How to Choose the Medicare Prescription Plan That’s Best for You
In the past few months, I’ve covered a wealth of information about Medicare, and there’s still so much more information to cover. Last month we talked about how Medicare works with employer-provided coverage. In this newsletter I’d like to educate you regarding the options available to you to help to cover the costs of prescription medication.
Remember that the text that’s blue and underlined in this newsletter allows you to link to our web site, with more information about the topic, just by clicking on it.
Studies show that about two-thirds of all people over age 65 take at least one prescription drug every day, and 25% take three or more.
Taking these numbers into account, you can imagine that drug costs can quickly add up. For many people, these therapies are life-saving, or allow them to maintain an excellent quality of life.
If you are hospitalized and need medications during your stay, those costs are covered by Medicare Part A. But Medicare does not have any coverage for drugs taken on an outpatient basis built into it. Instead, these costs are paid through private insurance companies in one of two different ways.
As an individual, you may chose to purchase a Part D prescription drug plan (often abbreviated PDP) from a private insurer. The only benefit provided by a PDP is coverage for generic and brand name prescription drugs. You still need coverage through Medicare (parts A and B) and we strongly recommend purchasing as Medicare supplement plan as well, to fill in what can be substantial gaps in traditional Medicare coverage.
Your other alternative is to purchase a Medicare Advantage plan. Often referred to as “Medicare Part C”, these plans are administered by private insurance companies, and not only cover hospital and doctor costs (what is traditionally covered by Medicare Parts A and B) but also the costs associated with prescription drugs. You might also hear people refer to these plans as MA-PD’s.
Coverage for your prescription drugs works the same whether you have a Part D plan or a MA-PD.
You pay 100% of drug costs up to the annual deductible, and then you pay a portion of the costs of your drugs and your insurance company shoulders the rest. Once the total retail amount of your drug expenditures reaches a set amount you enter what’s become commonly known as the “doughnut hole”, where you stay until you reach your out-of-pocket maximum for the year. At this point, you pay only $8.50 for brand name drugs and $3.40 for generic ones.
Did you know that a 16 year-old ship’s captain named Hansen Gregory is credited with putting the hole in the middle of a doughnut in 1847? Supposedly he needed a place to stash his deep-fried treat during a sudden squall, so he impaled it on the spoke of the ship’s wheel, thus changing the world forever. Well, maybe that’s a bit of an overstatement, but once you’re 65, the doughnut hole associated with prescription drug costs is likely to change your world.
The doughnut hole is the virtual place you end up after you run out of the initial drug benefits and before you reach your out-of-pocket maximum for the year. In the doughnut hole, you pay a percentage of the cost associated with a drug (and that percentage differs based on whether the drug is generic or brand name, at least for the next several years), and your insurance company pays the rest. The chart below shows how those percentages are changing over the next several years, as the federal government attempts to “fill-in” the doughnut hole:
|Year||Your portion for brand names||Your portion for generic|
Again, once you’ve reached your out-of-pocket maximum for the year, you’ll pay a flat rate for all prescriptions.
So if both PDP’s and MA-PD work essentially the same, does it matter which plan you choose?
The answer is a resounding “YES!”, and the reason is that each insurance company has a different list, or schedule, of drugs that they will pay for. If you are already taking prescription drugs, we can help you to find a plan that will give you maximum coverage for those drugs at the lowest monthly premium.
What can you do right now to get coverage in place for when you turn 65?
Visit our Medicare Advantage and Part D Quote Page, give us a few pieces of key information about yourself, such as your age and zip code, and we’ll prepare quotes customized to your needs. We’ll follow that up with a call by one of our Personal Benefits Managers. My team will help you sort through the details, and will make sure any plans you are considering cover the drugs you need as fully as possible.
You can also always call us toll-free at (800) 913-3416. It’s crucial that you secure coverage when you turn 65 during your initial enrollment period (the month you turn 65, and the three months before and after that month); otherwise you’ll be forced to wait until the yearly open enrollment period, and that may leave you without prescription drug coverage for many months. Don’t forget that my team and I are always here to help, so don’t hesitate to contact us!
I hope you’re finding the information contained in these newsletters of value. Next month I’ll cover some more of the ins-and-outs of Medicare supplement plans.