We’ll all retire someday. For those of us without any other health insurance, Medicare will be a lifeline. Below, Allegro continues its series on the ins and outs of Medicare. This month: how Medicare’s drug benefit works. Did you know that prescription coverage is not included in traditional Medicare? You have to buy it! Read on…

When your Medicare card arrives, think about prescription coverage. Prescription coverage is not included in traditional Medicare; you may buy it through a program called Medicare Part D.

Part D plans are sold privately. You pay a premium and the 2009 deductible is $295 or less. Some plans waive the deductible. This is a standard Part D plan:

• Annual $295 deductible
• You pay 25 percent ($601.25) of the cost of prescriptions, up to a total of $2,405.
• After a total of $2,700 ($295 deductible + $2,405 mentioned above) is paid, you pay 100 percent of the total until you pay $3,453.75 (coverage gap)
• When total out-of-pocket cost reaches $4,350 ($295 + $601.25 + $3.453.75), you are out of the gap and qualify for catastrophic coverage. You pay 5 percent of cost, or $2.40 for covered generic drugs and $6 for brand-name, whichever is greater.

There is no mandated premium for Part D plans. They do not have to offer the standard plan, but actuarial value must be the same or greater to you. They cannot impose a higher deductible or higher out-of-pocket requirements than the standard.

The coverage gap mentioned above is infamously known as the “doughnut hole.” While in the gap you are only credited for “true out-of-pocket expenses “ (TrOOP) toward the $4,350 needed for catastrophic coverage. Only Part D covered drugs count toward TrOOP. Over-the-counter drugs do not count. Other coverage or an AIDS drug assistance plan helping you cover costs are not credited. Drugs bought outside the U.S. do not count, nor your Part D premium. Each month you receive an explanation of benefits (EOB) showing how much you have been credited toward catastrophic coverage.

The Kaiser Family Foundation found that in 2007, 26 percent of enrollees filling prescriptions reached the gap. For the rest of the year, 22 percent remained in the gap. Of those on Alzheimer’s medication, 64 percent reached the gap, as did 51 percent on oral anti-diabetic drugs and 45 percent of those on anti-depressants. This is something to consider when choosing a plan. 

There are low-income subsidies or “Extra Help” for people with incomes of 150 percent of federal poverty or below. The Social Security Administration mails notices and accepts applications for subsidies, which pay up to 95 percent of cost of covered prescriptions, while the beneficiary is in the gap. The Medicare Savings Program will help pay Part D premiums; some states offer a State Pharmaceutical Assistance Plan. Local 802 Musicians’ Assistance Program can help determine eligibility for these programs. Call (212) 397-4802. These subsidies will be credited toward qualifying for catastrophic coverage.

One drawback is that the Medicare Modernization Act eliminated all Medicaid coverage for 6 million people eligible for both LIS and Medicaid. Drugs that Medicaid can cover, such as weight-gain drugs used in AIDS and cancer treatment, and barbiturates used to treat seizures, are not covered under Part D.

Yearly open enrollment is from Nov. 15 to Dec. 31. If there is no change, you will be automatically re-enrolled in your current plan. Evaluate plans according to how they cover your particular prescriptions — easier said than done. Local 802 member Les Scott told me, “If you’re not taking any prescriptions regularly, it’s really hard to predict the future.” Try basing your decision on the following: 

• Premium/deductible amount. Premiums do not get credit in the coverage gap; deductibles do.
• Plan formularies. These are three-tiered lists: non-preferred brand-name (covered, but with a co-pay), preferred brand-name (lower co-pay) and generic (lowest co-pay). This is important because your prescription can be moved from one category to another or dropped. Keep in mind that plans can change their formularies at any time with 60 days notice to enrollees.
• How much your prescriptions cost and how likely you are to reach the coverage gap.
• Whether your plan covers any costs while you are in the gap.

Medicare.gov has a “Prescription Drug Plan Finder.” Enter your Medicare information, your prescriptions and preferences. The site does comparisons of different plans and cost breakdowns.

Finally, remember that if you don’t already have health insurance coverage, then your enrollment period for Medicare is three months before you turn 65 until four months after. (You may qualify for a special enrollment period if you currently have coverage and are losing it.) If you delay enrollment longer than four months after your 65th birthday or seven months after losing other coverage, you may be penalized. 

Martha Hyde is a multi-woodwind player who performs on Broadway. A member of Local 802, she is also a trustee on the Local 802 Health Benefits Fund. To view past articles in this series, search for topic “To Your Health” on the Publications page of this site.