Playing The Drug Card


    LANSING — The enrollment period for the new prescription drug insurance program being offered by Medicare, called Part D, starts on Nov. 15 and runs for six months.

    Although the program is voluntary and Medicare recipients do not have to sign up for the coverage, those who enroll after their registration period passes could be hit with a 1-percent penalty for each month after their sign-up window closes.

    The penalty is tacked on to the monthly premium, which is expected to be $35 a month. So if someone waits two years to register for the coverage, he or she may be forced to pay a premium that is 24 percent higher, or $43.40 a month. A penalty that high adds up to $100 worth of additional premium payments over the course of a year.

    “That is one take of the math and that is probably accurate,” said Andy Farmer, associate state director for health and supportive services with AARP Michigan in Lansing

    Farmer added that there were plenty of questions needing answers concerning the new program, which goes into effect on Jan. 1. One is whether a late-enrollment penalty can be appealed, especially if someone who didn’t register in time had drug coverage under another plan. That answer, and many more, should be coming in October when the specifics of the program are scheduled to be rolled out.

    As things now stand, current Medicare recipients will have until May 15, 2006, to sign up for Part D without being penalized. When someone turns 65, they will have six months to enroll. Younger persons getting disability checks qualify for Medicare after two years of receiving those payments, and they will have six penalty-free months from the date they become recipients to sign up for Part D.

    A year’s worth of monthly premiums for the drug benefit costs $420. After an enrollee meets the $250 deductible, Medicare will cover 75 percent of prescription costs up to $2,250. But a gap in the coverage pops up once that figure is reached and participants will have to dig into their own pockets to pay for the next $2,850 worth of prescriptions. Then Part D will pick up 95 percent of all prescriptions that a beneficiary may still need.

    Over the course of a year, participants will have to invest about $4,020 in premiums and drug costs to reach the point where Medicare would cover 95 percent of their purchases.

    The Congressional Budget Office has projected that Part D will cost taxpayers about $104 billion in 2010, just five years into the program. (See related chart.)

    Farmer said there were two groups of potential beneficiaries who may not want to sign up for Part D, at least initially. One would be those still in the work force who have good prescription drug coverage from a company-sponsored insurance plan. Retirees with similar coverage from their pensions are the other group. But both groups need to remember that enrolling in the drug program after their initial registration period could lead to a penalty and to paying higher premiums than others for the same coverage.

    “There is this penalty that is indeed built into it for those who make that choice. It’s not one that we agree with or think is productive, but that is what Congress and the President were able to maintain in the package when it went through back in 2003,” said Farmer.

    Help is available for Michigan residents trying to determine if they should register for Part D from the Medicare/Medicaid Assistance Program, or MMAP. AARP Michigan and the Area Agencies on Aging across the state are partners in the effort. MMAP, which has been around since 1984, has trained counselors to review individual cases and recommend which prescription drug plan, if any, is right for each person.

    “We will be ramping up efforts to promote the MMAP program services around Part D education and enrollment, which we think is a very neat way for everyone to end run the even greater amount of confusion that will begin once the actual plan itself will be announced in October,” said Farmer.

    Those who want more information can call MMAP at (800) 803-7174 or visit online at

    ‘D’ As In Dollars

    In fiscal year 2010, the Medicare Part D prescription drug insurance program will account for one of every five dollars spent on benefits and will become the second-highest expense for Medicare with a total outlay that year of nearly $104 billion.

    Only inpatient hospital benefits will cost the system more than the new prescription drug program that begins in January, as Part D will account for 20 percent of the $519 billion that Medicare is expected to spend in 2010.

                                                 2004            2004            2010            2010

    Type of                           Spending     Spending    Spending   Spending

    Service                             Amount         Share         Amount       Share

    Hospital Inpatient              $115.0            39%            $150.5          29%

    Prescription Drugs                    $0              0%            $103.8          20%

    Physicians/Suppliers            $76.7            26%              $93.4          18%

    Health Plan – Part C            $41.3            14%              $72.7          14%

    Hospital Outpatient             $14.7              5%              $25.9           5%

    Skilled Nursing Facilities     $14.7              5%              $20.8            4%

    Other Part B Benefits          $14.7              5%              $20.8            4%

    Home Health                       $11.8              4%              $20.8            4%

    Hospice                                 $5.9               2%              $10.4            2%

    Total                                  $295              100%               $519         100%

    Note: Figures for 2004 are actual. Figures for 2010 are projected. Amounts are presented in billions of dollars.

    Source: Congressional Budget Office, Medicare Fact Sheet, March 2005    

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