Do the Math for Best Coverage

Times Staff Writer

For the 40 million seniors and disabled Americans who rely on Medicare, some big changes are in the works.

Congress has added a new benefit -- an option to buy insurance coverage for prescription drugs.

It has also told beneficiaries that they will pay more for the existing Medicare coverage for doctors' services, medical equipment, outpatient hospital care and certain other services -- known as Part B medical insurance.

Combined with other modifications, the changes are the most extensive since Medicare was created in 1965.

The bottom line for beneficiaries: Many people will come out ahead if they buy the new drug insurance. But there will be a variety of these new drug plans, and it will probably take some pencil-and-paper calculations to determine which one best fits a person's needs.

Following are some questions and answers about how to navigate the new options.

Question: Can I buy coverage for prescription drugs right away?

Answer: No. The insurance will not be available until 2006. As a temporary measure, seniors will be able to buy drug cards that entitle them to discounts on prescription drugs.

Q: How can I tell if I should buy a drug card?

A: This will require some shopping around. The drug cards will cost $30 a year. But they will be offered by private companies, and each one will have a different list of covered drugs and discounts.

A look at existing drug cards -- a handful are now on the market -- has some experts worried that it will be hard for seniors to determine which card offers the best deal.

Some cards state a drug discount as "retail price minus 12%," for example, while others give the actual discounted price -- say, $49.04 for 100 pills.

Consumer advocates hope that federal officials will require the card companies to make it easier to compare plans.

Q: If drug discount cards are already on the market, why did Congress authorize new ones?

A: If they meet certain requirements, the new cards will be able to use the Medicare name in their marketing -- a kind of quality seal of approval, said Tricia Neuman, a Medicare specialist at the Henry J. Kaiser Family Foundation, an independent health policy organization.

Congress is betting that the Medicare imprimatur will prompt more people to buy the new cards, and that card companies will be able to use the higher volumes to bargain for deeper discounts from drug manufacturers.

Q: Once the drug benefit starts in 2006, how can I tell if it is a good deal for me?

A: First off, people should look at the drug coverage they may already have, consumer advocates say. About 12 million Medicare beneficiaries are covered as part of their retirement package from companies or the government. They may want to stick with their current coverage rather than consider one of the new plans.

"Employer coverage is the gold standard for drug coverage, and it will continue to be so," said Gail Shearer, a health policy analyst for Consumers Union, an independent testing and research organization.

Q: What if I don't have drug coverage?

A: Again, get out the calculator and prepare to shop around. Private companies will sell the drug plans; their premiums, deductibles and other features will vary.

However, Congress has laid out a "standard" plan that should be close to what the private market will offer.

That plan calls for a monthly premium of $35, or $420 a year.

Once in the plan, consumers have a $250 deductible before any coverage kicks in.

For the next $2,000 in drug bills, the plan covers 75%, giving the beneficiary as much as $1,500 in reimbursement.

For the next $2,850 in drug bills, the plan covers nothing.

When annual drug costs reach $5,100 -- at this point, an individual will have paid $3,600 out of pocket -- reimbursements begin again. At that point, the plan covers 95% of all additional costs.

Q: How can I tell if this is a good deal?

A: Beneficiaries can determine their own cost savings by using a calculator at the Kaiser Family Foundation Web site: http://www.kff.org/medicare/rxdrugscalculator.cfm.

Neuman notes that people with less than $800 in annual drug costs would wind up paying more into the plan -- in the form of premiums, co-payments and the deductible -- than they would get in benefits.

But the insurance could be a good idea even for those people. After all, Neuman says, this is insurance -- a hedge against the unpredictable nature of events. A person's health status could change, and the plans impose a penalty on people who delay the decision to join.

Most seniors spend far more than $800 a year on prescription drugs. The average drug bill will be $3,160 in 2006, the Kaiser Family Foundation estimates. The standard plan would cover one-third of that bill.

Q: Do I have to buy the coverage?

A: No. However, there are strong incentives to buy the coverage in the first year a person is eligible, experts say. People who decline the coverage will pay higher premiums if they decide later that they want it.

This is to discourage people from waiting until they are sick before they buy coverage. To survive, an insurance plan has to balance its payouts to people who use a lot of drugs with revenue from people who are healthy and need few prescriptions.

The rules are different for people who already have coverage through a retirement package. Those people will be able to switch into a Medicare drug plan without paying the penalty of higher premiums.

Q: Will the costs of the insurance rise?

A: Yes. The estimated average premium is expected to rise from $35 a month in 2006 to $58 a month in 2013. The average deductible will rise from $250 in 2006 to $445 in 2013.

And instead of $5,100, a person would have to spend $9,066 on drugs in 2013 before the plan would start paying 95% of the drug costs.

But, again, the actual figures will vary with each plan.

Q: What if I cannot afford the cost of the insurance?

A: Congress has approved significant subsidies for low- income seniors and disabled people, including reduced or waived premiums and drug prices.

These subsidies vary according to income and end when a senior has an estimated annual income in 2006 of more than $14,505, or $19,577 for a couple. Seniors with assets over a certain dollar value are also disqualified from the subsidies.

Q: Can I get a better deal if I join a Medicare managed-care plan?

A: That may be the case. Congress has approved big subsidies to insurance companies to encourage them to create health maintenance organizations and other managed-care networks for Medicare beneficiaries.

These plans usually have limitations on the doctors a beneficiary may use and on access to specialists. But they may also offer features that are more generous than those in the standard Medicare package, such as enhanced drug coverage.

Q: What changes are in store for Medicare Part B -- the coverage for doctor visits, medical equipment, outpatient hospital care and other services?

A: This insurance has carried a $100 deductible for years. Now, it will be indexed to inflation. The deductible will rise to $110 in 2005 and is expected to hit $166 by 2013.

For the first time, upper-income individuals will pay higher premiums under Part B than lower-income people. These adjustments, which start in 2007, affect people with annual incomes of $80,000 or more, and the adjustments get larger as a person's income rises.

The premium for Part B is currently $57.80 a month.

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