7 Tips for Picking a Medicare Part D Plan

How to switch into a lower-cost prescription drug plan in 2011.


Beginning next week, Medicare Part D beneficiaries will have the opportunity to switch to a new prescription plan. Choosing a plan that covers your medications for a lower cost could save you hundreds of dollars in 2011. About 2.6 million beneficiaries enrolled in prescription drug plans will see a premium increase of at least $10 per month if they stay in their current plan. Current beneficiaries can choose a new Medicare Part D plan between November 15 and December 31. Here are some important factors to consider when choosing among the Part D plans in your area:

Compare premiums. The average monthly Part D premium will be $40.72 in 2011 if beneficiaries remain in their current plan, which is up 10 percent from $36.90 in 2010, according to a Kaiser Family Foundation analysis. Average premiums vary considerably by location, ranging from $29.01 per month in New Mexico to $46.51 per month in Idaho and Utah. "We have seen plans that have had pretty substantial increases in premiums over the years," says Jack Hoadley, a health policy analyst at Georgetown University's Health Policy Institute. "What may have been the cheapest plan for you three or four years ago when you first signed up may not be good for you now." For the first time, in 2011 there will additional premium increases for high-income retirees. Part D enrollees with annual incomes above $85,000 ($170,000 for couples) will have a monthly adjustment automatically deducted from their Social Security check. If that amount is more than the amount you receive from Social Security, you will get a bill from Medicare.

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Evaluate cost-sharing provisions. Premiums aren't the only prices you need to evaluate when choosing a Part D plan. Include the deductible or amount you must pay before your coverage begins in your calculations. Also consider the copayments or coinsurance you will need to pay for covered drugs. The Centers for Medicare and Medicaid Services has an online tool that allows potential and existing Medicare beneficiaries to enter the drugs they expect to take next year and compare expected out-of-pocket costs under various local plans.

Scrutinize the formulary. Each Part D plan has a list of covered drugs called the formulary. Most Medicare drug plans separate the covered medications into tiers, each of which has a different out-of-pocket cost. "Many plans are changing the amount they change for prescription drugs and adding and subtracting drugs from their formula," says Juliette Cubanski, a policy analyst at the Kaiser Family Foundation. "Even if you are happy with the coverage you have, it's important to know that your coverage might be changing between 2010 and 2011." If you are considering changing medications in the coming year, make sure a plan covers the potential new prescriptions as well.

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Find out what authorizations are required. Some prescription drug plans require you to jump through a few hoops before your medication will be covered. A Part D plan may require prior authorization before paying for a drug, which means you or your doctor must contact the drug plan before you can fill certain prescriptions. "It's really important to look at whether a plan imposes certain utilization restrictions such as prior authorization that can affect a beneficiary's access to the medicines that they take," says Cubanski. Some plans also limit how much of a medication you can buy at a time and may require you to try one or more similar lower-cost drugs before they will cover the prescribed drug.

Get ready for more gap coverage. Most Medicare drug plans have a coverage gap called the "donut hole". The coverage gap begins after an enrollee incurs $2,840 in total drug spending and lasts until catastrophic coverage kicks in after an enrollee has spent $4,550 out-of-pocket. Beneficiaries who reach the coverage gap in 2011 will see lower costs this year as a result of changes made by the Affordable Care Act of 2010. Brand-name drugs purchased in the gap will be discounted by 50 percent in 2011 and plans will pay 7 percent of the cost for generic drugs in the gap. "If you are using brand-name drugs and reach the coverage gap, you are going to pay only about half the cost that you did last year for those same brand name drugs," says Hoadley. However, nearly three-quarters of plans will offer little or no gap coverage beyond what is now required by law, KFF found.