By John Mills

Its open enrollment season for Medicare Prescription Drug programs from November 15 to December 31, 2009.  If you are covered by Medicare and are 65 or older, now is the time to choose a plan.

The Medicare prescription drug program is 4 years old.  Yet there is still confusion about how to choose a plan that best fits the needs of you or your loved ones.  I will attempt to clarify some of the questions about this program. 

How Do I Get Prescription Drug Coverage through Medicare

Medicare provides coverage for prescription drugs in both the traditional Medicare plan and in the Medicare Advantage program (Medicare HMOs).  In the traditional program you can go to any doctor who accepts Medicare but must meet a deductible and pay 20% of the costs.  In a Medicare Advantage plan, you pay much lower out of pocket costs but are restricted to doctors who participate in the insurer’s network.  (A future blog will offer more detail about Medicare Advantage plans.)

If you are in a traditional Medicare, you must choose a prescription drug program offered by a private insurer.  If you are in the Medicare Advantage plan you will receive your prescription drug coverage from the Medicare HMO you choose.

If you are 65 and this is the first year you are eligible for this coverage, it is important that you sign up immediately because there is a 1% penalty for every month penalty that you wait.  For example, if you wait a year, you will pay 12% more than the person who signed up immediately. 

What are the Prescription Benefits that Medicare Offers

Medicare requires that all plans provide a minimum level of coverage but many offer better benefits.  In 2010, Medicare requires that plans provide the following:   

• A deductible that is no more than $310 per year
• Co-insurance that is no more than 25% of the cost of the prescription
• An initial coverage limit of $2,830 (above this amount the coverage gap kicks in)
• Catastrophic coverage that begins at $6440 (end of the coverage gap)
• Total out-of-pocket costs that do not exceed $4,550  per year

Shop around because most plans offer lower deductibles, smaller co-insurance and cover part of the coverage gap.  Your monthly costs will vary by insurer.

What to Consider Before Choosing a Plan

Choosing a prescription drug plan is an important decision.  There are some important things you need to consider. 

• Out of Pocket Costs Versus Premium – You need to decide which is more important to you – out of pocket costs versus your monthly premium.  It is a tradeoff because in most cases higher out of pocket costs result in lower monthly premiums.
• Calculating Your Coverage Gap – Review your existing prescription drugs to determine whether you will have a coverage gap.  There are a number of good tools which can help you including the AARP Donut Hole Calculator.
• A National Plan versus A Local Plan – If you don’t travel much it doesn’t make a difference.  However, if you are a “snowbird” or travel a lot, a plan from a national insurer (for example United Healthcare) is a safer bet because they are more likely to have pharmacies anywhere you go.
• Plan Quality – Medicare provides quality rankings for prescription drug plans. 5 stars is the highest grade.  The rank is based on customer service, the number of member complaints, drug pricing and patient safety and member experience. 

Choosing a Plan

When you are ready to choose your plan, Medicare has a Prescription Drug Plan Finder which allows you to search and compare plans based on zip code.  Once you have found one that first your needs you can enroll online or by paper. 

Remember you must choose your 2010 plan by December 31, 2009!

Please ask any questions in the comments section.  Registration is free.