Seniors that are eligible for Medicare Part A and/or enrolled in Medicare Part B may participate in Medicare Part D. Enrollment starts on November 15, 2005 and will continue until May 15, 2006. Eligible seniors that fail to enroll during this period will likely pay a higher premium. If the senior is a member of a Medicare HMO (Medicare Part C), he or she will be automatically enrolled in that HMO’s prescription drug plan. If the senior has prescription drug coverage through another plan, such as a former employer’s group health plan, then the senior may want to decline Part D coverage unless the Part D coverage is better.

While most medications will be covered, different plans will have different “formularies,” or groups of prescription drugs that they will offer at discounted rates. Because you can only belong to one Medicare Part D plan and the election to be enrolled in that plan is irrevocable until the next enrollment period, it will be very important for seniors that take a variety of drugs to investigate the formularies of the different plans in order to learn which one is most favorable based on the drugs being prescribed to that senior. Various websites will come into being over the next few months to help with this analysis. For more information, contact Medicare online at http://www.medicare.gov or by calling 800-633-4227 (TYY users should call 877-480-2048). You can also get useful information now at the Center for Medicare Advocacy Medicare Part D home page, located at http://www.medicareadvocacy.org/FAQ_PrescDrugs.htm#Standard. Although seniors will not be allowed to switch plans until the next enrollment period, the various plan providers will be able to switch their formularies throughout the year. For seniors who are prescribed expensive brand name drugs, a mid-year switch of the formulary could prove financially devastating.

The premiums for Medicare Part D coverage will vary from region to region, but will be approximately $35 per month. There will also be a $250 deductible. After the $250 deductible is met, covered drugs will be paid 75% by Medicare and 25% by the senior for prescriptions up to $2,250. Medication costs from $2,250 to $5,100 will be paid entirely by the senior (this is known as the “donut hole”). Prescription costs over $5,100 are paid 95% by Medicare. In order to reach the level where Medicare will pay 95% of covered drugs, the senior will have paid “true out of pocket” or TrOOP expenses of $3,600 ($250 deductible plus $500 (25% of $2,000) plus $2,850 (“donut hole” amount)).

A recent study by PricewaterhouseCoopers shows that low income seniors will benefit the most from the Medicare Part D program. Medicare divides low income seniors into three groups: (1) seniors that are “dual eligibles” (seniors that qualify for Medicare and Medicaid coverage) or have income at or below the federal poverty level (annual income of $9,570 for an unmarried individual or $12,830 for a married couple); (2) seniors whose annual income is at or below 135% of the federal poverty level (annual income of $12,920 for an unmarried individual or $17,321 for a married couple); and (3) seniors whose annual income is at or below 150% of the federal poverty level (annual income of $14,355 for an unmarried individual or $19,245 for a married couple). For groups 1, 2 and 3 the senior must also have available resources under $11,500 for an unmarried individual and $23,000 for a married couple. Available resources include such things as bank accounts, brokerage accounts, stocks, bonds, investment real estate and other investments. Assets that are not considered available resources include the senior’s residence, a car, furniture, furnishings and certain items of jewelry.

Groups 1 and 2 will be identified by Medicare through the Social Security Administration. Dual eligible seniors who do not enroll in a Part D plan by December 31, 2005 will be automatically enrolled in a plan and have their formulary chosen for them (this will not always be the best plan for that senior). Enrollment for persons in Groups 2 and 3 will be the same as for regular Medicare Part D participants. Although it is still uncertain exactly what benefits will be provided to Group 1, 2 and 3 seniors, it is clear that these low income seniors will pay a reduced monthly premium, have a smaller co-pay and a much reduced “donut hole.”