If you – or perhaps your elderly parents – are eligible for Medicare, you now have a major new development to consider. Effective Jan. 1, 2006, the new Medicare drug benefit (Medicare Part D) will pay part of the cost of outpatient prescription drugs. Current Medicare recipients can enroll for the new drug benefit until May 15, 2006; if this deadline is missed, recipients will have to wait until next year’s open enrollment period. Of course, the new drug benefit will affect health-care decisions – but it also has implications on planning your future finances.
Basics of New Drug Plan
The new drug benefit is available through different plans offered by private companies. Each plan provides its own array of drugs and participating drugstores. Apart from your Medicare Part B premium, you will have to pay an estimated $37 per month for the new drug coverage, although the actual premium may vary, depending on where you live and which plan you choose.
Beyond the monthly premium, here’s what you might pay, in 2006, for the new drug benefit:
* A deductible of the first $250 of the cost of covered drugs.
* Co-insurance payments of 25 percent of the cost of covered drugs between $251 and $2,250.
* 100 percent of the cost of covered drugs between $2,251 and $5,100. (You might see this coverage gap referred to as the "doughnut hole.")
* The greater of the following: 5 percent of the cost of covered drugs above $5,101 or a co-payment of $2 for covered generics and $5 for covered brand-name drugs.
Some of these figures will vary among Medicare private drug plans. To pick the right plan, you will need to "comparison shop." You can get some help in comparing plans by calling 800-MEDICARE or visiting www.medicare.gov. Once you decide on a plan, you can enroll by contacting the company directly or by going to www.medicare.gov.
Filling in the "Gaps"
As you begin navigating Medicare Part D, you may encounter some issues that could lead you, or your parents, to ensure that you (or they) have a retirement income stream strong enough to supplement any shortfalls you may find in the new drug benefit plan. Specifically, you may need to fill in the "doughnut hole" mentioned above – the gap in drug coverage between $2,251 and $5,100.
Furthermore, as long as a plan provides a 60-day notice, it can drop drugs from its "covered" list. Because you can’t switch plans until the next open enrollment period (Nov. 15 through Dec. 31), you could face some unexpected out-of-pocket drug costs. (However, if your doctor thinks you need a drug that isn’t on the list, or if a drug you need is removed from the list, you or your doctor can apply for an exception or appeal the "drop" decision.)
To deal with these contingencies, structure your investment portfolio and retirement plan withdrawal strategies to provide the income needed to continue paying for needed medicines. To make sure these withdrawals fit in with your overall investing strategies, you may need to work with an investment professional.
Take Action Soon
If you enroll in the Medicare drug plan after May 15, you may have to pay a premium penalty of at least 1 percent a month for every month you postpone enrollment. And you’ll have to pay the higher premium for as long as you stay in your chosen program.
Submitted By Edward Jones Representative John J. Quinnan II, Investment Representative, 12900 Old US 27, Suite 4, Dewitt MI 48820. He may be reached at 517-668-2406 or toll free at 877-668-2406.
