WNY Legal Services for the Elderly - The Medicare Prescription Drug Benefit

Medicare -> The Medicare Prescription Drug Benefit - What will it do?

The Medicare Prescription Drug Benefit - What will it do?

by Prof. Tony Szczygiel, SUNY at Buffalo Law School

Overview: An individual with Medicare can choose to enroll in a prescription drug plan.

Currently, 45 private Prescription Drug Plans (PDPs) offer the drug benefit to traditional Medicare enrollees in New York. Medicare Advantage (MA) members (such as Senior Blue, Senior Choice or Encompass65 members) can enroll only in the MA’s drug plan.

The Costs to you:

Premium:

The monthly premiums range from $0/month to more than $80/month ($960/yr). The national average premium is $32/month. The New York benchmark premium is $29.83/month. This premium will increase each year.

Annual deductible:

Your deductible can be no more than $250 for 2006, increasing to $265 next year.

Many individuals qualify for a low income subsidy that will lower premium and deductibles.

The Benefit to you: Each drug plan offers a benefit package, but these differ from plan to plan. However, every plan must give you at least the value of a basic plan set out in the Medicare law. The basic plan covers the following amounts each year:

First tier coverage: You pay 25% and Medicare pays 75% of the $2,000 of drug costs above the deductible. Your out-of-pocket cost for the initial $2,250 of drugs is $750 in 2006. For 2007 you will pay $800 out of the first $2,400 of covered drugs.

Second tier (the hole) : You are responsible for the next $2,850 (2006); $3,050 (2007).

Third tier (Catastrophic coverage): After $5,100 in incurred drug costs (your share: $3,600) Medicare will provide much greater help. You will pay the greater of a 5% coinsurance or $2 for generics/$5 for brand name drugs.

For 2007, this threshold will increase to $5,451.25 (your share $3,850).

If you qualify for Extra Help, you do not pay a deductible, the initial co-pay is reduced from 25% of the drug cost to no more than $5 per prescription, the hole and third tier co-pays are eliminated

Enrollment: The initial enrollment period for current Medicare enrollees runs until May 15, 2006. After that you can enroll during the Annual Enrollment Period or, in limited circumstances, during a Special Enrollment Period.

Late enrollment penalty: You may pay a higher premium if you do not enroll during your initial period of eligibility. The penalty amount is 1% of the premium each month you remain unenrolled. The penalty will not apply if you have “creditable coverage”, such as a Group Health Plan, EPIC, TRICARE, PACE or VA coverage.