A Better Bargain
By: Patricia Barry; Source: AARP Bulletin Date Posted: 2005-11-17 15:44:00-05:00
Medicare beneficiaries are being courted with better-than-expected deals for Medicare prescription drug coverage next year—but they also face a potentially bewildering variety of choices as scores of private insurers scramble to carve out market share in the new program.
With Nov. 15, the start of the first enrollment period, fast approaching, competing insurance companies approved by Medicare to offer drug coverage in 2006 are deluging beneficiaries with options. They include many plans with lower premiums and better benefits than the "standard" Medicare drug benefit enacted in 2003.
"The benefits look better than we thought they'd be, and that's good news for beneficiaries," says John Rother, AARP's director of policy. "But we also didn't expect so many plans to participate, and for many people sorting out those choices will be daunting."
Even so, it may be worthwhile for people who are not already receiving better drug coverage to get into the program, he adds. "Most will find it very important to their long-term health and financial security."
Beneficiaries in Alaska will have 27 plan options, the smallest number of any state. Large urban areas will have the most—99 in Miami and 83 in Los Angeles, for example, according to details provided by the federal Centers for Medicare & Medicaid Services (CMS).
It is this heavy competition that has driven many plans to offer more generous drug coverage—at least for 2006—than the package originally designed by Congress.
Under that standard benefit, enrollees would pay a deductible of $250 and 25 percent of the next $2,000 of drug costs. Then they'd be responsible for all costs in a coverage gap—the so-called "doughnut hole"—until they'd spent $3,600 out of pocket. After that they'd pay only 5 percent of any remaining costs in the year. Monthly premiums are estimated to average $32 a month.
As it turns out, few plans precisely mirror this standard design, which is the minimum set by law.
Plenty of plans will charge higher premiums, often for extra coverage. But beneficiaries in every state will have access to plans with monthly premiums of about $20 or lower [see chart for sample ranges]. In 35 states the lowest premiums are under $11 a month. In seven states (Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota and Wyoming) one plan that is designed exactly the same as the standard benefit costs just $1.87 a month.
These rates apply to statewide and nationwide "stand-alone" plans that offer only drug coverage and will most likely be purchased by people enrolled in traditional fee-for-service Medicare who have no other drug coverage. Many regional and local Medicare Advantage (MA) plans, mainly HMOs and PPOs that provide managed care alternatives to the traditional program, offer zero premiums for drugs.
Very low premiums may be a typical business strategy to entice enrollees the first year of the program. But such premiums may also be a boon for healthy beneficiaries alarmed at the prospect of paying $32 a month when they use few or no drugs now.
"Frankly, we hope [these premiums] will attract people who are buying this truly as an insurance policy, who don't actually expect to use it yet but want the comfort of coverage," says Scott Latimer, M.D., an executive of Humana, a company offering some plans with low premiums.
Among the plans designed to woo enrollees are many that require no deductibles and some that provide coverage in the doughnut hole. All beneficiaries (except those in some U.S. territories) will have access to each type, but some will get better bargains than others. In parts of Florida, for example, 87 MA plans will offer fill-ins for the doughnut hole, plus zero drug premiums and no deductibles.
Typically, though, the extra coverage comes with higher premiums, rising to over $100 a month in a few cases. Some plans offer coverage during the gap that includes both generic and brand-name drugs. These are usually more expensive than generic-only options.
Outside the coverage gap, all plans are required to offer brand names as well as generics and to cover at least two medications in each group of drugs used to treat the same condition. But some plans cover more drugs than others.
Do low premiums mean fewer drugs are covered—a trade-off you might expect? Not necessarily. Some plans with very low premiums cover almost all the 100 drugs that CMS has listed as the most popular among Medicare beneficiaries, whereas some very high-cost plans cover only three-quarters.
There are complex trade-offs among premiums, deductibles, copays and extra coverage. Beneficiaries should look carefully at each when comparing plans, consumer advocates say. Medicare offers plan-to-plan comparisons online at www.medicare.gov and on its hotline at (800) 633-4227.
Even so, it may still be difficult to compare plans that, say, charge a flat copay for each prescription with plans that charge a percentage of the drug's cost. In Iowa, for example, one Aetna plan at $35.94 a month requires a $250 deductible, $5 copays for generics and $25 for brand names, and offers no coverage in the gap. In the same state, a $99.90-a-month MedicareBlue plan charges enrollees 30 percent of the cost of all their drugs up to $12,000, when catastrophic coverage kicks in for the standard copay of 5 percent.
Such apples-and-oranges comparisons may place heavy demands on beneficiaries trying to choose a plan. But "getting into the program over the next six months means you have insurance protection and you won't risk a penalty for signing up late," Rother says. "And if you wish to reconsider your choice, you have the right to change to another plan at the end of next year and every year after that."
[As a matter of disclosure, AARP is making available a stand-alone prescription drug plan through United HealthCare.]
|
*Medicare Advantage plans with zero drug premiums may not be available to all beneficiaries. Source: AARP Bulletin analysis of data from Centers for Medicare & Medicaid Services, October 2005
Additional Related Links
The Basics: Medicare Drug Coverage
preview