Блог Анкара

In This Chapter

^ Steering clear of the late penalty by enrolling in Part D when you should ^ Understanding what you pay if you don’t sign up on time

He Part D late penalty basically sets a deadline. It’s a device for persuading you to join a Medicare drug plan when you first become eligible —

And not just when you happen to feel like it. If the date of your personal Part D enrollment deadline passes and you enroll in Part D months or years later, prepare to

Pay a penalty in the form of a surcharge that’s added to every monthly Part D premium for as long as you stay in the program.

Face a higher penalty the longer you delay signing up for Part D.

Experience a probable increase in your penalty cost each year.

Pay a lot more for the same drug coverage over time than if you’d signed up for Part D as soon as you were able.

Heavy stuff, huh? People considering Part D often think the late penalty is unfair, though actually it exists for several reasons (see the later sidebar "What were they thinking. . . when they created the late penalty?"). Medicare strictly enforces the late penalty — and takes the view that being confused about Part D is no defense for signing up late. If you have no other prescription drug insurance that’s at least of equal value to basic Medicare drug coverage (or Creditable; See Chapter 6), or if you’re not receiving Extra Help (see Chapter 5), every month that you delay enrolling in Part D makes the penalty bigger. That’s why I’m sharing its implications in the context of deciding whether you need to sign up for Part D right now. Very often, the late penalty is an important part of that decision — or a consequence of it.

So in this chapter, I explain how to avoid the penalty by signing up at the right time — depending on your individual circumstances. Then I describe how the penalty is calculated, how it grows ever larger over time, and whether putting off joining Part D is worth risking it.

What were they thinking. . . when they created the late penalty?

If you’re like many people, you probably feel indignant about the late penalty. How can joining the Medicare drug program be voluntary if you’re going to be penalized for not signing up on time? Why can’t you wait to join Part D until you need it, or when you choose to? Here are the arguments:

Part D gives protection against future risks, just like any other form of insurance. You buy home insurance in case the basement catches fire; you buy car insurance in case you total the station wagon.

If no one joined Part D until she needed prescription drugs, the system couldn’t function. Here comes that insurance concept again: Healthy people must be in the system to spread the financial risk and hold down costs. If only sick people enrolled, drug coverage would be so expensive that most people wouldn’t be able to afford it.

Part D isn’t the only Medicare program that has a late penalty. So does Part B,

Which imposes an extra 10 percent on the premiums for every year you delay signing up, for the same reasons given previously. But because almost everyone signs up for Part B as soon as they’re eligible, the fact that a late penalty exists often goes unnoticed. (Part B helps you pay to see a doctor and use other outpatient services; see Chapter 1 for details.)

Of course, Part D isn’t entirely insurance in the ordinary commercial sense. It’s also a benefit, and that’s why the late penalty seems a bit confusing. The federal government subsidizes your drug coverage in various ways — to a certain degree in the initial coverage period, and to a very large extent if your income is low enough to qualify you for Extra Help (which I explain in Chapter 5) or your drug costs are high enough to take you into the catastrophic phase of coverage. Nonetheless, Part D is built on insurance principles, with the late penalty as a cornerstone.

Avoiding a Late Penalty by Signing Up for Part D at the Right Time

The only way to avoid a late penalty is to meet your own particular deadline. Getting the timing right depends on your situation, which is probably one of the following:

You’re joining Medicare right now (or are about to do so) but don’t have good drug coverage.

I You already have good drug coverage from another source (such as an employer health plan) but are about to lose it or drop it.

I You’re just returning to live in the United States after living abroad.

I You’ve just been released from prison.

In the next few sections, I consider each of these circumstances and also provide a tip for sidestepping an obstacle hidden in the fine print that may trip you up if you don’t know about it.

Ij$jAB££ If you miss your personal deadline for joining a Part D plan, your next chance to join is the annual enrollment period between November 15 and December 31 (with coverage beginning January 1). See the later section "The Price of Missing Your Personal Enrollment Deadline" to find out about the costs you have to pay for letting your deadline slide.

When you join Medicare and don’t have creditable drug coverage

Iijj|kB£* You can get Part D as long as you’re enrolled in Medicare Part A (hospital insurance) and/or Part B (doctor and outpatient services), as explained in Chapter 1. Whether you need to enroll in Part D at the same time as you sign up for Medicare depends on whether you have other drug coverage regarded as creditable under Part D rules. (Coverage is Creditable When it provides at least as much value as minimum Medicare drug coverage. I explain this concept and how it affects decisions about joining Part D in detail in Chapter 6.) If you have creditable drug coverage when you sign up for Medicare, you don’t have to sign up for Part D at the same time.

But what if you Don’t Have such coverage?

If you’re turning 65 soon and Don’t Have creditable drug coverage from another source, you need to enroll in a Part D drug plan at the same time as you enroll in Part A or Part B to avoid a late penalty. That means signing up within the span of your seven-month initial Medicare enrollment period, which starts three months before the month you turn 65 and ends three months after it. For example, if your birthday is in April, your enrollment period runs from the beginning of January to the end of July, and you need to enroll in a Part D plan in July at the latest (and start receiving Medicare drug coverage on August 1) to guarantee avoiding a late penalty.

If you’re joining Medicare at a younger age because of disability and Don’t Have creditable drug coverage from elsewhere, the same rules apply. But in this case, your seven-month initial enrollment period begins three months before your 25th month of receiving disability payments and ends three months later. So, as in the preceding example, if your 25th month on disability falls in April, you need to sign up for a Part D plan in July at the latest to dodge a late penalty.

If you join Medicare at a younger age due to a disability and incur a late penalty because you didn’t sign up for Part D at the same time, you get another chance when you turn 65. You can use the regular seven-month Medicare enrollment period around your 65th birthday to re-enroll in Part D and get rid of the late penalty.

I If your income is limited and you qualify for Extra Help (as explained in Chapter 5), by law you Won’t Be hit with a penalty if you sign up late.

When you lose or drop your current creditable drug coverage

If you have creditable drug coverage from another source, you Don’t Need to enroll in Part D when you sign up for Medicare, as explained in Chapter 6. But what if you lose that coverage? Or your coverage suddenly ceases to be creditable? Or you decide to drop it?

If you lose creditable coverage Involuntarily, Meaning that you lose it through no fault of your own — for example, if your employer’s plan terminates or begins offering benefits that overall are of less value than Medicare drug coverage — you’ll qualify for a special enrollment period in which you can sign up for Part D without incurring a late penalty. That period lasts for 63 days after you’re notified that your creditable coverage will end Or 63 days after the date it actually ends (whichever’s later). See the later section "What the 63-day rule really means" for some crucial details if you’re in this boat.

I If you deliberately drop your creditable coverage, perhaps if it becomes too expensive to maintain, you Won’t Receive a special period to enroll in Part D. Instead, you must sign up during the annual enrollment, which runs from November 15 to December 31 each year. To avoid a late penalty, you can’t go for more than 63 days without creditable coverage. So you’d have to keep your current coverage at least until the end of October, because your Part D coverage wouldn’t begin until January 1. (Ideally, however, you’d keep your own coverage until the end of the year so you continue to be protected by insurance.)

You may find out that your previous sponsored coverage (which you’ve already lost or dropped) Wasn’t Creditable only when you enroll in a Part D plan. Then, almost certainly, you’ll be slapped with a late penalty. At that point, you’ll need to ask the plan for a Reconsideration — a review during which your claim of not realizing that your previous coverage wasn’t creditable will be investigated. I cover this situation, as well as other circumstances in which people feel they’ve received a late penalty unfairly, in Chapter 13. That’s where I also explain in detail how to go about asking for a reconsideration.

When you return to the United States after living abroad

You can’t receive Part D coverage while living abroad, and you Aren’t Expected to sign up for it until you return to live in the United States

Permanently. (This rule is different from the one for Part B enrollment when you’ve been living abroad, which I clarify in Chapter 1.) When you return to the U. S., you can join Part D without risking a penalty in one of two ways, depending on your circumstances:

If you turned 65 while living abroad: You get a special initial enrollment period (IEP) to sign up with a Part D plan on your return. This period lasts seven months — three months before the month of your return to the U. S., the month of your return, and three months after your return. Enrolling in a plan no later than the end of the month before you return ensures you can use your Part D coverage as soon as you arrive back.

