicare, covering doctor bills, hospital bills and other services.
Part D covers prescription drugs. It is managed by private insurance companies that offer "stand-alone'' plans, called that because they offer only drug coverage. You pay an extra monthly premium, as well as deductibles and copayments. Stand-alone drug plans are used only in conjunction with Medicare's traditional Parts A and B.
"Medicare Advantage'' plans, once known as Part C, are run by private insurance companies. Medicare pays the insurance company to administer all your care, including doctors, hospitals and drugs. Copayments and deductibles are often less expensive than with traditional Medicare, but the plans restrict the doctors and hospitals you can use.
Some Medicare Advantage plans provide benefits not covered by traditional Medicare, like hearing aids and eyeglasses. They may pay part of your Part B premium. But in some circumstances they can turn out to be more expensive than traditional Medicare.
Medicare Advantage plans comes in four basic types.
• HMOs, where you are restricted to a network of doctors, hospitals and other providers. Sometimes, you can't see a specialist without a referral from your primary doctor. Some HMOs allow out-of-network care for higher prices.
• PPOs also have provider networks, but give you more flexibility in seeking care outside the network. PPOs are usually more expensive than comparable HMOs.
• Special Needs Plans are HMOs or PPOs that serve people living in nursing homes or people with chronic illnesses. You may need a specific condition like diabetes or COPD to qualify for some plans.
• Private Fee for Service plans negotiate rates from doctors and hospitals on your behalf. A sales agent might say you get to pick your own doctors, but that's only partly true. In practice, many providers refuse to treat PFFS patients. If choosing your doctors is important, make sure they accept payments from the plan before signing up.
Review your options
If you do not pick new coverage by Dec. 31, Medicare will continue your current arrangement. Something to consider: It could be a lot more expensive this year.
Explore outside drug coverage
If you qualify for drug coverage outside of Medicare, you probably don't need a Part D stand-alone drug plan or a Medicare Advantage plan with drug coverage.
For example, VA, Tricare and the Federal Employee Health Benefits program offer good drug coverage, as do many retiree plans run by employers and unions.
Make sure your employer or union can certify that its coverage is "creditable'' or you could face a penalty down the road. "Creditable'' means that the plan is as generous in coverage as Medicare drug coverage.
Get drug coverage of some kind
If you do not have drug coverage outside of Medicare, you should buy either a stand-alone drug plan or a Medicare Advantage plan with drug coverage as soon as you become eligible for Medicare or you will face a hefty premium penalty if you need drug coverage in the future.
In recent years, Target, Kmart, Wal-Mart and other retail outlets have offered generic drugs and some brand-name drugs for $4 or less. Pharmaceutical companies sometimes give away free or low-cost drugs to people with low incomes.
Despite this, it's still a good idea to sign up for some kind of plan, even if you don't use it right away. You can buy a stand-alone Part D plan or a Medicare Advantage plan with drug coverage for less than $240 a year. That protects you against penalties and gives you drug coverage in case you get sick.
Learn the specifics
Whether you buy a stand-alone plan or a Medicare Advantage plan, Medicare's drug coverage formula follows a basic pattern:
• The plan negotiates discounts from pharmacies and establishes a "formulary'' of drugs it will cover, and at what prices. You get your drugs through a retail pharmacy or through the mail.
• You pay a premium for coverage, though some Medicare Advantage plans waive that premium.
• You pay a deductible before coverage kicks in, though many plans waive the deductible.
• After any deductible is met, you pay a portion of your drugs' cost until you reach the "coverage gap,'' sometimes called the "doughnut hole." These copayments might range from nothing for a generic medication to $70 or more for brand-name drugs.
• You reach the coverage gap when the total cost of the drugs reaches $2,830. Note that the total cost is what the plan pays the pharmacy, not what you pay the plan. If your plan buys your drugs for $500 a month, but charges you only $100, for example, you will hit the coverage gap in less than six months.
• In the coverage gap, you pay 100 percent of the cost of the drugs, though some plans still cover generic drugs and a few brand name drugs in the gap. The coverage gap continues until your out-of-pocket payments for drugs total $4,550.
• After your out-of-pocket payment costs reach $4,550, you qualify for "catastrophic'' coverage. In this phase, your copayments for both brand and generics are quite low.
Insurance premiums do not count toward out-of-pocket costs. People who take a lot of drugs and expect to reach catastrophic coverage should consider buying a low-premium plan with a deductible, instead of a higher premium plan with no deductible. The lower premium saves you money up front and paying the deductible helps get you into catastrophic coverage more quickly.
Compare plans online
Many people simply pick plans with the lowest monthly premiums and zero deductibles. But beware: That could cost you money — not save money — depending on your drug needs.
The only thorough way to compare the cost of plans is on Medicare's Web site, www.medicare.gov. That's because you can enter your particular drugs into the computer, which then calculates how much each plan will cost.
The Web site also contains quality ratings from people who have used many of the plans.
Compare plans on paper
The following pages contain charts about stand-alone Part D drug plans and two charts about Medicare Advantage plans with drug coverage.
Note the low and high estimated costs for each plan, as calculated by Medicare. These costs include out-of-pocket expenses, including premiums, deductibles and copayments.
Plans that seem economical for a younger person in good health may not be best for someone who is older and needs more care.
These estimated costs are general guidelines. Your actual costs could be thousands of dollars higher if a plan's formulary fails to cover a few of your drugs. That's why it's so important to use Medicare's Web site to factor in your drug use.
People with little income and minimal assets may qualify for special subsidies that can dramatically lower their out-of-pocket costs for a drug plan. The 2009 income limits were $16,245 for a single person and $21,855 for a married couple, including Social Security. Your liquid assets (stocks, cash, savings accounts, etc.) had to be lower than $12,510 for a single person and $25,010 for a married couple.
These thresholds may rise a bit for 2010. So if you fall below them or a little above them, call the Social Security Administration toll-free at 1-800-772-1213 to sign up for extra help or sign up online at www.socialsecurity.gov.
Enroll in a plan
Once you choose the plan, call its toll-free telephone number to enroll. Have your Medicare card ready when you call.
Florida's Department of Elder Affairs has excellent volunteers who help people 65 and older and disabled people with their insurance issues. The program is known as SHINE.
You can call for an appointment, and a trained volunteer will call you back. The volunteers can use Medicare's Web site to help you find a suitable plan. To contact a volunteer, call Florida's Senior Help Line toll-free at 1-800-963-5337 between 8 a.m. and 5 p.m. weekdays. The program will refer you to the nearest SHINE office.
You can also call a Medicare office toll-free at 1-800-633-4227 for help. This office has hundreds of employees trained to take calls but they usually don't spend as much time with callers as SHINE volunteers do. If you have a formal complaint about an insurance company, you should call the Medicare number.
Stephen Nohlgren can be reached at email@example.com or (727) 893-8442.