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Making sense of the new drug plan

Medicare's imminent benefit covering prescriptions might seem daunting. Here's a guide to sorting through the 60-plus choices.

October 31, 2005|Daniel Costello | Times Staff Writer

Which one should I pick?

Millions of people are asking that question as they consider Medicare's new prescription drug plan, which rolls out Jan. 1. The voluntary program -- also known as Medicare Part D -- will allow seniors and the disabled who are covered under the Medicare program to get subsidized drug coverage.

Medicare beneficiaries have been bombarded with mail, phone calls and advertisements over the last several weeks from plans eager to sign them up. Enrollment starts Nov 15.

By now, they've probably realized it's more confusing than anything else.

California's 4.3 million Medicare beneficiaries have more than 60 plans to choose from -- each with its own premium, lists of covered drugs and participating pharmacies. The Bush administration estimates the coverage (which will cost the federal government at least $720 billion during the first 10 years) will save beneficiaries an average of $1,300 a year. But in fact, the savings can vary wildly depending on factors such as what kind of drug coverage someone currently has or to how much they spend on prescription drugs.

For The Record
Los Angeles Times Monday November 07, 2005 Home Edition Health Part F Page 8 Features Desk 2 inches; 84 words Type of Material: Correction
Medicare -- An article in last week's section on Medicare's new prescription drug benefit said that enrollees in a typical plan would pay for the first $250 in drugs each year and be responsible only for copayments on the next $2,000, after which they would pay for the entirety of the next $1,350 in drug costs -- the so-called "doughnut hole." Plan designs depend on each insurer and can vary considerably, but according to the government's example plan, that out-of-pocket amount would be $2,850.

A person who spends $1,500 a year on prescriptions, for example, can save about $550 on the new plan. But another person who spends just $500 may actually pay $198 more out of pocket because of premiums and drug co-payments.

How to make a choice among the blizzard of plans? "You don't have to understand every detail and every option," said Dr. Mark McClellan, administrator of the federal Medicare agency. "People just need to focus on what they want."

Following are some highlights and things to consider about the new drug plan.


One of the biggest misconceptions about the new drug benefit is that it's only for low-income seniors. In fact, all Medicare beneficiaries are eligible. People won't be automatically enrolled, however. Enrollees have to choose a plan and sign up through a private insurer or with Medicare, either on the agency's phone or its website.

Deciding if it's worth it

The plans make most sense for people who are already spending a lot of money on prescription drugs, and for low-income seniors, who may be eligible for financial assistance with premiums and drug co-payments.

On average, Californians will pay premiums of about $25 a month for the first year, although the actual costs for each plan can vary considerably depending on what's offered. This year, monthly premiums vary from nothing to as high as $60 a month, although cheaper plans usually have much leaner coverage, with higher deductibles and fewer covered drugs.

Which plan to pick

This essentially boils down to what prescriptions you use and how you like to pay for them, and the kind of medical coverage you have.

Plans can look very different, because the government is allowing insurers to structure them as they want. They merely have to be "actuarially equivalent" to each other -- they must, in other words, provide the same benefit in the end. For most people, the first $250 is not covered, but the next $2,000 is -- except for any co-payments you may have to make. Following this, you will have to pay the next $1,350: Experts refer to this as a "doughnut hole" in coverage. But after that, 95% of drugs are covered, which is meant to help people with catastrophically high drug costs in any given year.

There are two classes of plans among the dozens of offerings. The one you'll pick will depend on whether you're buying just a drug plan or adding it to your current managed care plan.

Seniors who choose to stay in Medicare's traditional fee-for-service plan can only buy what's called a stand-alone prescription drug plan. Those who are in Medicare Advantage HMO plans -- about one-fourth of all beneficiaries -- will now get the drug benefit added to their current plan. Whether the premium will rise, and by how much, depends on the plan.

"People need to sit down, take a breath and figure out what is best for them," said Bonnie Burns, Medicare policy and training specialist for California Health Advocates, a nonprofit Medicare education and advocacy group.

Employer drug coverage:

keep it or not

About 30% of Medicare recipients have drug coverage through a former employer, which is often better than the coverage the government is offering. Think hard before dumping that coverage, experts say. "Retirees who cancel their employer coverage and take the new federal benefit may not be able to go back if they later realize they've made a mistake," said Tricia Neuman, director of the Medicare Policy Project at the Henry J. Kaiser Family Foundation.

Which drugs are

covered, which aren't

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