I If you were eligible for Part D before moving abroad: You get a special enrollment period (SEP) on your return. You can enroll in a plan without having to apply for an SEP (as I explain in Chapter 17). The SEP begins on the date of your return to the U. S. and ends 63 days later. (See the later section "What the 63-day rule really means" for details.)

When you’re released from prison

You can’t receive Part D coverage while incarcerated in a prison or any other correctional institution, and your stay doesn’t count toward the Part D late penalty. In this situation, the rules are the same as for someone returning from abroad, as I explain in the previous section. If you turned 65 in prison, you get a seven-month initial enrollment period (IEP) to sign up for a Part D plan, lasting from three months before the month of your release to three months after. Otherwise, you get a special enrollment period (SEP) to sign up for a Part D plan, beginning on the day of your release and ending 63 days later. (See the following section for more on the 63-day rule.)

What the 63-day rule really means

The 63-day rule Is usually explained as the time you have during a special enrollment period to enroll in a Part D plan and avoid a late penalty. But this explanation isn’t precisely accurate. Rather, you must be actually Receiving Part D coverage within 63 days to avoid a penalty.

Say you lose your current creditable drug coverage on March 31. Counting 63 days from that date brings you to June 2. If you leave it to the last minute and sign up with a Part D plan on June 1 or 2, you’re still within the 63-day time frame. But you’re not avoiding the late penalty because, under Part D rules, your drug coverage actually begins on the first day of the month After You enroll — in this example, July 1. You’re then penalized for one month without coverage, which may not amount to much money at first but can increase quite a lot with time, as I explain later in this chapter. So think in terms of 60 days instead (or 59 if the time frame includes February), and you’ll be okay.

The Price of Missing Your Personal Enrollment Deadline

The purpose of this section isn’t to scare you half to death, but to give you a practical awareness of what the late penalty means so that — if it figures at all in the decisions you make about joining Part D (and it may not) — you can make an informed choice. Here, I explain how the penalty is calculated and how it can grow over the years. In the end, only you can decide whether ignoring the late penalty is worth the risk.

Looking at how the late penalty is calculated

The basis of the late penalty is something called the National average premium (NAP). Every fall, Medicare works out the average of all the premiums that Part D plans nationwide will charge during the following year. This dollar amount becomes the NAP for that next year. If you incur the late penalty, you’ll pay 1 percent of the NAP for every month you were without creditable coverage and didn’t sign up for Part D. This formula works out at 12 percent a year.

JttNG/ If you miss your personal deadline for joining a Part D plan, your next chance is the annual enrollment period that runs from November 15 to December 31 (with coverage beginning January 1). If you also miss that window, you have to wait another 12 months to sign up, increasing your penalty amount by another 12 percent. Every extra year of delay adds 12 percent to the penalty. Check out the following examples to see the math for yourself:

I Rebecca turned 65 and signed up for Medicare in March 2007. But by the time her personal enrollment period expired at the end of June, she hadn’t signed up for Part D (and had no comparable drug coverage). Her next chance to join Part D was during the open enrollment period between November 15 and December 31, 2007. She decided to do it, and her drug coverage began January 1, 2008. By then she was six months over her deadline (July through December). So her late penalty in 2008 was 6 percent (1 percent x 6 months) of the 2008 NAP, which was $27.93. One percent of that amount is 28 cents. So Rebecca’s monthly late penalty was calculated at 28 cents multiplied by 6 (her months without coverage), which came to $1.68. Medicare rounds the penalty to the nearest 10 cents, so Rebecca actually paid $1.70 a month in 2008, or $20.40 for the whole year, on top of her plan’s premiums.

I Brad was 70 years old and already in Medicare when Part D drug coverage began in 2006. Because the program was just starting, the initial enrollment period for that year was extended into May. But Brad couldn’t figure out what to do about Part D, and he let the deadline pass.

He had another chance to sign up during open enrollment at the end of 2006, but he let that go by, too. Finally, he enrolled in a Part D plan at the end of 2007. By then, he’d been without drug coverage for 19 months (June 2006 to December 2007). So in 2008, he paid a 19 percent penalty — 28 cents multiplied by 19, which came to $5.32. This amount was rounded to the nearest 10 cents, so Brad paid $5.30 a month, or $63.60 over the whole year, on top of his plan’s premiums.

Understanding how the late penalty can add up over time

Maybe the amounts in the preceding section’s examples don’t sound like too big of a deal. But that isn’t the end of it. Rebecca won’t pay the same penalty amount she was first assessed — $1.70 a month in 2008 — for all the years to come. Nor will Brad pay his penalty — $5.30 a month in 2008 — for as long as he’s in the Part D program. They’ll both pay a new penalty amount each successive year, and so will anyone else who has a late penalty. That’s because Medicare recalculates the NAP annually. If the NAP changes, the crucial 1 percent also changes — and so does everyone’s penalty amount.

One part of the calculation doesn’t change — the number of months anyone goes without drug coverage. For example, Brad will continue to pay a penalty of 19 percent of the NAP due to the 19 months he lacked drug coverage. But the dollar amount of that 19 percent will change each year as the dollar amount of the NAP changes. So in 2009, he’ll pay 19 percent of the 2009 NAP, and the next year he’ll pay 19 percent of the 2010 NAP, and so on every year.

I cover the NAP’s yearly variation and provide some estimates of the effect of NAP changes over time in the following sections.

Wondering how much the NAP will change each year

If the NAP rises, everybody with a penalty pays more as time goes by. But the truth is, nobody knows how much the NAP will change annually. Even Medicare doesn’t know until September of each year when it works out the average of all Part D plans’ premiums for the following year. Whether the NAP rises or falls depends entirely on the plans.

Certainly you can find out what the NAP will be for Next Year. That information is included in the Medicare & You Handbook that Medicare sends to all of its beneficiaries every October. The last section in the handbook explains Medicare costs for the following year, including the Part D national average premium (referred to more bureaucratically in the handbook as the National base beneficiary premium) And the 1 percent penalty amount. (You can also read the Medicare & You Handbook online at Www. medicare. gov.)

As this book goes to press, the 2009 NAP is unknown. So to date, only one NAP change, from 2007 — the first year the penalty was imposed — to 2008, has occurred. Between those two years, the NAP rose only 58 cents (from $27.35 in 2007 to $27.93 in 2008), which was far less than anyone expected. Will it always stay so low? Nobody knows. But it’s worth remembering that in these days of Part D’s infancy, the plans have tried to keep their premiums relatively low in order to attract customers. If the market shakes out in the future, with fewer plans competing, you can expect premiums to rise, taking the NAP upward as well.

Estimating how the late penalty may grow long-term

At this point, presenting a chart that shows exactly how much penalty amounts can grow over 5 years, 10 years, 20 years, or more would be useful. Of course, that’s impossible due to the annual reassessment of the NAP. But, what the heck, I’m going to do some educated guesswork so you can at least get an idea of how those amounts can accumulate long-term.

The NAP may creep up very gradually by a dollar or less every year throughout the next decade or so. Or it may jump around all over the place — going up by $5 or $10 one year, or even going down by a few dollars or cents the next. But here I make very conservative assumptions. In fact, in Table 8-1, I make a totally unrealistic assumption — that the NAP doesn’t rise At all, But remains basically the same ($28) as in 2008. Even so, you can see how the penalties mount up and become substantially higher with every year you delay joining Part D. (Note: These figures are raw calculations that haven’t been rounded to the nearest 10 cents.)

Table 8-1 How Penalties Mount Up If the NAP

Remains the Same as in 2008 ($28)

$3.36

Now I’m going a bit further out on a limb, but still very conservatively. In Table 8-2, I assume the NAP will rise by $2 each year in the ten years from 2009 through 2018 — so it becomes $30 in 2009, $36 by 2012, and $48 by 2018. And since these numbers are just raw calculations, I haven’t rounded to the nearest 10 cents.

Table 8-2 How Penalties Grow If the NAP Increases

By $2 a Year from 2009 to 2018

Deciding whether to risk ignoring the late penalty

I know what you’re thinking. You’re looking at that last figure in Table 8-2 — $1,411.20 as the possible accumulated ten-year penalty for someone who delayed signing up for more than three years — and wondering whether it’s less than what you’d have paid in premiums for those 40 months. It may well be. But before deciding to ignore the late penalty and stay out of Part D for a few more years, consider the following:

W Table 8-2′s numbers aren’t real. They’re purely a guesstimate. The actual penalty amounts may be higher.

