Medicare, Medigap and the New Prescription Medication Coverage (Medicare D)

Medicare D is the new Medicare prescription program that went into effect January 1, 2006.  Now is the perfect time for all Medicare beneficiaries to reevaluate all aspects of enrollee's Medicare Coverage, if you or your friends or loved ones are or will be wrestling with the details of Medicare D. 

How do I maintain the best coverage under medicare?

1. What are the Medicare Health Plans?
2. Which of the Medicare Health Plans should I select?
3. Which of the drugs that I use is in the plan formulary, does it help me to know that, and what is a formulary?
4. Can my plan require me to have my drugs pre-approved before purchase?
5. Can my plan require that I test generics before allowing me to use a brand name medication?
6. What is a Medigap policy?

1) What are the Medicare Health Plans?

Medicare health plans provide different ways to get your health care coverage in the Medicare program. The Medicare health plan that you choose affects many things including cost, benefits, doctor choice, convenience, and quality. Your Medicare health plan choices include: Original Medicare Plan, Medicare Advantage, or Medicare D. 

The Original Medicare Plan is available nationwide. If you get your health care from the Original Medicare Plan, you use your red, white, and blue Medicare card to get your health care. The Original Medicare Plan pays for many health care services and supplies, but it doesn’t pay all of your health care costs. There are costs that you must pay, like coinsurance, co-payments, and deductibles. These costs are called "gaps" in Medicare coverage. You might want to consider buying a Medigap policy to cover these gaps in Medicare coverage.

Medicare Advantage Plans, formerly called Medicare + Choice, are available in many areas. If you have one of these plans, you don’t need a Medigap policy. Medicare Advantage Plans include: Medicare Managed Care Plans (ie HMO's) or Medicare Preferred Provider Organization Plans (PPO). 

If you’re not in a Medicare Advantage Program, a patient must choose from one of the new Prescription Drug Plans (PDP's). The basic plan includes monthly Premiums and a $250 deductible.  After the deductible is satisfied, Medicare pays 75% of your costs, up to $2250.  In other words, after your $250 deductible is paid, you will pay $500 and then your Plan will pay $1500, up to a total out of pocket of $2250.

After the first $2250, enrollees enter a coverage gap (aka donut hole) until their total out-of-pocket expenses reaches $3600. 

There are three variations available on the basic plan described above:

1. Standard Drug Benefit Plan-Follows above basic plan exactly. There is no coverage for donut hole. This coverage is not commonly available. For example it is available in only 5 of 51 plans in Philadelphia.
2. Equivalent or Alternative Plans, which work well for seniors who take few drugs or lots of inexpensive generics.  There is either no deductible or a deductible that is lower than $250. Instead of plan paying a percentage of the expenses, the enrollee pay co-payments of specified dollar amounts.  Equivalent plan has four drug tiers with different co-payments for each

Tier 1: Generics.  Usually co-payment of $10 or under
Tier 2: Preferred brand drugs. Co-payments usually in $15-$40 range
Tier 3: Non-preferred brand.  Co-payments run from $60-70
Tier 4: Expensive specialty drugs such as Enbrel.  Co-payments will be 25% of  the cost in almost all plans
3) Enhanced Plans, which should appeal to enrollees whose current expenses are between $2250 and $5100.  This includes 39% of all current Medicare beneficiaries.  Plans offer a) coverage for the donut hole, b) either a low or no deductible, and c) lower co-payments in the drug tiers or both.

2) Which of the Medicare Health Plans should I select?

You won't necessarily know it when you find it. Although the names “standard,” “equivalent” and “enhanced” are used in the law, the providers are not required to use these names so it is more complicated to compare.

3) Which of the drugs that I use is in the plan formulary, does it help me to know that, and what is a formulary?

A formulary is a list of drugs that a plan carries. Formularies will vary from one plan to another. An enrollee must pay 100% for any drugs that they use that is not included in the formulary.  A company can drop a drug from its formulary at any time with a 60 notice to the enrollee during which time your doctor can file for an exception or change your prescription.

4) Can my plan require me to have my drugs pre-approved?

YES. Insurers can require enrollees to have certain drugs (ones that are likely to be taken incorrectly or prescribed inappropriately) pre-approved by the plan.

5) Can my plan require that I test generics before allowing me to use a brand name medication?

YES. Insurers can require step therapies for certain drugs such as pain relievers. In that case, the plan may require you to first try inexpensive generic equivalents before moving you up to more expensive brand name medications

6) What Is A Medigap Policy?

A Medigap policy is a health insurance policy sold by private insurance companies to fill the "gaps" in the Original Medicare Plan. Medigap policies help you pay some of the health care costs that the Original Medicare Plan doesn’t cover. If you are in the Original Medicare Plan and have a Medigap policy, then Medicare will pay its share and your Medigap policy will pay its share of your health care costs.

Currently, there are ten standardized Medigap plans called "A" through "J." Medigap policies must follow Federal and State laws. These laws protect you. The front of a Medigap policy must clearly identify it as "Medicare Supplement Insurance." Each plan, A through J, has a different set of benefits. Plan A covers only the basic (core) benefits. These basic benefits are included in all the Medicare plans (A through J). Medigap Plans B through J offer extra benefits. Plan J offers the most benefits.

Insurance companies can only sell you one of the ten standardized Medigap policies. Medigap policies are standardized so you can compare them easily. Two of the standardized Medigap policies may have a high deductible option. In addition, any standardized Medigap policy may be sold as a Medicare SELECT policy. No matter where you live (except for Massachusetts, Minnesota, and Wisconsin), Medigap policies must offer the same benefits within Medigap plans (A through J).

It’s important to compare Medigap policies because costs can vary. Remember, the standardized Medigap policies that insurance companies offer must provide the same benefits. The only difference between Medigap policies sold by different insurance companies might be the cost. Also, insurance companies that sell Medigap policies don’t have to offer each Medigap plan (A through J). Each insurance company decides which Medigap policies they want to sell. Make sure the insurance company offers the Medigap policy that you want.

Generally, when you buy a Medigap policy you must have Medicare Part A and Part B. You will have to pay the monthly Medicare Part B premium ($88.50 in 2006) to Medicare. In addition, you will have to pay a premium to the Medigap insurance company. As long as you pay your premium, your Medigap policy is guaranteed renewable. This means it is automatically renewed each year. Your coverage will continue year after year as long as you pay your premium.

You and your spouse must buy separate Medigap policies. Your Medigap policy won’t cover any health care costs for your spouse.

If you have questions about Medicare or planning for your retirement and for your estate, please call us and we’ll be glad to assist you in any way we can.