Cost vs. Benefit - New Medicare Part D Prescription Coverage
Show #320 Airing Sunday, 11/27/05
How much should your prescription drugs be costing you to make paying for the new Medicare Part D coverage worthwhile? This question pops up all the time now as I speak to seniors groups. When I wrote about this in my Plain Dealer column, even more questions poured in. So let me try to answer when it makes sense to enroll in the new Medicare program.
To simplify the discussion today, I am not going to address people with low income, below about $14,000 for unmarried folks and $19,000 for couples, or people who currently have drug coverage under an employer or retiree plan, or people who get their drugs through the VA. For all of you, there are different rules.
But if you are among the millions of seniors who don’t currently have prescription drug coverage, should you sign up? Or should you pass?
The answer depends on which of the Medicare plans you pick, and how much you’re currently spending on your medications. For most people, the break-even point will be about $730 of drug costs per year. If you pay more than about $730 per year, or $60 a month for drugs, you’ll come out ahead by signing up. If you pay less than about $730 a year, you’ll probably lose money by signing up for the new program.
Here’s why. To get the Medicare coverage, most people will pay a monthly premium. That premium will vary depending on which program you sign up for. There are dozens of different Medicare plan options to pick from. Yes, it gets very confusing. But on average, the premium will run about $30 a month, or $360 a year.
There’s also a $250 annual deductible for most plans. This means you’ll pay the first $250 of your medication costs yourself, even if you signed up for coverage.
Once you’ve paid $250 of medications costs, the coverage starts. At that point, under most plans, you’ll pay 25 percent and Medicare will pay 75 percent of your costs up to $2,250.
Let’s say your medication costs for the year generally run $730. You’ve paid $360 of premiums, all of the first $250 of your costs, and 25 percent of the next $480, which is $120. Your total cost for $730 of medicines is about $730.
So here’s the bottom line. If your income is not very low, and you are not covered by any other program, add up all of your current prescription costs. If they’re over $730 a year, you’ll come out ahead by signing up for a Medicare plan.
And even if your medicine costs are less than $730 a year, you may still come out ahead by finding a plan that charges premiums, deductibles, and co-pays which are lower than the averages I’ve described. For more information, call 1-800-Medicare, or go to www.medicare.gov.
The new Medicare plan is very confusing. And picking one can be a daunting task. But the program will provide real benefits for most people.