U Table 8-2′s numbers only account for the next 10 years. Penalties accumulated after 15 years or more — when you may be in your 80s and on a fixed income that doesn’t go as far as it once did — are going to be a lot higher.

U At present the monthly late penalty is calculated on 1 percent of the NAP. But Medicare law allows for this amount to be increased to 2 percent at some unspecified future date. If that happens, the penalties would be doubled.

So delaying Part D enrollment is your choice — but recognize that it’s a gamble. Remember the famous line from Dirty Harry Where Clint Eastwood is facing down a bad guy who doesn’t know whether Clint still has a bullet left in his.44 Magnum? He says, "I know what you’re thinking . . . [and] you’ve got to ask yourself a question: ‘Do I feel lucky?’ Well, do ya, punk?" Well, do you?

Part III

In This Chapter

^ Taking the insurance factor into account

^ Finding a possible compromise — coverage at the lowest cost

Ere you are in the pink of health and lucky enough not to be taking any prescription drugs — or perhaps only an antibiotic now and again.

Maybe you’ve never needed anything beyond the occasional aspirin. And — even though you have no other drug coverage — you’re asking yourself why on earth you should pay out good money every month to a Medicare drug plan when you’d be getting zip in return.

No doubt about it, this is a major dilemma for healthy people. Of course, you have every right not to join Part D. Maybe even the threat of a late penalty — the higher rate you’d pay for drug coverage if you delay enrolling in Part D, as explained in Chapter 8 — doesn’t cut much ice with you. But I’m guessing that you also know, in your heart of hearts, that this isn’t really the point.

The real question is whether you can afford to be without drug coverage when you also lack a crystal ball — or any way of peering into the future to see whether you’ll fall prey to some unforeseen disease or injury that requires expensive meds to treat. That’s the insurance factor, and although Part D provides less-than-comprehensive coverage (unless you qualify for Extra Help, described in Chapter 5), it does offer protection against cata-strophically high drug expenses that you may face if you’re diagnosed with a serious illness. It covers you If You need it and When You need it.

In this chapter, I assume you’re healthy, have no other drug coverage, and aren’t inclined to enroll in Part D, or at least not for now. I highlight factors to think about when weighing the current state of your health against future risks. And I also suggest a compromise — how to find a Part D plan that will cost you the least money while still giving you an umbrella for insurance.

Balancing Today’s Good Health against Tomorrow’s Risks

On the whole, human beings are optimistic by nature, and it’s often said that Americans are the most optimistic on earth. We don’t expect bad things to happen to our bodies, and we’re confident that, if ill health does hit us sometime in the far-off future, medical science will be able to fix it. Well, increasingly, medical research is finding answers — and very often they come in the form of prescription drugs.

In this section, I play devil’s advocate. If you’re on the fence about joining Part D, then you’re figuring on being without any insurance against possible drug costs for months and perhaps years to come. So here I raise several "what ifs" about your chances of becoming ill and the potential costs of being without coverage.

The odds of getting sick

Around the time when the Part D drug benefit went into effect in 2006, I talked with a man in his 70s who passionately — and sincerely — argued against signing up. He described how healthily he’d lived, never smoking or drinking alcohol, always eating natural foods, and getting plenty of exercise and sound sleep. He believed that this long-held regimen would see him through, and he’d never need prescription drugs. I don’t know what happened to this man, though I hope his excellent health continues. But a few months later, a good friend of mine who’d pursued an equally healthy lifestyle — to the extent of never letting red meat pass his lips — suddenly developed Parkinson’s disease in his mid-60s. It seemed tragically unfair. But that’s the point of this parable. Life can be unfair. Lightning strikes out of the blue. Stuff happens.

Living healthily is always the best way of preventing or postponing the common maladies that come with the aging process. And yes, it’s also the best method of averting the need for many kinds of prescription drugs! Yet even the healthiest lifestyle can’t completely protect you against all medical setbacks. These certainly include

Genetic diseases that medications can help alleviate

Physical injuries that are treated with painkillers, muscle relaxants, and other medications to help restore body parts to working order

Surgeries that require medications for postoperative care and complications

But let’s face it; most of us don’t lead rigorously healthy lives. We smoke; we drink; we sit on our fannies all day; we choose a salad and pour bacon bits and fatty glop all over it. Along the way, our bodies are silently clocking the damage and doing their best to repair it — until one day, in our later years,

The bill comes due. Warning signs appear. And then the doctor confirms we have some condition we need to do something about. Sometimes that just means changing our bad habits. Often it means taking prescription drugs to minimize the problem’s effects or hold at bay a more serious medical event, such as a heart attack or stroke, that may otherwise occur.

I don’t want to belabor this point unduly, but when you’re figuring the odds against getting sick over the age of 65, it’s useful to know what the odds are. Here are just a few facts, culled from statistics collected by the Alliance for Aging Research on its Web site, Www. silverbook. org:

At least 80 percent of Americans age 65 and over have at least one chronic condition (such as high blood pressure, heart disease, diabetes, arthritis, or vision disorders), and more than half have at least two.

More than 1 in 5 Americans age 60 or older has diabetes.

Among Americans age 65 to 74, 60 percent of men and 73 percent of women have high blood pressure.

More than 37 million Americans 65 and older have one or more types of heart disease. The average age for a first heart attack is just under 66 for men and just over 70 for women.

About 77 percent of all cancers are diagnosed in people age 55 and over, most often around age 70. More than two-thirds of prostate cancer cases occur in men age 65 and older. The greatest risk for ovarian cancer is to women in their late 70s.

Alzheimer’s disease affects 1 in every 10 Americans over 65 and nearly half of those over 85. Parkinson’s disease affects 1 in every 100 Americans over age 60.

The cost of going without drug coverage

One of the costs of waiting to enroll in Part D until the time you think you need it is the late penalty, which increases the amount you’d pay for Part D coverage for every month that you delay. You may think that delaying offsets the penalty if you save money by not having to pay premiums in the meantime. I delve into this very point, along with everything else you need to know about the late penalty, in Chapter 8.

But you have to remember that — except for certain circumstances, also explained in Chapter 8 — after you’ve missed your deadline for enrolling in a Part D plan, you can sign up only once a year during the open enrollment period in November and December. Missing that window doesn’t just mean another 12 months of added penalties. More importantly, it means another 12 months Without coverage.

If you fall sick and need prescription drugs during that time, you’ll pay the full cost out of your own pocket. That’s obvious — duh! But do you have any idea how much you’d pay compared to the cost of being in a Part D plan? Of course not — it would depend on the drugs you had to take. (Where’s that crystal ball when you need one?) But I can give you examples that illustrate the cost differences, and they may surprise you.

Retail drug costs versus out-of-pocket Part D costs

In Table 7-1, I show four brand-name drugs.

U I chose Fosamax because it’s commonly used to prevent or treat osteoporosis, a condition that makes bones more fragile and likely to break. It affects 44 million Americans (1 in 2 women, 1 in 8 men), most often after the age of 60.

U I deliberately chose the other three drugs as examples of those used to treat "lightning-strike" medical problems — the serious kind that can creep up on you without warning, until you get the diagnosis. Gleevec, for example, is used mainly to treat chronic myelogenous leukemia (CML), a cancer that attacks bone marrow. Most of the 4,500 Americans who are diagnosed with CML each year are middle-aged or older, according to the National Cancer Institute. Gleevec is the most expensive drug on this list, but many anticancer meds cost a lot more, especially the new biologic ones that target cancers more specifically than older drugs.

Table 7-1 Out-of-Pocket Costs of Four Drugs Bought

Retail or through a Part D Plan in 2008

Source: Part D costs from Www. medicare. gov. Chain pharmacy prices from Www. cvs. com, Www. costco. com, And Www. drugstore. com, June 2008.

I looked up the mail-order cost of each of these brand-name drugs at three online chain pharmacies, where you may well be buying your meds if you have no drug insurance. The results, in column three of Table 7-1, reflect the lowest cost for a full year’s supply.

