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DOES PART "D" MAKE SENSE FOR ME IN 2009?

Bob Fassbach, Editor www.SeniorARK.com

Updated: March 07, 2012

We think the answer is Yes ----and No!

If you are asking this question, you are not alone. Millions of retired, and retiring Americans have had to grapple with the same question during the past year. We have read online, and in the news, that 19 million, or 26 million,  or 29 million, or over 31 million have already signed up to participate in the Medicare Prescription Drug Program, also known as Part D. No matter which number you believe, it is clear that a massive group of Seniors have decided to cast their lot with the program.

If asked, we suspect that the majority of those millions of Seniors would not really know if it is a good deal for them or not. Believe me---We understand! We have been told by the government that it is. We have been told by AARP that it is. But remember, those in the government who formed the program (with a lot of help from drug and insurance lobbies) want to look good. They want to go back to their constituents to receive accolades for a successful program well-conceived and executed. If nobody signs up, the elected officials look bad. If they can convince us that the program is the latest greatest thing, then they will look good. So what about AARP's aggressive support of the program? Do you know that a major portion of the AARP revenue now comes from the sale of Part D insurance to you? Their enthusiasm for the program must be looked at with some suspicion, faced with a huge profit motive. The government pays them, and other insurers, large subsidies to provide either "stand-alone" Part D drug coverage, or total coverage through Medicare Advantage Programs. My premium for a Medicare Advantage policy through a private insurer might have a zero cost premium for me, but the government pays the insurer up to $650 per month for each and every one of us.

In mid 2006 SeniorARK published an opinion on the program, "Part D Fiasco". We still hold the opinions expressed in that article. Part D needs work. Insurance companies participating in the program are crowing about record company profits since Part D began, and drug companies and drugstore chains are reaping enormous benefit. Today we hear their ads all day long. They are trying to convince us to beg our congressman to vote against Medicare negotiating with drug companies for better prices. They want us to believe that Medicare, the largest channel for prescription drugs in the world, should not flex its powerful muscle to save money for Seniors and taxpayers. They have found the mother lode, are on a drunken binge, and don't want anyone to question their prices or practices. For years folks have complained that the government should be run like a nimble business. Well my fellow Seniors, there isn't a responsible business in the world that would not negotiate for lower prices.

As Part D exists today, what are some reasons you might not want to sign up for Part D?.

1. I don't use prescription drugs, or I don't use enough to make Part D necessary.

2. I get a better deal from Canada.

3. I have enough money to pay for prescriptions, and couldn't care less.

4. My prescriptions are already covered in another plan.

5. Those plans limit which medicines I can get, and may force me to use generics.

6. I have done the math, and I lose.

 

What are some reasons you might want to sign up for Part D?

1. I use a lot of drugs, and it should save me money in the "catastrophic area".

2. I don't want to buy from Canada or some other cheaper source--it might not be safe.

3. I look at Part D as insurance, and one never knows when a condition might develop where I may need many more drugs than I can afford.

4. If I don't sign up now, I am penalized by Medicare regulations, a greater percentage every year. It is like a rolling snowball.

 

All of those 10 reasons, pro and con,  have some validity, and should be considered carefully when deciding whether to participate in Medicare Part D. Perhaps the specific examples below will help as well.

 

To understand the examples, one must first understand how the basic Part D Plan works in 2009. This is Part D for 2009 in chart form. Refer back to this chart as you assess the examples below.

 

    2009 Part D

 

AMOUNT  &  ITEM  WHAT YOU PAY    WHAT MEDICARE PAYS  
$480  PREMIUMS  (varies) $480 $0
$295 DEDUCTIBLE $295 $0
(25% / 75%)  NEXT $2,405 $601.25 $1803.75
$3216.25 "DOUGHNUT HOLE"  $3,453.75 $0    
TOTAL $4,830 $1,803.75
SO UNTIL $6,633.75 IS SPENT, YOUR COST IS $4,830  ($4,535 if not counting premiums)

AFTER THAT YOU PAY $2.40 FOR EACH GENERIC, OR $6.00 FOR EACH BRAND NAME, OR 5% OF THE  TOTAL OF EACH PRESCRIPTION, WHICHEVER IS THE HIGHER NUMBER. EXAMPLE: A $200 BRANDED DRUG COSTS YOU $12.00. THIS SO-CALLED "CATASTROPHIC COVERAGE" CONTINUES ONLY UNTIL DECEMBER 31, 2008

ON 1/1/10 IT ALL BEGINS OVER AGAIN, WITH HIGHER PREMIUMS AND DEDUCTIBLE, AND A LARGER DOUGHNUT HOLE.

Remember, if you have been in Part D for less than a full year in 2008, being in for a full 12 months in 2009 may mean that the doughnut hole takes on a greater significance for you.

 

 

Here are some examples of how the program would affect your savings, or non-savings, at various prescription drug expenditure levels.

 

These are the assumptions we are using for the purpose of our examples:

-----The prescriptions you use are brand name medications, not generic.

-----You could have saved 30% on each prescription (a conservative number) by buying Canadian.

-----The Part D policy you purchase follows the basic Part D guidelines.

-----Your monthly Part D premium is $40 (actually  $8 to $120 per month, based on coverage and state)

-----We are talking about the year 2009.

