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What You Need to Know About Medicare Plans in 2012

Save money by taking the time to comparison shop

En español | If you have Medicare Part D prescription drug coverage, the chances are very high that this year you've been paying a lot more for your medications than you needed to.

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That's because so few enrollees bother to compare the Part D drug plans available to them. As a result, in 2011 fewer than 7 percent are in the Part D plan that offers them the lowest out-of-pocket costs, according to a recent analysis.

Comparing plans during open enrollment is the best way to ensure that you don't miss out on your best deal for 2012, which could produce savings of several hundred dollars next year, especially if you take a lot of medications.

But be warned: This year's seven-week open enrollment period begins Oct. 15 and ends at midnight on Dec. 7 — a deadline three weeks earlier than in previous years.

If you enroll in a different plan during this period, coverage in your current plan will automatically end at midnight on Dec. 31 and your new coverage will begin Jan. 1.

If you choose to keep your current plan (and it is still offered in 2012), you don't need to take any action — your enrollment automatically continues next year.

Medicare Part D prescription drug plans in 2012

All Part D plans can change their costs and coverage each calendar year. So pay attention to the "Annual Notice of Change" you should have received from your current plan in September. This spells out any changes for 2012 — in premiums, deductibles, copayments or coverage — and may contain good news or nasty surprises.

Among "stand-alone" Part D drug plans — the kind you have if you're enrolled in traditional Medicare rather than a Medicare Advantage plan — a few that operated in 2011 will no longer be available in some states in 2012.

If you're in one of these plans, you may be automatically enrolled in another offered by the same insurance company, if available, or you can switch to a different plan. There are still plenty of choices in each state, ranging from 25 in Alaska and Hawaii to 36 in Pennsylvania and West Virginia.

Overall, monthly premiums for stand-alone plans in 2012 will range from $15.10 to $131.80. On average, premiums will fall slightly, according to the Centers for Medicare & Medicaid Services. But some premiums will rise significantly.

For example, the country's most popular drug plan, AARP MedicareRx Preferred, run by UnitedHealthCare, will increase its monthly premiums by an average of 14 percent, ranging from 20 cents in Arizona to $8.10 in California. UnitedHealthCare spokesman Matthew Burns says that the plan "covers more branded drugs than most of our competitors and has no deductible," adding that on average "our premiums for 2012 are slightly lower than 2010 levels," given that they fell in most states in 2011.

Next: Medicare Advantage plans in 2012. >>

Why compare plans?

Although most people tend to focus on premiums, these are usually less important in determining how much you pay out of pocket over the year than the copays for your specific drugs. In fact, the main reason for comparing Part D drug plans is because the copays vary so widely, even for the same drug. An AARP Bulletin analysis of 2012 plans in three states revealed examples of how big those variations will be for three common brand-name drugs:

  • Lipitor: In Florida, copays for the cholesterol-lowering drug Lipitor 20 mg range from $0 to $90 for a 30-day supply. Of the 33 plans offered, nine plans charge copays of $8 or less for this drug, whereas most have copays in the $30-$45 range, and 12 plans do not cover it at all.
  • Plavix: In California, copays for Plavix 75 mg, used to prevent heart attacks, range from $35 to $90.42 for a 30-day supply. Of the 33 plans offered, most charged copays between $40 and $50, and eight plans charged $70 or more.
  • Zyprexa: In New York, copays for the antipsychotic drug Zyprexa 5 mg range from $34 to $163.98 for a 30-day supply. Of the 29 plans offered, 10 plans charge copays of under $90 for this drug, 19 plans charge $90 or more, and 7 plans charge more than $115.

These huge disparities in copays for the same drug are very common because each plan decides its own copay structure and makes its own trade-offs. So plans that charge high for some drugs charge low for others. Some plans charge fixed dollar amounts for copays, and these cannot vary throughout the year. Others charge a percentage of the drug's cost — 25, 33 or even as high as 53 percent in a few cases — which can vary if the full price fluctuates. Paying a percentage rather than a flat copay for expensive drugs explains some of the highest prices shown in the examples above.

Next: Is a Medicare "gold star" plan an option for you? >>

Figuring out your best deal

So how do you figure out what you'll pay for your own unique set of medications?

The most effective way is to use Medicare's online plan finder program. If you enter your ZIP code, the names of the drugs you take plus their dosages and how often you take them, this program automatically does the math to find the plan in your area that covers your drugs at the least overall out-of-pocket cost — including premiums, deductibles, copays and costs in the coverage gap known as the doughnut hole. You can also call the Medicare help line at 1-800-633-4227 and ask a customer representative to do this search for you.

When comparing plans, keep in mind that costs aren't always the only consideration. On the plan finder you can also find out:

  • What kind of service to expect from any plan by looking at the quality rating Medicare gives it
  • Which pharmacies in any plan's network are convenient for you
  • Which plans offer pharmacies nationwide if you travel a lot
  • Which plans offer mail-order service
  • Which plans place "restrictions" on any of your drugs, meaning they require you to ask permission (with your doctor's help) before they will cover it.

Also, if you don't take any drugs right now, selecting the plan with the lowest premium will give you the protection of coverage at the least cost.

Next: Ways you can save on drugs in 2012. >>

Other ways to save money on drugs in 2012:

  • Savings in the Part D doughnut hole: The manufacturers' discount on brand-name drugs in the coverage gap known as the doughnut hole continues to be 50 percent in 2012, but the government discount for generic drugs goes up from 7 to 14 percent. (Under the new health care law, these discounts are due to increase until 2020 when nobody will pay more than 25 percent for any drugs in the gap.) Some plans also offer additional coverage in the gap.
  • More generics will become available: Cheaper generic copies of some expensive, blockbuster drugs such as Lipitor, Plavix and Zyprexa will come on the market in 2012. Part D plans typically charge far lower copays for generic drugs. The original brand-name drugs, however, typically retain their high prices when they lose patent protection and face generic competition.
  • Low-cost drug coverage: About 2 million people who are eligible for subsidized coverage under Part D's Extra Help program are not taking advantage of its savings, according to Medicare estimates. "The eligibility requirements are more flexible than they were a couple of years ago," says Medicare administrator Don Berwick. "If you were turned down in the past due to income or resource levels, you should reapply." To apply, call Social Security at 1-800-772-1213 or apply online.

Also of interest: 8 Medicare cuts on the table. >>

Patricia Barry is a senior editor at the AARP Bulletin.