Then I ran the numbers to see what you’d pay for the same drugs (whether purchased from a retail pharmacy or by mail order) under the Part D plan that showed up as the least expensive in my own state of Maryland. (Costs vary among states because the same plan may charge a different premium in different states. Also, the plan that proved the least expensive turned out to be different for each drug.) And, believe me, I played fair! The results, shown in column four, reflect not only what you’d pay for just one of these drugs over a whole year (including co-pays, deductible, and full price in the coverage gap, which I cover in Chapter 15), but also the plan premiums. (And remember, the premium stays the same, no matter how many drugs you buy.)

In other words, Table 7-1 shows the difference between the price of each drug when purchased retail and what you’d pay for the whole insurance caboodle under Part D. The results speak for themselves. In each case, the Part D plan works out much cheaper — and for the most expensive medicine, you’d save more than half the cost.

I also took the comparison one step further, in a way not shown in Table 7-1. I wondered whether the price of these drugs would be lower at Canadian online pharmacies than the American ones shown in the table. So I checked out a reputable Canadian pharmacy that advertises itself as having the lowest mail-order prices (and often does). Here are its prices for four batches of 90-day supplies over a year (including $40 a year for shipping charges):

U Fosamax: $476 U Prograf: $1,480 U Avastin: Not available U Gleevec: $13,027

As you can see, only Fosamax is less expensive at the Canadian mail-order price ($476) than under the Part D plan ($556). Yet this plan’s overall cost would drop to $459 if the drug were bought in similar 90-day supplies by mail order instead of at a retail pharmacy. For the two other available drugs, Part D worked out far cheaper than Canada, even without mail order. And the price of Gleevec was nearly three times as much as the total out-of-pocket costs under the Part D plan. (If you’re curious about buying prescription drugs abroad, flip to Appendix C for details on how to do it safely.)

The high cost of stopping maintenance drugs without coverage

Ignoring Part D brings another potential cost. Without coverage, people are less likely to take the drugs they may need to actually keep themselves healthy. These so-called Maintenance drugs Are taken regularly to keep certain conditions in check — for instance, high blood pressure, cholesterol, diabetes, osteoporosis, arthritis, and so on. Without those treatments, the risk of serious illness or injury rises hugely.

To take just one example: Untreated osteoporosis, which weakens bone tissue and greatly increases the risk of falling, is the most common cause of hip fractures. Such an injury can cause permanent disability or require hip replacement surgery that is extremely expensive. That too is a possible future cost — both physically and financially — of being without drug insurance. And ultimately a much higher one.

Compromising on Coverage at the Lowest Cost

If you read the earlier sections in this chapter, you know that turning your back on Part D is at best a gamble on your future good health. But, naturally enough, you still may be disgruntled when you think about forking over money each month — possibly out of a Social Security check that buys less and less each passing year — and not getting anything back.

Here’s a possible compromise you can consider: Purchase coverage at the least possible cost by choosing a Part D plan that has the lowest premium in your area.

How low is low? That depends on where you live and the kind of Part D coverage you choose:

U Part D stand-alone plans (PDPs) — the kind that provide coverage Only For drugs and are usually purchased as an add-on to traditional Medicare medical coverage — vary a lot in the monthly premiums they charge. The same plan can charge different premiums in different states, but each plan must offer the same premium to all enrollees within a state. In 2008, every state has at least one plan with a premium of under $20 a month, and 28 states have at least one under $15 a month. Only Arizona has a plan costing less than $10. (Puerto Rico has a PDP with a premium of $2.60, and the U. S. Virgin Islands has one costing $4.30.)

U Medicare Advantage plans that include drug coverage (MAPDs) — the

Kind that combine medical and drug coverage in a single package — also vary a lot in their premiums. Many MAPDs charge zero premiums for both medical and drug benefits. In 2008, all states, the District of Columbia, and Puerto Rico have at least one (and often many) MAPDs with zero premiums, though these plans aren’t offered in all counties or zip codes. (None of the other U. S. territories have any Medicare Advantage plans.)

You can easily find out the lowest premiums of plans in your area for 2009 and subsequent years. This information is contained in the Medicare & You Handbook that is sent to everybody on Medicare in October each year. You’ll find the list of PDP and MAPD plans that will be available to you in the following year toward the end of the handbook. You can also find these details by going to the Medicare Web site at Www. medicare. gov and clicking "Learn More About Plans in Your Area." See Chapters 9 and 10 for more details about deciding on an MAPD or a PDP.

To give you a general idea, Table 7-2 shows the lowest premiums for PDPs in several states and how many MAPDs offered zero premiums in 2008. (Note: The asterisks in the MAPD columns indicate that the plans weren’t available in all counties.)

Table 7-2 Lowest Monthly Part D Premiums in

Selected States in 2008

(continued)

Table 7-2 (continued)

Source: Part D plan details by state, 2008, at Www. medicare. gov.

Among PDPs in the states, the lowest premiums range from $9.40 a month in Arizona to $18.00 in Alaska and Tennessee in 2008. These minimums are likely to rise in future years. Gone are the days of the $1.87 premium, which one plan offered in seven states in 2006, the first year of the Part D program, as a come-on to people to enroll.

MAPDs are likely to continue offering zero premiums as long as they keep getting the extra federal subsidies that allow them to do so. Paying no premiums (except for the standard Part B premium) is attractive to people who can’t (or don’t want to) pay premiums for drug coverage, including those who don’t use prescription drugs right now. If you consider joining an MAPD plan for this reason, remember that the way you receive medical benefits is different from traditional Medicare, usually with restrictions on the doctors and hospitals you can go to and sometimes higher costs for certain services, as explained in

Chapter 9.

One more thing: If paying the kind of premiums listed among PDPs in Table 7-2 would be a hardship to you, you should look into whether you qualify for the Part D Extra Help program. If you qualify for full Extra Help benefits, you wouldn’t pay a premium at all, and qualifying for even partial benefits would reduce the premium. I explain the Extra Help program in detail in Chapter 5. You can also check out whether you’re eligible for help under a State Pharmacy Assistance Program (SPAP) if your state has one. These too provide prescription drug coverage at a low cost.

Chapter 8

In This Chapter

^ Determining whether your other drug coverage is creditable under Medicare rules

^ Choosing between your current coverage and Part D

^ Using your current coverage to fill gaps in Medicare drug coverage

^ Factoring in free or low-cost drugs from other sources

M F you’re one of the millions of Americans who already have insurance for prescription drugs, it’s of utmost concern to know what will happen when you become eligible for Medicare. Will you lose your current drug coverage? Can you keep it? And if so, do you need to give Part D a second thought? This can be a head-scratching time, and maybe even a cause for real anxiety.

But don’t reach for the Valium yet (regardless of whether your prescription plan covers it). In this chapter, I explain the importance of finding out where your current coverage stands in relation to Part D — a step that’s essential in figuring out what to do next. Maybe you won’t have to do anything and can forget about Part D for now — but you can’t assume this without first finding out the facts of your own situation and how Part D rules apply to it. If you need to decide whether to stay with your present coverage or switch to Part D, I suggest some pros and cons to think about. I also explain the different kinds of drug coverage that can be used at the same time as Part D and how they fit together.

But first, you need to understand what counts as "other prescription drug coverage." I’ve heard people talk about "my coverage" or "my plan" when what they mean is some method of obtaining low-cost drugs that isn’t actually coverage at all. Coverage Equals Insurance — in other words, a system that guarantees you protection from some of the costs of prescription drugs in the future as well as now. For quick reference, look at Table 6-1. It shows which methods of obtaining drugs count as coverage and which don’t. I highlight those that are Not Coverage, and how they compare with Part D, in the last section of this chapter.

Finding Out Whether Your Current Drug Coverage Is Creditable

Creditable Is another of those Part D-speak words that you’ve probably never come across before. Creditable — not to be confused with Credible (meaning believable) — means something that can be credited or counted. Under Medicare rules, your current drug coverage is creditable if it counts as being at least as good as Part D coverage. This rule really matters. If the coverage you have now Is Creditable, you probably don’t need Part D. If it’s Not Creditable, you’ll need to make some careful decisions.

