Medicare Part D: The Prescription Drugs Benefit. Could enrolling in Part D be beneficial to me?

By Gema Hernández

While the country is still interpreting the effects the Medicare Modernization Act will have on how much individuals will pay for their medications, the drafting of the Medicare Part D section is underway. Understanding the benefits and the disadvantages of enrolling in Part D, also known as the Prescription Drug benefit, is therefore an important and challenging task. We have until January 1, 2006 to make up our minds, but within the next 3 months you will begin receiving confusing and massive information.

Like Medicare Part B, Part D is a voluntary option, and you would have to sign up for the plan. It is estimated that if you sign up for Part D the monthly premium would be about $35 dollars with an annual deductible of $250 before the drug coverage starts. These are of course, estimates, and knowing the multiple math errors that have been committed in the past estimating the cost of the Medicare program, it is very possible the deductible as well as the monthly premium will be higher by the time the program starts. Once the up front deductible is met the plan will cover 75% of your prescription drug costs up to $2,250. From that point forward if your medication costs exceed an out of pocket expense of $2,250 you will be responsible for paying the entire amount out of your pocket until you reach $3,600 in out of pocket prescription drug expenses. At that point, Medicare Part D will cover 95% of your prescription drug costs for the rest of the year.

If you like numbers, the above scenario should be fascinating to you. For the average person, like me, the number game does not answer the real questions; how much will my prescription drugs are going to truly cost me and whether or not I will have access to the latest medication and not just 10 year old medication with limited value to my present condition.

According to the Congressional Budget Office (CBO), by 2006 the average Medicare enrollee will spend $3,104 a year for prescription drugs. This number reflects the average expenditure, and you, as an individual, may pay less or more than the average, therefore, the first thing you need to do is to become aware of how much money you spend on prescription drugs. If you are relatively healthy with only one or two medications this plan is not for you. As a rule of thumb enrolling in the plan is going to cost you up front $250 for the deductible plus $35 per month for 12 months ($420), meaning that your total will be $670 dollars per year plus 25% of the cost of your medication. My basic math tells me that if you pay less than $800 a year for medication the plan is going to cost you money.

Once you know how much you are paying for prescription drugs per year, the second thing you need to do is to find out if the medication you are taking is part of the formularies that have been pre approved for Part D. If your medication is not in that formulary you should seriously consider the options of whether or not it is to your advantage to change medications. This is particularly important if your medication is making you feel better and providing you with the quality of life you desire with limited side effects. This is, in my opinion, an important drawback of the benefit. Explore what are the alternative medications available for your condition and talk to your doctor about those other options.

If you are comfortable changing medication then the financial component should be the focus of your attention. If you spend in the neighborhood of $900 to $1,500 a year enrolling in Part D could be a touch and go saving. The closer you get to spending $2,000 a year that is when you begin to see the financial advantages of Medicare Part D. If you now pay $2,000 a year on drugs, you would pay $688, or 34%, of your drug costs, and if you add the $35 dollars a month premium, your total out of pocket comes to $1,108 a year. With this scenario you come out ahead and save approximately $892 a year. The higher your yearly prescription drug costs, the more the savings you can realize enrolling in Part D.

Some of you assume that because you are now receiving retiree health coverage this is not going to impact you. I am sorry to say it will because many employers that are now offering their retirees health benefits coverage are revisiting this issue and exploring integration of Medicare Part D in their plans. If you are forced to enroll in the plan because you lose retiree health coverage offered through your former employer or continuation benefits, such as COBRA, you can choose to enroll in this plan later than January, 2006 without penalties.

Once the new Medicare Part D gets up and running in 2006, no new Medigap insurance policies with prescription-drug coverage will be sold. As you know, Medigap policies are used to supplement Medicare coverage by paying Medicare's deductibles and covering other gaps in coverage. This will no longer be an option. You can keep your Medigap policy if the plan does not offer drug coverage, or if you have a drug coverage policy independent of your other policy you will be allowed to renew it.

Start doing your homework now before you are forced to make a decision. Medicare Part D is here to stay.