Demystifying Part D

Retirees may need your help to understand Medicare’s prescription program coverage.

By Helen Thompson

Thanks to the Medicare Modernization Act of 2003, Medicare recipients are finally getting prescription drug benefits. Open enrollment started last November for these plans, and coverage began on Jan. 1.

Now that this program is under way, you can sit back and rest easy, right? Don’t be so sure. According to Bill J. Foudy, LUTCF, of Foudy Insurance Services in Los Angeles, it’s time for advisors to roll up their sleeves and make sure that all their eligible clients are on track to receive this important benefit and that they aren’t getting lost in the myriad plans they can consider. Medicare Part A automatically kicks in when a person turns 65. But just as they have to do for Part B, people have to enroll in Part D to get prescription coverage. These plans are administered by insurance companies, and vary widely among those companies, as well as from state to state.

Creditable coverage
The first hurdle for agents who work with employee benefits is to make sure that they’ve helped their employer clients send out notices of creditable coverage for any employee eligible for Medicare who has not yet retired or is still receiving employee benefits. “Employees over 65 may think they want to stay with their group plan,” says Foudy, who serves as membership chair of the Association of Health Insurance Advisors and is a member of NAIFA-Los Angeles. “But before they choose to do that, they need to verify that their coverage is creditable.”

JUST AS THEY HAVE TO FOR MEDICARE PART B, PEOPLE HAVE TO ENROLL IN PART D FOR PRESCRIPTION COVERAGE.

Creditable coverage is prescription drug coverage that is better than the Medicare plans. “Most employee plans are creditable,” says Foudy. “But employers are required to send that notice every year, because if the employee later wants to enroll in Medicare Part D, he will be asked for that notice to avoid a penalty.”

You should also review your book of business for clients with prescription coverage on their Medicare supplemental prescription drug plans, most of which are not creditable, Foudy says. “The new Part D plans are better than most current supplemental plans—those from the past 10 to 15 years. Clients with those plans should drop their existing coverage and sign up for Medicare Part D,” he adds.

Know those deadlines
Open enrollment started on Nov. 15, 2005, but anyone who is eligible now must enroll by May 15. After that, they will incur penalties for enrolling late if they don’t have previous creditable coverage, and those penalties can get steep. “It’s 1 percent for each month that you’re late,” says Foudy—and there’s no ceiling for that. And if clients become eligible by turning 65, or want to enroll after losing creditable coverage, they have 63 days to sign up from the date of their eligibility or loss of coverage.

Help them shop
What your clients get for their monthly premium can vary, depending on what each company offers in their state. “Agents have a fiduciary responsibility to help their clients find the best plan available,” says Foudy. “That means finding out how much money your clients spend on prescriptions each month so that you can help them shop. And some clients don’t know how much they spend, because they’re already using benefits from Medicare supplemental policies.”

While different plans may vary, they must meet the standard Medicare plan requirements. There’s a tool at www.medicare.gov that will help you and your clients as they look for the right plan for their needs. Another website that contains useful tools and information is www.medicaretoday.org.