Bear with me for a moment while I explain more accurately what creditable coverage actually means. The common definition I just used — "at least as good as Part D" — is a convenient shorthand, but it’s also misleading. For example, I’ve heard people wonder why their employer drug coverage is regarded as "better than Medicare’s" when it’s actually costing them more — "If it’s better, shouldn’t I be paying less?" Or, conversely, wondering why their coverage isn’t creditable when it seems a whole lot better than Part D — "Hey, mine has no doughnut hole!" The answer is that creditability has nothing to do with whether you, as an individual, get a better deal under your own plan than you would under Part D. Instead, it’s a matter of accountancy. Your plan is considered creditable if whoever sponsors it pays at least as much money overall for everybody in the plan as Medicare would.

So in the following sections, I consider each kind of drug coverage listed in the first column of Table 6-1, how it fits in with Part D, and how to find out

Whether it’s creditable. What you need to do as a result of this information is detailed in the later section "Deciding Whether to Stay with the Coverage You Have or Switch to Part D."

Drug coverage from a current or former (nonfederal) employer

I’m assuming in this section that you’re an employee or retiree who has drug coverage based on employment in a private company, nonprofit organization, or state or local government. If you’re a federal employee or retiree, whether military or civilian, you can go to the later section "Drug coverage for federal employees and retirees."

What happens to your drug coverage when you retire?

Ever since Part D began in 2006, employers or unions have had a choice of several different drug coverage options for their retirees.

U The great majority of employers have continued their own coverage, not least because, under Medicare law, the federal government pays them large subsidies to do so.

U Some employers have modified their coverage so it fits in with Part D. (See the later section "Having It Both Ways: Using Part D as Well as Your Own Drug Insurance" for more details.)

U Relatively few employers have dumped drug coverage entirely, obliging their retirees to fall back on Part D — though this may occur more in the future.

So what may happen when you retire? Possible options include U Your current coverage remains available to you.

U Your current coverage ends, but your employer or union agrees to Wrap around Medicare drug coverage by paying some or all of your out-of-pocket expenses in any Part D plan that you choose.

U You’re required to join a specific Part D plan as a condition for continuing to receive healthcare benefits from your employer or union. These benefits may or may not cover some or all of your out-of-pocket expenses in Part D.

U Your current coverage ends, but your employer or union contributes a lump sum annually toward your Part D expenses. This amount is subject to tax.

U Your current coverage ends, and your employer or union makes no contribution to your out-of-pocket expenses in Part D.

As you approach Medicare age, the administrator of your health plan or your employer’s human resources department should let you know your options for health and drug coverage in retirement.

What happens if you retire before age 65?

Remember that you can’t join Medicare before turning 65 (unless you qualify at an earlier age because of disability), as explained in Chapter 1. So if you retire before you reach 65, you need to find out what health and drug coverage (if any) your employer or union will make available to you in the years or months that remain until you can join Medicare and enroll in a Part D plan.

If you won’t be covered at all during this period, you may qualify for the COBRA program, Which allows people to buy between 18 and 36 months of continuing coverage after they’ve left or lost jobs that provide health insurance. To find out more about COBRA, go to the U. S. Department of Labor’s Web site at Www. dol. gov or call the agency in your state that deals with labor and employment.

What happens if you work beyond age 65?

In many cases, employees with health and drug coverage who remain employed after they reach retirement age continue to receive their benefits until they retire, regardless of age. However, some employers require employees to switch to Medicare (and to Part D for drug coverage) as soon as they become eligible at age 65, even though they’re still working. (If you work for a company or organization with 20 or fewer employees, you’ll probably be required to enroll in Medicare when you reach 65, as explained in Chapter 1.) Sometimes employees’ spouses who are younger than 65 continue to receive the plan’s coverage until they, too, reach Medicare age. Your employer will notify you of any required changes before you turn 65.

How do you find out whether your drug coverage is creditable?

If you continue to receive full employer – or union-sponsored drug coverage in retirement or while working after age 65, you need to find out whether your coverage is creditable. You also need to know this information if you turn 65 when you’re receiving COBRA temporary health insurance after losing or leaving a job. COBRA counts as employment-based coverage, so it comes under the same Part D rules.

The Medicare law requires your employer or union (or COBRA insurer) to inform you in writing whether your current drug coverage is creditable and, if so, whether it continues to be creditable from year to year. Your plan may provide this info in a letter, in its regular annual brochure, or in its Evidence of Coverage document that gives details of your coverage for the following year.

U If the notice says your coverage is creditable (or "at least as good as Medicare Part D coverage," which is intended to convey the same thing), you don’t need to join Part D at this time.

U If the notice says your coverage is Not Creditable, it may or may not describe alternative options for you, but either way, you need to think carefully about what you do next. I cover points for you to consider in the later section "Deciding Whether to Stay with the Coverage You Have or Switch to Part D."

This notice about creditability is hugely important. If you don’t receive it, call the plan administrators or your benefits department and insist that they provide this info in writing, as the law requires. (Most retiree plans can be relied on to send such notices, but employers sometimes forget to send them to employees who are still working.) If you’re told your drug coverage is creditable, make sure you keep the written confirmation in a safe place — together with any follow-up mailings in subsequent years saying that your coverage continues to be creditable. Hanging on to these notices is a sensible precaution, because if you lose your creditable coverage, you may need to prove that you had it in order to join Part D without incurring a late penalty. (I explain the late penalty and its implications in Chapter 8.)

Drug coverage for federal employees and retirees

If you qualify for medical coverage through current or former employment with the federal government, you receive prescription drug coverage in one of two ways:

U Federal Employees Health Benefits Program (FEHBP): Drug coverage under this program for civilian federal workers, retirees, and their dependents is considered creditable. (For information or help on FEHBP benefits, go to Www. opm. gov [or to Www. opm. gov/retire if you're retired] or call toll-free 888-767-6738.)

U TriCare for Life (TFL): This Department of Defense healthcare program is for active duty and retired members of the military who are enrolled in Medicare, and for their dependents. Drug coverage under this program is considered creditable. (For information or help on TFL benefits, go to Www. tricare. mil or call toll-free 800-538-9552.)

With drug benefits from either of these programs, you do Not Need to join a Medicare Part D plan. And if you lose this coverage, you can join a Part D plan without penalty as long as you begin Medicare coverage within 63 days of losing FEHBP or TFL benefits, as explained in Chapter 8.

You can be in either of these programs and have Part D at the same time (without losing FEHBP or TFL benefits) if there’s any reason to do so. One reason may be if your income is low and you qualify for Extra Help under Part D. For more details on using both sets of drug coverage, see the later section "Having It Both Ways: Using Part D as Well as Your Own Drug Insurance."

Veterans drug benefits

If you’re a veteran and enrolled in the healthcare system run by the U. S. Department of Veterans Affairs (VA), your prescription drug coverage is creditable. You do Not Need to join a Part D plan. This is also true of the CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs) program, which is available to a spouse, widow or widower, or child of certain veterans who were killed or disabled in the line of duty. In either program, if you lose this coverage, you won’t pay a late penalty on joining Part D as long as your Medicare coverage starts within 63 days of losing VA coverage.

However, Medicare rules allow you to be enrolled in the VA system (including CHAMPVA) and in Part D at the same time. This can be an advantage, as I explain later in this chapter.

For more information or help on VA health and pharmacy benefits, go to www. Va. gov/healtheligibility, visit a local VA medical facility, or call the VA

Health Benefits Service Center toll-free at 877-222-8387. For CHAMPVA

Information, go to Www. va. gov/hac or call 800-733-8387.

Medicaid drug coverage

Iijj|kB£* If you’ve been getting drugs from your state under Medicaid (also known by other names in some states, such as MediCal in California, MassHealth in Massachusetts, and TennCare in Tennessee), you can’t continue to do so after you become eligible for Medicare. Medicaid coverage is certainly creditable. But under the law, as soon as you turn 65 (or qualify for Medicare at an earlier age through disability), you must receive your drugs from Medicare Part D, not Medicaid.

You’ll also automatically qualify for very low-cost coverage under Part D’s Extra Help program. If some of the drugs you need aren’t covered under your Part D plan, you may still be able to get them from Medicaid. Both of these scenarios are explained in detail in Chapter 5.

