Changes ahead for Medicare drug program

Nearly 2 million low-income Medicare participants could be switched to different insurance plans for their prescription drug coverage next year.

Millions more will have to shop around if they want to avoid double-digit increases in their monthly premiums.

The reassignment of the poorest beneficiaries and the higher premiums for many others are just two reasons why seniors and the disabled may want to look into other plans as the Medicare drug benefit enters its third year.

The shopping season officially begins Nov. 15 - the first day of an open enrollment period that continues through Dec. 31.

Advocacy groups warn the benefit's 24.5 million participants to take nothing for granted even if they're happy with their current coverage.

"Everybody needs to shop around every year," said Patricia Nemore, senior policy attorney at the Center for Medicare Advocacy. "Just because you like your plan this year doesn't mean that plan will work the same next year."

Under the drug benefit, Medicare subsidizes insurance plans that cover an enrollee's prescription drug buys. The government pays insurers extra for covering the very poor.

The plans adjust their coverage to reflect the changing marketplace. They change which drugs they will cover for safety and financial reasons. They also make adjustments to the monthly premiums they charge customers, trying to maximize demand for their product and profitability.

On average, Medicare Part D plans will charge a monthly premium of $28 in 2008, but the premiums vary widely across the nearly 1,800 plans around the country. The premiums range from $9.80 for a basic benefit to $107.50 for enhanced coverage.

About a quarter of the poorest beneficiaries don't pay any monthly premium. They will still be entitled to that extra benefit next year, but they will have to get their coverage though other plans meeting Medicare's requirements for offering coverage to low-income beneficiaries. Medicare officials sent letters this past week to nearly 2 million people to inform them that they will be moved to a new plan.

Kerry Weems, administrator for the Centers for Medicare and Medicaid Services, said those beneficiaries can opt to stay with their current coverage if they like, but would have to start paying. He anticipates that the government will make changes to the drug benefit in future years to reduce the number of people "pingponging" from insurer to insurer with each new year of coverage.

"It's not good for them," Weems said. "There's some things we could have done this year to avoid that, but it would have meant changing the business rules after companies had bid. That didn't seem like the right thing to do."

Most of the low-income beneficiaries being reassigned participate in plans offered through UnitedHealthcare and Humana, according to an analysis from Avalere Health, a consulting firm based in Washington. Two companies, Silverscript and Medco, should pick up many of the reassignments.

The poorest participants can switch their drug plans at any time, so if they get a reassignment notice from the government, they should make sure their new plan covers all their medicine, Nemore said. They can do that by consulting 1-800-Medicare, or by contacting the State Health Insurance Assistance Program, which has counselors in every state.

But it's not only the poor facing major changes, officials note. Enrollment in the drug benefit is highly concentrated, and some of the most popular plans will charge considerably higher monthly premiums next year.

For example, the most popular plan, the AARP Medicare RX Preferred Plan, will increase its monthly premium by 16 percent. Humana Inc. will increase the premium for its standard plan by 71 percent. And the AARP Medicare RX Save Plan will jump 65 percent, according to Avalere Health.

Silverscript, the ninth largest plan, lowered its monthly premium by 24 percent.

Weems said he had not seen Avalere's analysis, but he pointed out that beneficiaries have a wide array of choices and more than 90 percent of participants can move into a plan with a lower premium than they are currently paying. They just need to shop around, Weems said.

The open enrollment season lasts until Dec. 31, but officials warn beneficiaries that it's safer to make a decision sooner rather than later, if they want to be sure their new coverage is in effect when they pick up their first prescriptions in January.

While the drug benefit affects people differently depending upon their incomes, their health and where they live, the standard benefit looks like this: Participants pay the first $275 in drug costs. Then, the plan pays 75 percent of the tab until total drug costs reach $2,510. That's when beneficiaries hit the so-called doughnut hole, where they pick up all cost until they've paid $4,050 out of pocket. After that point, they only have to pay 5 percent of the tab for their medicine.

About a quarter of the plans offering the drug benefit do cover generic drugs when customers hit the doughnut hole.