5 Ways to Benefit From New Medicare Drug Plans

Seniors are advised to use the open enrollment period to shop for a better plan.

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Is inflation yesterday's news? Not when it comes to prescription drug plans, where prices keep going up and up. With large 2009 premium increases from private insurers on the way, especially from Humana, subscribers to Medicare's stand-alone Part D plan for prescription drugs are being strongly urged to look carefully at whether there are better packages to meet their needs. The open enrollment period extends to December 31.

Now, Paul Krugman may have won a Nobel Prize for economics, but I bet even he would have a hard time figuring out the best Part D plans for his elderly relatives. This year, more than ever, though, it will pay to look carefully at Part D choices. Here is what seniors need to do to get the best deal:

1) Seek Better Premiums. With typical premiums set to rise 30 percent, this is the time to really look at other insurers to see if you should switch. The Kaiser Family Foundation has extensive information on Part D and other Medicare drug programs. Avalere Health, a Washington consulting and research firm, analyzed insurers' 2009 Part D plans and calculated that average premiums would rise 24 percent and that premiums within the 10 largest plans would be 30 percent higher than in 2008. Among the 10 largest plans, the two AARP plans (administered by UnitedHealth) have the smallest premium increases, at 8 and 15 percent, while premiums for the two Humana plans are up 60 percent.

2) Check the Fine Print. Part D subscribers need to look at multiple aspects of their plans in addition to the premiums, and this complexity is cited by experts as a likely reason for the low rate at which seniors have been switching their Plan D providers. "Research has shown that very few people have exercised their right to shift plans from year to year," says Avalere spokesperson Lindsey Spindle.

In addition to highlighting hefty premium increases, analysis by Avalere and others has found that insurers are reducing the number of drugs offered in the plans, boosting annual deductibles and copays, and moving drugs into coverage tiers with higher copays. Plans generally started in 2006 with three tiers. The most basic tier was for generic drugs and usually had no copay, and higher tiers were for branded and more expensive drugs. Most plans have four or five tiers and feature increasing consumer payments in the upper tiers.

3) Compare Drugs Across Plans. Medicare offers extensive online tools that let you find the specific drugs you need and compare what they cost under different plans. Make sure the plan you choose offers the drugs you need at the most competitive prices.

4) Shrink the "Doughnut Hole." Medicare generally will not pay for drugs in 2009 once you've spent $2,700 and doesn't resume payments until total out-of-pocket costs exceed $6,154, when catastrophic coverage kicks in that pays for 95 percent of your drugs. The coverage gap is known as the doughnut hole, and 2009 Part D plans are pulling back from insuring you while you're in that hole.

"Monthly premiums for PDPs (stand-alone prescription drug plans) that provide gap coverage are about double that of PDPs with no gap coverage in 2009," Kaiser says. "Average monthly premiums are $73.36 for PDPs that offer some gap coverage (up from $63.29 in 2008), $33.80 for PDPs with basic benefits and no gap coverage (up from $30.14 in 2008), and $40.59 for PDPs with enhanced benefits but no gap coverage (up from $31.97 in 2008)."

5) Find $4 Generics. Because of the widespread availability of $4 generics at big-chain pharmacies, seniors who use generic drugs should evaluate filling their needs outside the Part D program and thus reduce the odds of hitting the $2,700 coverage-gap trigger.