Drug coverage from a State Pharmacy Assistance Program

Many states have programs to help people pay for prescription drugs. But only some State Pharmacy Assistance Programs (SPAPs) offer drug coverage comprehensive enough to be regarded as Qualified (which is different from creditable) under Part D rules. SPAPs become qualified if they meet Medicare requirements, the most important one being that they must coordinate with Part D by wrapping around it any extra benefits that they provide. (In 2008, 23 states have qualified SPAPs, according to Medicare: Colorado, Connecticut, Delaware, Florida, Illinois, Indiana, Maine, Maryland, Massachusetts, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Virginia, Washington, and Wisconsin, plus the U. S. Virgin Islands.)

Coverage from a qualified SPAP is definitely creditable. But this doesn’t mean you can choose to get coverage from an SPAP instead of Part D. If you’re already in a qualified SPAP, you’ll be expected to join Part D — and, most likely, to apply for Extra Help — as soon as you become eligible for Medicare.

That’s hardly a problem. Being enrolled in a qualified SPAP may greatly improve your Part D coverage in some or all of the following ways, depending on the specific program:

U Lowering your out-of-pocket costs: Some SPAPs pay some or all of Part D premiums, deductibles, and/or co-pays.

U Offering low-cost coverage even if you don’t qualify for Part D’s Extra Help program: SPAPs’ income limits are generally higher than those required for Extra Help — and usually there are no asset tests — so you have a greater chance of qualifying, as explained in Chapter 5.

U Providing coverage in the doughnut hole even if you don’t qualify for Extra Help: Any payments an SPAP makes for your drugs in the coverage gap count toward your Part D out-of-pocket limit, as explained in Chapter 15.

U Covering needed drugs that aren’t covered in your Part D plan: Some SPAPs also cover drugs that Medicare excludes, such as barbituates and benzodiazepines, as explained in Chapter 4.

U Coordinating coverage with Part D as seamlessly as possible: I explain the ins and outs of this later in this chapter.

If you become eligible for Medicare while you’re in an SPAP, the program will inform you of what you need to do about Part D, help you enroll in a plan, and, if appropriate, help you apply for Extra Help.

Drug coverage for Native Americans

If you’re an American Indian or an Alaskan Native Elder who gets prescription drugs from the Indian Health Service, a Tribal Health Organization, or the Urban Indian Health program, your drug coverage is creditable. You’ll be able to join a Medicare Part D plan down the road without paying a penalty. (But be sure to get a letter from your Indian healthcare provider saying that you have creditable coverage.)

Right now you may be getting your drugs free or at low cost from an Indian health pharmacy if you’re enrolled in one of these programs, and this won’t necessarily change when you become eligible for Medicare. You aren’t required to join a Part D plan. However, it would be a big help to your community if you do. That’s because the drug plan pays part of the cost of your prescriptions — and pays almost all of the costs, in fact, if you qualify for Part D’s Extra Help program. This stretches the precious federal dollars that support your local clinic, allowing it to provide needed care for more people in your community.

As you approach age 65, visit your clinic or contact the benefits coordinator of your health program to talk over what it would mean for you to join a Medicare Part D plan and, if your income is limited, to apply for Extra Help.

Drug coverage from Medigap insurance

Medicare beneficiaries can buy private insurance policies to cover some out-of-pocket expenses of Medicare Part A and Part B and to fill in some gaps in Medicare coverage. These policies, known as Medicare supplementary insurance or Medigap, are explained in Chapter 1. Until Part D began on January 1, 2006, some of the policies included coverage for prescription drugs. But the Medicare law prohibited new policies with drug coverage from being sold after that date; it also barred people from having this kind of policy and being enrolled in a Part D plan at the same time. So if you still have a Medigap policy with drug coverage, it means you bought it before 2006 and haven’t yet joined Part D.

Most Medigap policies aren’t considered creditable compared with Part D. The standardized policies that include drug coverage — designated H, I, and J — are definitely not creditable. But some plans in Massachusetts, Minnesota, and Wisconsin (and some older policies dating from the 1980s and earlier in other states) may be creditable. You’ll have received a notice from your insurer saying whether yours is creditable. If it isn’t, you have the right to keep your policy — but you’d have to pay a late penalty (as explained in Chapter if and when you decide to join a Part D plan for your drug coverage. I cover the implications of this in the later section "Understanding the Medigap dilemma."

Drug coverage from individual insurance

People who are self-employed or who receive no group health coverage from their employers sometimes purchase individual health insurance policies. Such policies are the most expensive kind of health coverage on the market, so even people who can afford them are often relieved to give them up when they become eligible for Medicare.

If your coverage includes prescription drugs and you want to continue it after joining Medicare, you need to contact your insurer to find out whether it’s creditable under Part D rules. If it is creditable, you don’t need to join Part D. If it’s not creditable, joining a Medicare drug plan now would allow you to avoid a late penalty if you were to join one later on, as explained in Chapter 8. You can have individual insurance with drug coverage and be enrolled in Part D at the same time, as described later in this chapter.

Deciding Whether to Stay with the Coverage You Have or Switch to Part D

Stay or switch? Strangely enough, this decision doesn’t only affect people whose coverage isn’t creditable compared with Part D. As the costs of health insurance in general, and prescription drugs in particular, continue to climb, many retirees who are on fixed incomes but have employer or other coverage are beginning to find their health insurance less and less affordable. In some cases, Part D may offer a less expensive option. (See the nearby sidebar "What were they thinking. . . when they ‘allowed’ employers to dump drug coverage?" for more information.) But if you’re in either of these groups, you need to be aware of all the consequences before deciding which way to go. Look before you leap — and look before you stay.

In the following sections — assuming that you already know whether your current drug coverage is creditable — I outline what you need to consider when deciding what to do next. For quick reference, Table 6-2 shows at a glance whether different types of drug coverage are creditable and what action you may need to take, if any.

Table 6-2 What You Need to Do about Part D, Depending on Your Current Prescription Drug Coverage

Type of Drug Coverage Creditable or Not? Action Required

Employer or union Depends on plan 1) None, if plan

Benefits for current coverage is creditable.

Employees or retirees 2) If not creditable, must

Decide whether to keep it or switch to Part D, unless switching would affect medical benefits. 3) If required for people of Medicare age, must join Part D as condition of continuing to receive medical benefits.

A Part D plan after becoming eligible for Medicare.

Decide whether to add Part D. Can choose to have both existing plan and Part D coverage.

What were they thinking. . . when they "allowed employers to dump drug coverage?

Employers can generally do what they want about health and drug coverage, unless they’re bound by a cast-iron union contract. Most employee health insurance comes with a caveat — the employer reserves the right to change the terms from year to year or end coverage completely. And as the cost of healthcare has risen inexorably, employers have been faced with three choices — eat the costs themselves, pass on more costs to employees and retirees, or terminate benefits. The result is that employer health insurance and retiree benefits,

Traditionally the cornerstone of the American health system, are steadily shrinking.

So what has been Part D’s impact? Experts on health benefits are unanimous in saying that without it the situation would be far worse for retirees. That’s because Congress didn’t "allow" employers to dump drug coverage. Far from it. Congress actually gave a big incentive to employers to continue offering creditable retiree drug coverage after Part D went into effect — in the form of tax-free subsidies

(continued)

(continued)

Amounting to an average of 28 percent of their retirees’ drug costs. The result was that 82 percent of large employers took the subsidy and continued drug benefits.

After Part D began in 2006, I invited readers of the AARPBulletin To recount what had happened that year to their own retiree drug coverage. Hundreds sent in their stories. At one end of the spectrum was a fortunate retiree in California who said he was still getting the same generous coverage he’d been promised on retirement in 1990 — zero premiums, deductibles, and co-pays. At the other end were people who’d lost drug coverage they’d had for years and understandably blamed Part D: "We were thrown to the wolves," said one. Between these two extremes were many experiences that threw light on some developments that retirees hadn’t expected.

Although some reported their premiums had gone down, many others said they were paying more — and sometimes the premium hike had been so great that some suspected a deliberate attempt to force them out of the plan and into Part D. Naturally, they wondered why their insurance was costing more when their companies were now getting fat federal subsidies. One reason, benefits experts say, is

That the Medicare law didn’t require the subsidy to be used to reduce retirees’ share of the costs — or even specify how it should be used at all. Another reason is that in recent years many employers and unions have put caps on healthcare spending, so when it passes a certain point, the extra costs automatically trigger a rise in premiums for everybody in the plan.

