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Guardians and those who assist the elderly will need to make a decision on behalf of the disabled or elderly person concerning enrollment in a Part D plan.  Employers will need to take action if they provide health insurance to active workers, retirees or their dependents.

Life Care Planning, Estate Protection, Disability,
VA & Medicaid Assistance Lawyers

Impending Medicare Changes

Impending Medicare Changes

 

            The Medicare prescription drug program (Medicare Part D), which becomes effective January 1, 2006, will provide limited prescription drug coverage for Medicare beneficiaries.  Enrollment of certain beneficiaries has already begun.  Guardians and those who assist the elderly will need to make a decision on behalf of the disabled or elderly person concerning enrollment in a Part D plan.  Employers will need to take action if they provide health insurance to active workers, retirees or their dependents.

 

            Beneficiaries who enroll in a Part D prescription drug plan will be required to pay a monthly premium in addition to the monthly Part B premium.  Since the standard premium amount for Part D is not set in the law, the premium amount may vary among different Part D Plans.

 

            The monthly premium for Part D is now estimated to be $37 or $444 per year.  Before Medicare coverage begins, beneficiaries will first need to meet a $250 deductible.  Once the deductible is met, beneficiaries will be responsible for a 25% co-insurance on covered medications until they reach an initial coverage limit of $2,250.  When beneficiaries reach the initial coverage limit, they will have a gap in coverage. This is known as the “doughnut hole.”  During this gap in coverage beneficiaries will continue to be responsible for the monthly premium and also will be responsible for the cost of their medications until they reach the total annual out-of-pocket expense of $3,600.  Once this out-of-pocket limit is reached, catastrophic coverage will begin and beneficiaries will pay $2 for generics and $5 for non-preferred drugs or a 5% co-insurance amount, which ever is greater.

 

            When you break this down, it is apparent each beneficiary will have true “out-of-pocket” expenses of at least $4,044 each year for their prescription medications before catastrophic coverage will kick in.  A married couple could have total expenses of $8,088 before catastrophic coverage began for both.

 

Part D Costs for 2006 per Individual Beneficiary

Beneficiary Expense

Out-Of-Pocket Expense

Cumulative Out-Of-Pocket

Premium

$444 per year (estimated)

$444 per year (estimated)

Deductible

$250 for $250 Rx

$694 for $250 Rx

Co-Pay (25%)

$500 for $2,000 Rx

$1,194 for $2,250 Rx

Doughnut

$2,850 for $2,850 Rx

$4,044 for $5,100 Rx

Catastrophic Coverage Co-pay

5% Co-Pay all additional Rx for rest of year. Start over next year.

$4,044 + 5% Rx for rest of year. Start over next year.

            But wait, the true out of pocket expenses for a beneficiary may far exceed $4,044.  First the law allows Part D plans to offer a different package than the standard package.  For example, plans can create tiers for co-payments or co-insurance for different types of drugs, requiring beneficiaries to pay different amounts for generic, brand name and preferred brand name drugs. In addition, only the cost of those medications included on the plan’s formulary (list of covered medications) will count toward meeting the beneficiary’s deductible and out-of-pocket expenses.

 

            Moreover, delay can add significantly to an individual’s costs because a late penalty is tacked on to the Part D premium of 1% per month for each month a beneficiary delays enrollment in a Part D Plan.  For example, if a healthy 65 year old individual delays enrollment in Part D for 3 years, the delay would cause a 36% late penalty to be added to the Part D premium.  Using the 2006 estimate for the Part D premium as the baseline, this would cause the yearly Part D premium to increase $159.84 to a total of $603.84.

 

            For further information on Medicare Part D, go to www.medicareadvocacy.org.

 

            Richard Habiger is an elder law attorney.  You may contact him at 618-549-4529 or Richard@HabigerElderLaw.com.