insurance

5 tips for choosing a Medicare Part D plan

Highlights
  • The open enrollment period for Medicare Part D plans started Oct. 15.
  • The doughnut hole, a gap in Part D drug coverage, is getting smaller.
  • You can face a premium penalty for late enrollment in a Part D plan.

Get out your wallets. The open enrollment period for 2012 Medicare Part D prescription drug plans started Oct. 15, 2011.

If you're eager to save money this year, reviewing plan copays and out-of-pocket expenses -- besides premiums -- is crucial. Making a savvy choice can save you thousands of dollars per year. But you'll need to advocate for yourself because every plan is different, and costs may rise.

In 2012, six of the top plans in the Medicare Part D market are raising premiums, according to a recent analysis from health policy firm Avalere Health LLC based in Washington, D.C. The drug plan unit of one large player, UnitedHealth Group, is raising 2012 premiums an average of 14 percent.

There's good news, though.

"Medicare Part D plans are becoming simpler and more cost-effective," says Steve Weisman, a senior lecturer of law, taxation and financial planning at Bentley University in Waltham, Mass. "Lots of companies have been weeded out."

Start your search online

For 2012 plans, which start Jan. 1, the open enrollment period runs from Oct. 15 to Dec. 7, 2011. During this period, you can join, switch or drop your plan. And everyone with Medicare coverage can sign up for Part D.

To find a plan, search Medicare.gov. The interactive Medicare Plan Finder helps you compare deductibles and copays for your prescriptions under various plan scenarios. Input your own list of drugs into the Formulary Finder to make custom comparisons.

After checking the Medicare.gov site, don't forget to reverify that your drugs will be covered, says Lita Epstein, author of "The Pocket Idiot's Guide to Medicare Part D." Sometimes there are mistakes on the site, she says, and changing your plan later isn't easy.

Walgreens and other drugstore chains can also search plans if you can't do your own, says Epstein. Also, turn to pharmacists you trust, but avoid insurance brokers who may be pushing their own plans, she says.

Before making a final decision, heed these money-saving hints.

Compare total annual drug costs. Totaling premiums, deductibles and out-of-pocket expenses are the best way to compare Medicare Part D costs, says Epstein. The exception is Medicare Advantage Plans, which are similar to health maintenance plans, in which drug costs are usually already folded into the plan. "Make sure you compare apples with apples," she says.

At least 30 to 40 Medicare Part D options exist for consumers nearly everywhere, says Epstein. Before using the Medicare online tools, list every drug you're taking, including milligrams or dosage, for 30 days. Then narrow your choices to three plans, and compare them side by side, says Cindy Holtzman, founder of the advocacy firm Medical Refund Service in Marietta, Ga.

Know your formulary. Costs for drug formularies, which are lists of prescription drugs preferred by your health plan, can change every year. Brand-name drugs may have tiered cost sharing, and others may not be covered at all. Costs for expensive drugs can vary widely from plan to plan.

Some plans require you to have prior physician authorizations for a particular drug, says Weisman.

Avoid hitting the doughnut hole. The doughnut hole, which is a gap in Part D drug coverage, is getting smaller every year. In 2020, it will disappear. However, when you hit the doughnut hole in 2012, you'll pay 50 percent of the cost of brand-name formulary drugs after spending $2,930 until you reach the out-of-pocket threshold of $4,700 in 2012.

"You'll hit the doughnut hole if you're on three or four brand-name drugs," says Epstein. By moving to generics you can avoid it, she says. Another option: wholesale clubs that let you use their pharmacy even if you're not a member. Drugs can cost much less.

Watch for plan cost increases. Premiums, deductibles or drug cost tiers can spike. So, look at plans every year, says Epstein. "There may be lots of changes, such as medications that are no longer covered," she says.

Waiting past age 65 can cost you. You can sign up for Medicare Part D three months before your 65th birthday. But if you wait, you'll be penalized with a 1 percent fee added onto your premium for every month you delayed enrollment. You may owe this penalty if, after your initial enrollment period is over, you go for 63 days or more without Part D coverage or prescription drug coverage that is at least as good as Medicare's. Your initial enrollment period ends three months after you turn 65.

"Even if you don't think you'll need Medicare Part D, sign up," says Epstein. Cheap plans are better than nothing, and you can always switch during open enrollment.

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