Some of these retirees, even with creditable coverage, chose to drop their employer’s plan and join a Medicare drug plan; and some reported saving enough money on premiums that they hoped would exceed any expenses they’d encounter in the doughnut hole, which hadn’t existed in their company plans. Others found that they couldn’t give up their drug coverage without also terminating their health coverage, not only for themselves but for spouses under age 65. And some found themselves in a single company-designated Part D plan that they were obliged to join as a condition for continuing to receive health insurance. "It’s been a learning experience," one man said with feeling. Even so — at a time when benefits are shrinking and out-of-pocket costs are rising — Part D now provides a safety net for retirees that wasn’t there before.

Considering the other factor: Medical benefits

»5#|kBE0 If you’re thinking about switching to Part D at all, your number-one 4Y\M\ Priority is to find out What will happen to your medical benefits If you do so.

Most employer or union health insurance combines medical and drug coverage into one package — for you alone, or comprehensively for you, your spouse, and any dependent children — with a single premium. Of course, there are many variations. But whatever kind of deal you have, these are the questions you should get answers to, depending on your circumstances, as soon as possible:

If I drop just my drug coverage, will I also lose my (and my family’s) medical benefits?

If I drop my drug coverage, will my spouse (and/or dependent children) lose medical and/or drug benefits if he or she is under age 65?

I If I drop my drug and/or medical coverage, will I be able to get it back again if I want to return to my present plan?

I If I enroll in a Part D plan because my drug coverage isn’t creditable, will I (and my family) automatically lose my/our medical benefits?

If I’m expected to enroll in a specific Part D plan as a condition of continuing to receive drug coverage, will I lose my (and my family’s) medical benefits if I choose to enroll in a different Part D plan?

These are critical questions. Chances are that your plan’s benefits manager will send you a notice before you turn 65 and each year afterwards informing you of your options for the next year under the plan’s rules. But if you haven’t received such a notice, or remain unsure of the rules, contact the plan immediately to find out where you stand.

If this all sounds too gloomy, let me say that some employer and union plans are more flexible than these questions may suggest. Some do allow enrollees to continue receiving medical benefits even if they drop drug coverage. Some plans will continue benefits for a spouse under age 65 who isn’t eligible for Medicare, even if the enrollee is no longer covered by the plan. And some plans allow enrollees who have dropped out to return at a later date. But, in general, these dispensations are more likely for Medicare-age people who are still working than for retirees.

If you have federal drug coverage under FEHBP, TFC, or the VA, you can choose to have Part D without risking any of your benefits. But be aware that if you’re a retiree with FEHBP or TFC and you cancel it entirely, you can’t get it back.

In the following sections, I delve into the details of two typical situations: when your drug coverage isn’t creditable but switching to Part D is scary because you’ll lose your medical benefits, and when your drug coverage is creditable but difficult to afford.

If your coverage isn’t creditable but switching is risky

What if your employer or union drug coverage isn’t creditable, but dropping it means losing your medical benefits as well? This is a real Catch-22 situation. Basically, you have three options:

Stay with your plan and hope that its drug coverage will continue for as long as you need it. If drug benefits, or the plan itself, are terminated in future years, you’ll face a late penalty upon joining Part D, as explained in Chapter 8.

Stay with your plan and also enroll in a Part D plan (which means paying an additional premium) to avoid a late penalty in the future if you lose or drop your current coverage.

Check with your plan to be sure that enrolling in Part D doesn’t automatically terminate your current drug and medical coverage. If it does, this isn’t really an option.

I Drop out of your plan and switch to Part D for your drug coverage and Medicare for your medical benefits. Before doing this, look closely at your plan’s medical coverage and compare it with your potential costs and benefits under the traditional Medicare program (on its own or with a Medigap supplementary policy) or a Medicare Advantage health plan, as explained in Chapter 9.

If your coverage is creditable but hard to afford

Before throwing out your creditable drug coverage, you’d be wise to carefully compare what you have now with what you’d get under Part D. Maybe your current benefits are difficult to afford because the premiums are much higher than they used to be — probably a lot higher than Part D premiums. But be cautious here and consider these points:

I If you’re married and your spouse is covered under your plan, you’re probably paying a single premium for both of you. In contrast, under Part D you’d each have to pay a separate premium.

I Part D has a gap in coverage (the so-called "doughnut hole," which I cover in detail in Chapter 15), and your present coverage almost certainly doesn’t. If your costs are high enough to take you into the doughnut hole, this can greatly affect what you pay out of pocket for your drugs over a whole year. So you need to compare your likely Overall Drug costs under your present plan with those in the Part D plans that are available to you. I explain how to do this in Chapter 10.

And what about your medical benefits? This question isn’t as crucial for some people as others. Some retirees say that medical coverage under their union or employer plan isn’t worth much anyway. But you still need to compare those benefits with traditional Medicare, with or without a Medigap policy, or a Medicare Advantage health plan, as described in Chapter 9 — especially if, under the rules of your current plan, you can’t get it back after you’ve given it up.

Determining whether Extra Help can help

The Extra Help program provides comprehensive coverage that’s less expensive than almost any drug benefits you could get elsewhere. (I say "almost" because a lucky few still pay absolutely nothing for their drug coverage under employer or union retirement plans.) So if your income is low, it’s worth finding out whether you qualify for Extra Help, which I cover in detail in Chapter 5.

,\NG/

If you think you may qualify, don’t do Anything About your current coverage until you’ve applied for Extra Help and received a letter saying that you’re eligible — because you don’t want to jump out of the plane (or in this case the Plan) Without a parachute. Also, you need to know whether you qualify for full or partial Extra Help. Compared to your current drug coverage, full benefits may give you a better deal, but partial benefits may not.

What if you do qualify? Remember that you can get Extra Help only if you join a Part D plan. So all the questions I raised in the earlier section "Considering the other factor: Medical benefits" about how joining Part D may affect the medical side of your health coverage apply here too. If they do, you should ask your benefits administrator whether any exceptions are made for people who qualify for Extra Help.

But the most important factor in considering Extra Help is whether you’d have to drop your current coverage and, if so, whether you could get it back again if you needed to in the future. Some employer and union plans allow people to return. For example, the federal health plans (FEHBP, TFL, VA, and CHAMPVA) don’t require enrollees to drop drug coverage if they join Part D, whether or not they receive Extra Help. Anyone else should check with their current plan, because Extra Help doesn’t automatically continue year after year. If your circumstances change — for example, if your income rises above the limits — you could lose it.

Understanding the Medigap dilemma

If you still have Medigap supplementary insurance that includes coverage for prescription drugs, And You know that this coverage isn’t creditable under Part D rules, you already face a late penalty if you switch to a Medicare drug plan now. (Ouch!) So should you stay with your Medigap policy or cut your losses and switch to Part D? Here are some points to consider:

U The premium for your Medigap policy will probably increase a lot as the years go by. This is because no new policies that include drug coverage have been sold since the end of 2005 and, by law, can’t be sold in the future. Also, the majority of people who had these policies before 2006 switched to Part D then. So over time, fewer and fewer people will be enrolled in your plan. As the enrollment pool dwindles, premiums for those who remain in the plan are likely to increase.

U The longer you postpone signing up for Part D, the more expensive it’ll be when you do finally join the program. The late penalty becomes larger each year that you delay, as explained in Chapter 8.

I Medigap plans with drug coverage are expensive, and premiums may rise as you get older. If you switch to a Medigap plan Without Drug coverage, your premium would be reduced substantially. You’d save more than you’d have to pay for Part D premiums, which don’t vary according to age.

If you decide to switch to a Part D plan, remember that you can normally do so only during open enrollment from November 15 through December 31 each year. So if you miss this window one year, you’d accrue another 12 months of added late penalties before being able to sign up for Part D the next year. However, if you lose your Medigap coverage through no fault of your own — such as the plan ceasing business — you can sign up for a Part D plan at other times of the year.

What about the medical benefits of your Medigap policy? If you drop drug coverage from your current Medigap plan, you can choose to stay in it for your medical benefits on the same guaranteed terms. Alternatively, you can change to a different Medigap plan. Doing so may mean paying a higher premium, especially if you have a pre-existing health condition, though some insurers may voluntarily waive such requirements in these circumstances. (To find out more about the Medigap plans available to you, go to www. Medicare. gov and click "Compare Medigap policies in your area.")

