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Medicare Part D: A New Prescription Drug Benefit

All Medicare beneficiaries are eligible for a new outpatient prescription drug benefit – called Medicare Part D – which begins January 1, 2006. The benefit will help pay for some medications and will be offered by Medicare-approved private drug plans. Medicare will set basic standards, but each private company will largely determine what it will offer. The benefit will be available both to persons in traditional Medicare and to persons enrolled in Medicare managed care plans. Many of the policies and rules that will govern Part D have not yet been decided. Part D is a complex program, and we urge you to seek individual legal advice when you make decisions about your prescription coverage.

Part D offers relief to those who currently have no prescription drug assistance. For those who are on both Medicare and MassHealth, Part D will replace MassHealth prescription drug coverage. These recipients will have to learn new systems to access their medications. Others, who currently have Prescription Advantage, Medigap, employer or retiree plans, or other sources of assistance, must carefully choose from among new options. Getting the most from Part D means learning about the program and how to reduce costs if you are eligible.

The cost of the Part D plan you choose depends in part on your income, savings, and certain resources. For 2006, standard costs include the following: a monthly premium (about $37); an annual deductible ($250); a 25% co-pay toward the next $2,000 worth of covered medications purchased ($500); 100% of the next $2,850 worth of medications purchased; and thereafter, "catastrophic coverage" under which you pay 5% and Medicare pays 95%. Therefore, if your covered medication costs are as high as $5,100, you will pay up to $3,600 out of your pocket before you reach catastrophic coverage.

Such costs are unaffordable for many. However, they may be reduced by a full or partial subsidy if your 2005 annual income is less than $14,364 (or $19,248 for a couple), and certain resources are less than $10,000 (or $20,000 for a couple). MassHealth recipients who are also on Medicare, as well as Medicare beneficiaries whose Medicare premiums are paid by MassHealth, will automatically receive a full subsidy. For them, all costs will be waived except for co-pays of $1 or $3 for generic drugs and $2 or $5 for brand names drugs. Others may qualify for different cost reductions, but they must apply for the subsidies and be approved. Millions of applications have been sent to those potentially eligible. If you think you qualify, but did not receive an application, call the Medicare Advocacy Project at 1-800-323-3205 or the Social Security Administration at 1-800-772-1213 or your local Social Security office.

For the most part, private companies will decide what drugs their plans will cover. Medicare requires that the plans offer at least two medications for each class of prescription drug such as gastrointestinal drugs or anticonvulsants. We will not know exactly what will be offered until October 15, 2005, when the plans begin marketing. At that time, Medicare will begin displaying comparative information on its web site (www.medicare.gov ). If the drugs you need are not covered, you may appeal.

May I Keep Using My Pharmacy?

Each plan will have its own network of pharmacies. Generally, you must purchase your medications at a pharmacy which is part of your plan’s network. Exceptions may be made to allow access to a particular pharmacy outside the network when it is the only one available.

No, but you may incur a penalty if you do not enroll when you are first eligible. The penalty will be 1% of the premium amount each month multiplied by the number of months during which you were eligible, but did not enroll, in Part D. The exception to this rule is that you will not be charged a penalty if your prescription coverage is at least as good as Medicare Part D ("creditable") and you do not give up that creditable coverage voluntarily. The details of what coverage will be "creditable," and under what circumstances ending coverage will be deemed voluntary, are not final. Employers and other insurance providers should advise you before October, 2005, whether their plans are "creditable" under Part D.

The Medicare Part D initial enrollment period is November 15, 2005, through May 15, 2006. Medicare beneficiaries on MassHealth will be automatically enrolled in the fall of 2005, with coverage beginning January 1, 2006. Those for whom MassHealth pays their Medicare premiums will be automatically enrolled in a plan in April or May of 2006, with coverage beginning June 1st, 2006. All other Medicare beneficiaries, even if approved for a subsidy, must enroll in a plan on their own to receive the benefit. When choosing a Part D plan, you should consider which plan best covers your medications, offers access to the pharmacies you prefer, and has the more manageable costs.

Medicare Part D will interact differently with different kinds of prescription coverage. For example, Prescription Advantage members may be required to join Part D, but the state may also agree to pay for Part D’s extra costs. If you have prescription coverage under a Medigap, employer, or retiree plan, there are many questions for you to consider. Is your current coverage "creditable"? When is termination of coverage considered voluntary? Are you allowed to carry Part D at the same time as other prescription coverage? Will your plan continue to be available after January 1, 2006? If so, how much will costs increase? What if the costs of your creditable coverage becomes too expensive? Many of the answers to these questions are not yet available and will depend on your particular circumstances. We encourage you to seek individual advice.

Note: This flier is for informational purposes only and current as of July, 2005.