 

 

Example 1: My prescriptions cost $1,000 per year.  ( In Canada they would cost ($700 )        

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $705:   176.25 

                                                                                          My total cost:  $951.25

Canadian Cost:   700.00

Pat D result is I lose:    $251.25

Example 2: My prescriptions cost $2,000 per year.  ( In Canada they would cost  $1,400 )        

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $1,705.00:   426.25 

                                                                                          My total cost:  $1201.25

 Canadian Cost: 1,400.00

I gain:    $140.75

Example 3: My prescriptions cost $3,000 per year.  ( In Canada they would cost  $2,100 )        

My cost under Part D:                                    Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $2,405:   601.25

This is the doughnut hole---100% of next $300:   300.00

                                                                                          My total cost:  $1,676.25

Canadian Cost:   $2,100.00

Part D result is I gain:    $423.75

Example 4: My prescriptions cost $4,000 per year.  ( In Canada they would cost  $2,800 )        

     My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $2,405:   601.25 

This is the doughnut hole---100% of next $1,300:   1,300.00

                                                                                          My total cost:  $2,676.25

Canadian Cost:   2,800.00

Part D result is I gain:    $123.75

Example 5: My prescriptions cost $5,000 per year.  ( In Canada they would cost  $3,500 )

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $2,405:   601.25 

This is the doughnut hole----100% of next $2,300:   2,300.00

                                                                                          My total cost:  $3,676.25

Canadian Cost:   3,500.00

Part D result is I lose:    $176.25

Example 6: My prescriptions cost $6,000 per year.  ( In Canada they would cost  $4,200 )

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $2,405:   601.25 

   This is the doughnut hole---100% of next $3,300.00: 3,300.00

My total cost:  4,676.25

Canadian Cost:   4,200.00

Part D result is I lose:    $476.25

Example 7: My prescriptions cost $7,500 per year.  ( In Canada they would cost  $5,250 )        

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $2,405:   601.25

This is the doughnut hole---100% of next $3,453.75: 3,453.75

I have just passed the doughnut hole, so I pay 5% of the next 1,346.25:    67.32 

My total cost:  4,897.32

Canadian Cost:   5,250.00

Part D result is I gain:    $352.68

Example 8: My prescriptions cost $10,000 per year.  ( In Canada they would cost  $7,000 )

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $2,405:   601.25 

This is the doughnut hole---100% of next $3,453.75: 3,453.75

I have just passed the doughnut hole, so I pay 5% of the next 3,846.25:    192.32 

My total cost:  5,022.32

Canadian Cost:   7,000.00

Part D result is I gain:    $1,977.68

Example 9: My prescriptions cost $15,000 per year.  ( In Canada they would cost  $10,500)        

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                   25% of next $2,405:   601.25 

This is the doughnut hole---100% of next $3,453.75: 3,453.75

I have passed the doughnut hole, so I pay 5% of the next 9,273.65:   443.32 

My total cost:  5273.32

Canadian Cost:   10,500.00

Part D result is I gain:    $5,226.68

Example 10: My prescriptions cost $20,000 per year. ( In Canada they would cost  $14,000)

My cost under Part D:                                     Annual premium:  $480.00

                                                                                    Annual deductible:   295.00

                                                                                    25% of next $2,405:   601.25 

This is the doughnut hole---100% of next $3,453.75: 3,453.75

I have passed the doughnut hole, so I pay 5% of the next 13,846.25:    692.32 

My total cost:  5,522.32

Canadian Cost:   14,000.00

Part D result is I gain:    $8,477.68

________________________________________________________

So then, what should you do?

Ultimately this must be your decision. The government has made you a gambler. Will you need great amounts of medication or not?

But here is our conclusion: Plan D is a program for catastrophic coverage. It starts to take on significant value for those who spend in excess of $7,500 per year on medications, and it becomes very valuable for those spending $10,000 per year or more. At all levels below $7,500, it is about a wash. Only the insurance and drug companies are joyful at those levels. The program may partially have been encouraged by drug companies, wanting to stem the widespread practice of buying deeply discounted drugs from Canadian sources. Perhaps this is why you cannot count any drugs you get from a Canadian source as helping you reach a Part D expenditure level.

In our examples we used a 30% Canadian discount as a guide. We hear reports that some drugs are discounted much more than this. If you would never buy from a Canadian source, then the program may be valuable for you at a lower expenditure level than $7,500.

Why are Canadian sources for the exact same drugs, manufactured in the exact same American factories, so much cheaper? Because the Canadian government negotiates lower prices from the drug companies on behalf of its citizens. If our senators and representatives  get the drug and insurance  lobbyists out of their offices, they will negotiate too. A lot of grease is flowing in Washington when hundreds of billions of dollars in profits are at stake. We---The People---need not put up with this crooked process. Email your elected officials and demand a change.

But how do we respond to the Part D program as it already exists today? SeniorARK feels that at the very least we all need to buy the cheapest plan available in our state, even if we don't need the medications today. This will protect us from the accelerating penalties the government has imposed to persuade us to sign up now. We can change the plan we choose, at the end of any year if our need for medication increases. And if we do need a lot of medications today, then we should investigate plans with a representative from our state to see which one best meets our needs. Every state employs people to help us make these comparisons. We may even find that we qualify for extra help from other Federal or state programs in paying for prescriptions.

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Other SeniorARK Medicare Articles:2009 Part D Premiums Rise, Part "D" FiascoPart "D"--Compare 2006/2007/2008/2009 Medicare Twilight Zone"Help! I'm Falling Into the Doughnut Hole"Main Medicare Page  Parts A,B,C,D Made Simple, Part D Simply Explained on One Page

 

Committing to the wrong Part D Plan for the next year could be a costly and tragic error. Are you sure you will have the best 2009 Part D Plan for your area, at the best price, and one that best meets your prescription needs? Medicare is making available a tool that will help you to know for sure. It will enable you to see the best plan, for the best price, that meets your unique prescription needs in your area. SeniorArk is proud to present links to this tool to help you find your way through the maze of Part D. As the editor of SeniorArk.com, I work with Part D information every day, and I'm not sure I will have the best 2009 Plan until I use Medicare's tool.  Use this tool now at Medicare-Part D Plan-Finder.  

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