Medicare Part D Update: The Danger of Being a Deer Caught in the Headlights

Many senior patients remain confused about and unable to make a decision regarding participation in the Medicare prescription drug program. Like a deer caught in headlights, they are likely to feel the pain of their indecision. This “pain” will come in three forms: a late enrollment penalty, being locked out of any plan until an open enrollment period, and the lost opportunity that comes with having prescription insurance that can lower one’s out-of-pocket expenditures. The lowering of one’s out-of-pocket expenditures is most significant for those 9 million persons eligible for the low-income subsidy; however, only about 1 million persons have applied and been accepted. An understanding of these three costs is important so that health care providers are able to educate and motivate their patients to move in the right direction.

Before discussing these three points, it is important to realize that there are some persons who may choose to do nothing and will not experience any pain at all. They are most likely older persons who will require very little medication over their entire lifetime. Of course they, like anyone, are at risk by not getting this insurance, and are taking a chance that they will not have a need for prescription drug insurance. Because of the increasing costs of prescription drugs and their importance in disease treatment, having prescription drug insurance such as that available under Medicare Part D becomes increasingly important. The bottom line is that most individuals should be covered by a Medicare Part D plan or an equivalent plan, one considered to provide just as good a coverage as Medicare Part D. These include many employer-sponsored plans, as well as the Veterans Affairs (VA) benefit. Persons covered by these plans should stay with this type of coverage because they provide coverage that is at least equal to that offered by Medicare Part D. But again, in most cases, individuals should make the move to assure that they have prescription drug insurance to avoid problems, including a late enrollment penalty, a lock-out, and lost opportunity.

LATE ENROLLMENT PENALTY

Currently, the initial enrollment period, which started on November 15, 2005 is set to end on May 15, 2006. Sixty-three days after the end of the enrollment period, beneficiaries eligible for Medicare Part D will be penalized 1% for each month without Medicare Part D or similar coverage. This penalty will be assessed against the premium when they eventually do enroll in a plan.

The late enrollment penalty was written into the Medicare Modernization Act to encourage seniors to enroll sooner rather than later. As with any insurance, part of the payment comes from premiums, so in order to encourage beneficiaries to join sooner, the penalty was introduced. This penalty is based on a similar late enrollment penalty under Medicare Part B, which is set at 10% per year for delayed enrollment.

An example of the cumulative nature of this penalty can be seen in a 65-year-old person who currently is not using much medication, and therefore wishes to stay out of the Medicare Part D program. Five years later, this same person now requires significant medications, and therefore joins a Medicare Part D plan, but because of his delay in enrollment, his premium will be increased over the base by 60%. In addition, this 60% late enrollment penalty is charged to the base premium for every month in which this individual is enrolled in the Medicare Part D program. As you can see, this is a significant penalty—especially for younger seniors who delay their enrollment in the program.

LOCK-OUT

As mentioned, the current initial open-enrollment period that started on November 15, 2005 is set to end on May 15, 2006. If a Medicare beneficiary does not enroll during this enrollment period, he or she will be locked out of any plan until the next open-enrollment period, which starts November 15, 2006, and ends December 31, 2006. Enrollment during the next open-enrollment period is not effective in a plan until January 1, 2007. So, a Medicare patient missing this current enrollment period would be locked out of enrollment in any plan until January 1, 2007, resulting in some seven months without coverage. Again, this is a tremendous risk to take—that one’s needs during these seven months will not include an expensive medication, such as one of the new, innovative oral cancer drugs (which can cost several thousand dollars per month).

LOST OPPORTUNITY

The lost opportunity builds upon the problem of being locked out, in that individuals would be responsible for 100% of the cost of medications because of missing the opportunity of having prescription drug insurance. This is especially true for those eligible for the low-income subsidy. For this group, there is a tremendous lost opportunity for not taking advantage of Medicare Part D. The low-income subsidy, which is available through application with either the Social Security Administration or a state Medicaid program, can reduce premiums and out-of-pocket expenditures by 83-100%. As with any insurance program, not taking advantage of these programs—especially for those eligible for further savings on their premiums and other expenditures—would be a significant loss.

WHAT IS BEING DONE?

Health care providers can do a great deal in educating patients on the danger of remaining uninsured when it comes to prescription drugs. Because of these dangers and the fact that millions of seniors currently face them, there are currently some legislative corrections that, if passed and signed into law, would reduce some of the pains of remaining on the sidelines. First, the legislation calls for extending the enrollment period for the entire 2006 year, which would eliminate the late enrollment period for this first year. A second part of the legislation calls for beneficiaries being able to change plans at least once during the year. This may take some of the fear out of making an initial decision.

Even with these legislative changes, providers need to educate and motivate their patients so that they can take advantage of this new prescription drug insurance, and prevent the pain of being unprotected against the dangers that lurk around every health care corner.