Having It Both Ways: Using Part D as Well as Your Own Drug Insurance

Having health insurance that wraps around Part D is useful because it fills in some or all of the gaps in Medicare drug coverage. Under current Medicare law, you can’t buy specific wraparound coverage for Part D in the same way that you can buy Medigap insurance to use with Medicare Parts A and B. Getting such coverage depends entirely on the health benefits you already receive.

In the following sections, I explain how different types of insurance fit with Part D. In most cases, you enter a complex and sophisticated system known as Coordination of benefits. This is intended to streamline the process so Part D enrollees with other drug coverage pay what they should for prescriptions at the pharmacy without having to file separate claims. Medicare’s automated system records the details of each person’s coverage under different insurers, and pharmacists can access this information instantly by computer. (To see what to do if this system doesn’t work as intended, turn to Chapter 14.)

Medicare will send you a questionnaire, soon after you join the program and once a year afterwards, asking what other health and drug insurance you have, if any. You absolutely must fill out this form (legally, you’re required to) and return it. Providing this info ensures that all the details of any extra coverage you have are entered into the system so your benefits and required payments can be coordinated properly. (This applies to medical coverage as well as drug benefits.) Medicare encourages plan sponsors (such as employers) to file this information too, but doesn’t require it. So filling out the Medicare questionnaire is an important safeguard. It helps ensure that you won’t pay more than you need to. If you don’t receive this form, or if you lose it, call Medicare at 800-633-4227 to ask for one.

Employer or union coverage

If your employer or union plan no longer provides full drug coverage of its own, it may offer help by paying any (or all) of these expenses:

I All or some of your Part D premium

I All or some of your Part D deductible

I Your Part D co-pays (in total or up to a dollar limit)

I All or some of your out-of-pocket costs in the Part D coverage gap

Many employers or unions that provide wraparound coverage coordinate with Medicare. But some may require enrollees to pay out of pocket at the pharmacy and then claim reimbursement. Even if your plan coordinates with Medicare, keeping your pharmacy receipts is a good idea — at least until you know the coordination system is working smoothly, and especially after you’ve joined a Part D plan for the first time. The Explanation of Benefits statements that you receive from your employer/union plan and your Part D plan should reflect who has paid for what.

Federal drug benefits

Drug coverage from the Federal Employees Health Benefits Program (FEHBP) or from the military’s TriCare for Life program (TFL) is much more generous than Part D. However, you and any covered dependents of Medicare age can be in a Part D plan at the same time if it would be an advantage — for example, if you qualify for Extra Help, because neither program offers additional benefits for enrollees with low incomes. If you do join Part D, your coverage will be coordinated with Medicare in the following ways:

Iu FEHBP: If you’re retired, Medicare is the primary payer. This means that your Part D plan pays for covered costs first; your FEHBP plan pays whatever remaining costs it agrees to pay under its rules. If you (or your covered spouse) are still working, FEHBP is primary.

IU TFL: Medicare is the primary payer, whether you’re retired or still on active duty. TFL does Not Pay Part D premiums. But it does pay your out-of-pocket expenses for drugs that are covered under the TFL formulary. These include deductibles, co-pays, and the costs of drugs not covered by your Part D plan. If you should fall into the doughnut hole (as explained in Chapter 15), your TFL coverage becomes primary; you then pay the standard TFL co-pays for your prescriptions.

Veterans drug benefits

VA drug coverage, like the federal drug benefits in the preceding section, is also much more generous than Part D. The VA system covers more drugs than any Part D plan, has no premiums and much lower co-pays, provides coverage all year round (no doughnut hole), places an annual cap on co-pays for some veterans, and charges no co-pays for those with limited incomes who qualify. The only snag is that generally you must go to a VA facility to have a VA doctor write a prescription, and many vets live hundreds of miles from the nearest facility. Also, eligibility rules for getting VA healthcare (including prescription drugs) change from time to time.

The CHAMPVA program is somewhat different. You can fill prescriptions at retail pharmacies for 25 percent of the allowable cost, or get maintenance drugs free through the Meds by Mail program. No additional benefits are available for enrollees with low incomes.

Both programs allow you to enroll in Part D if you want to. Here’s how each fits in with Part D:

IU VA: You can choose whether to have Part D or the VA help pay for your drugs on a prescription-by-prescription basis. There is no coordination of benefits between the VA and Medicare, but all you need to do at the pharmacy is show either your Part D plan card or your VA health benefits card. Of course, you can’t use both for the same prescription. The VA doesn’t pay Part D plan premiums.

IU CHAMPVA: Medicare is the primary payer, but CHAMPVA pays up to 75 percent of the cost of your Part D co-pays at retail pharmacies, or 100 percent after you’ve met an annual $3,000 out-of-pocket limit. You aren’t eligible for the no-cost Meds by Mail program. CHAMPVA doesn’t pay Part D plan premiums.

Coverage from State Pharmacy Assistance Programs

State Pharmacy Assistance Programs (SPAPs) that are qualified under Medicare rules (as explained earlier in this chapter) are required to coordinate benefits with Medicare. If you’re in one of these programs, any extra benefits you receive are wrapped around Part D coverage, and SPAPs generally try to make the process as seamless as possible.

You should be able to get your prescriptions filled without having to bother about whether Part D, Extra Help, the SPAP itself, or, in some cases, Medicaid is actually helping to pay for them. If you have any reason to think you’re being charged incorrectly, contact your SPAP for help.

Individual health insurance

Is there is any reason to stay with health insurance you buy yourself instead of switching wholesale to Medicare and Part D? There may be, if you have dependents not yet of Medicare age and if dropping coverage yourself may mean having to apply again for insurance for the rest of the family, maybe on less favorable terms. You need to check the consequences with your insurer.

If you decide to stay with your policy and enroll in a Medicare drug plan, you need to contact your insurer to see how it fits in with Part D — for example, whether your insurance is primary or secondary and whether your policy will cover some or all of your out-of-pocket Part D expenses. If the insurer doesn’t coordinate benefits with Medicare, you may have to keep your pharmacy receipts and send them to your insurer for whatever reimbursement is allowed.

Factoring in Drugs from Other Sources

In the absence of insurance for prescription drugs, people turn to a variety of other sources to get them at less than retail cost. Often this happens in that twilight zone where uninsured folks in their late 50s and early 60s begin to develop health problems requiring medications but have not yet reached Medicare age. If you’ve been in this situation but are now approaching 65, you may be of two minds about what to do next. Perhaps you can’t wait to leap into the Medicare prescription drug program and start getting some help with costs. Or you may be among those who are just plain suspicious of Part D, or concerned that it’ll cost too much or be too much of a hassle to navigate — so why not stay with the system you’ve got?

I consider each of these alternative sources in some detail in Chapter 16 and cover how you might use them together with Part D, especially if you fall into the doughnut hole. But here I ponder a different question: Should you continue using them Instead Of joining Part D?

Certainly, doing nothing may seem easier than going to the trouble of choosing a Part D plan. But some other considerations may be more important: cost and certainty, for example. Here are some questions to ask yourself about your current method of obtaining prescription drugs:

IU Will it provide the drugs I need reliably and indefinitely?

IU Will it pay most of the costs if I suddenly need very expensive medications?

IU Will it pay most of the costs if my income is very limited?

0K!

Most noninsurance sources aren’t reliable in the long term. Low-cost drugs from medical clinics, patient programs, charities, and state drug discount programs may decline through lack of funding. Free samples from doctors depend on which drugs, and for how long, the drug manufacturers offer them. Free or low-cost drugs directly from the manufacturers often come with time limits — and there’s no guarantee they’ll supply another drug you may need in the future. Pharmacy discounts — even those $4-per-prescription offers from some supermarket pharmacies — cover only a limited selection of drugs. Even drugs from Canada or other countries may be disrupted if the drug manufacturers succeed in blockading the trade, or the source countries try to stop it, or U. S. Customs intercepts supplies to American customers — all of which has happened.

Nor do any of these methods provide catastrophic coverage against very high drug costs, or continuous help for people with low incomes in need of multiple drugs, as Part D does. Not that Part D is perfect — far from it. But on the whole, except for the doughnut hole, it provides the certainty of insurance coverage. Having Part D And Using one or another of these alternative sources to supplement it if necessary, as explained in Chapter 16, may be a better way of covering all the bases long term.

Chapter 7