By Trudy Lieberman
Director of the Center for Consumer Health Choices
Consumers Union
Now that Congress has passed a new Medicare law, consumers will have more questions than answers. Under this new law seniors and people with disabilities will continue to pay top dollar for prescriptions and many will receive only modest drug coverage. For the time being there are no new benefits for seniors, and there’s nothing they need to do that’s different.
- What to do now
For the next two years you will have the same choices you have always had: you can choose traditional Medicare and cover the gaps in coverage with a Medigap policy, or you can choose to get your Medicare benefits from an HMO if one offers Medicare coverage in your area.
Here are some ways to think about the trade-offs between the two options:- If you want to keep the doctors you now have, including specialists, and those physicians are not in an HMO network, then you should choose a Medigap policy. Many people will want to keep the policy they already have.
- If your doctors belong to an HMO network, and you’re willing to abide by the restrictions on care, such as getting referrals, then consider joining the HMO. Or continue getting your benefits through the HMO if you are happy with the care and service you are receiving.
- Compare the annual costs of one option over another. For a Medigap policy Plan C that gives you a generous amount of coverage, you will pay between $1000 and $2500 a year for the premium. Annual premiums for an HMO may run close to $1000. Most Medigap policies will pick up your hospital deductible, the Part B deductible of $100 as well as the 20 percent coinsurance Medicare requires you to pay for medical services. You may have no further out-of-pocket expenses except, of course, for your prescription drugs.
- HMOs may require you to pay additional deductibles and coinsurance for such things as hospital stays and doctor visits. These copayments vary between $50 and $2000 for each hospital stay, but many are around $500. Some HMOs instead charge a copayment for each day you are in the hospital. These vary from $50 to $300. These daily copayments can add up if your stay is long. Sometimes an HMO will make you pay copayments for using an out-patient surgical center. Look at all the copayments the HMO requires. You might have to call the plan and ask about the copayments if an HMO’s literature is not clear. If you have an illness that requires frequent hospital stays, a Medigap policy might be a better choice. That way you won’t have to worry about costly copayments.
Note: The new law gave HMOs more money from the federal government. Many will use that money to reduce premiums and possibly copayments. So an HMO you choose today might be more attractive a few months from now when they advertise new premiums and benefits.
- If you take a lot of prescription drugs, an HMO may be a good choice. Most plans offer coverage for prescription drugs, but be forewarned: that coverage may be for generic drugs only. If you take brand name drugs, you may have no coverage and will have to pay the entire cost out-of-pocket. Keep in mind that you may have to pay copayments of between $5 and $15 for generic drug coverage. And there is likely to be a maximum amount that the plan will pay–probably $1000 or $2000. If a plan you’re considering does offer brand name drug coverage, the copayments will be much higher.
- If you’re choosing among HMOs and you have a chronic illness that requires a lot of visits to the doctor, then look for plans that have the lowest copayments. If you take a lot of drugs, look for plans that have the most generous drug benefits; that is, those with the highest cap on total expenses and those that have the lowest copayments.
- Currently you can also buy drug coverage from certain Medigap plans. The ones with drug coverage go by the letters, H, I, and J. Plans H and I cover expenses up to$1,250, and Plan J covers expenses up $3,000. Both have a $250 deductible and require you to pay half the cost of your medications. These plans are very expensive, upwards of $4000.
- If you need drug coverage now, it’s best to get it from an HMO rather than one of the Medigap policies. Keep in mind that choosing an HMO will also limit your choice of doctors.
- If you have coverage from your employer, keep it as long as you can. If it has drug coverage, which many of these plans have, it’s a valuable benefit. It will cost a lot more to buy drug coverage under other arrangements.
- What to do in June
In June, seniors will be able to purchase a drug discount card that is approved for sale by Medicare. For an annual fee of $30, they are eligible for discounts ranging from 15 to 25 percent. All kinds of organizations can apply to offer a card. These include local and national retail pharmacies, pharmacy benefit managers that manage benefits for HMOs, HMOs, and Medigap insurance companies.
It is not possible at this time to say how these cards will work–how the discounts will be figured, whether they will be based on retail price or the average wholesale price, what drugs will be covered. And it is not clear whether other discount cards now offered by pharmacies, drug companies, and other groups will continue, or whether these organizations will discontinue their cards and offer the government-approved type instead. It will be hard to comparison shop. And, if discount drug cards encourage the use of brand name drugs, the discounted price could be more costly than an equivalent generic drug. Here are some things to remember about the card program:- Seniors who are eligible for Medicaid or Medi-Cal and Medicare are not eligible.
- HMOs can limit enrollment in a discount card program.
- Seniors will be able to have only one Medicare-approved card.
- If you disenroll from the drug program, you can’t get a new card for the rest of the year, except under special circumstances like leaving the service area. You can get a new card during a special open enrollment period.
The decision you may have to make now is whether to join an HMO to get drug coverage from the health plan or stay with a Medigap policy and take your chance with one of the new discount cards. At this point, it is difficult to say which option is best because there are so many unknowns.
- What to keep in mind about the new drug benefit in 2006
The benefits of the prescription drug coverage have been overstated. At best many people will get only about half of their prescription drugs expenses covered. Some, with very low incomes, will get more coverage. Consumers Union estimates that someone who has no drug coverage now and pays $2300 a year for prescriptions will actually pay $2900 in 2007 assuming drug prices continue to rise at the same rate. Most likely they will since there are no cost controls on pharmaceuticals built into the new law. Here’s what you’ll pay for the new coverage:- Annual premium of $420. [Note: This is an average. Actual premiums could be much higher, especially in regions with little competition.]
- Annual deductible of $250
- Coinsurance of 25 percent for expenses up to $2250.
- All drug costs between $2200 and $5100. [NOTE: This is the so-called donut hole, which will affect those who have chronic illnesses and an ongoing need for five or six drugs a month. Those expenses often total an amount that falls inside the donut hole.]
- Coinsurance of 5 percent when expenses exceed $5100.
- All costs for drugs not included in your drug plan. [NOTE: These do not count toward out-of-pocket limits in spending.]
Some other important questions to keep in mind:
Q. Can I choose not to take the drug benefit?
A. Yes, but if you don’t sign up when you are first eligible, you will pay a penalty that could be steep. It will be at least one percent of the premium for each month not covered. So someone who waits three years to buy the coverage will pay at least an extra 36 percent in premiums. This provision is intended to protect insurance companies from people who put off buying coverage until they get sick.
Q. Can I buy Medigap insurance to cover the donut hole?
A. No. Congress wants seniors to shoulder more of the costs of their healthcare, and insurers can’t offer coverage for this gap as they can for other Medicare gaps.