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James Sullivan
Medicare Part D enrollment window opens

Now’s the time to encourage clients to review their prescription drug choices. Follow these steps to help analyze the total cost of the various options.

October 15, 2012
by James Sullivan, CPA/PFS

This is the time of year to talk with clients about Medicare Part D and their prescription drug choices. The Medicare Part D open enrollment period begins today (Oct. 15) and closes Dec. 7. Any changes in their prescription drugs during 2012 or in plan formularies mean their 2012 plan may not make sense in 2013. Making the right decision can save clients money and aggravation.

The enrollment period impacts clients who have “original Medicare,” which includes Part A (hospital insurance) and Part B (medical insurance covering doctor and other health care costs). To secure prescription drug coverage, these clients must elect Part D. Coverage under Part B and Part D is voluntary. But individuals who opt out of either plan may pay a penalty in the form of a higher monthly premium if they elect coverage later. The penalty can only be avoided if the Medicare participant had other coverage (such as an employer’s group health plan) which is creditable—equal to or better than the coverage they could have obtained under Part B or
Part D.

Some clients may have enrolled in a Medicare Advantage Plan (MA Plan). These plans are offered by private insurance companies and combine Parts A, B, and, usually, Part D. If prescription drug coverage is included in the MA plan (called an MA-PD plan), the Medicare participant does not need to elect separate coverage.

Insurance agents sell these plans, but clients can also enroll or make changes during the open enrollment on their own by going to medicare.gov. Online enrollment is recommended because most insurance agents represent only a few plans and may not sell the plan most beneficial to your client.

Medications make the difference

During the open enrollment period, clients may select a new prescription drug plan. When clients select a new plan, they will be automatically disenrolled from their 2012 plan as of Jan. 1, 2013. Part D plans are offered by private insurance companies. No medical underwriting is required to make the change. If a client wishes to remain in his or her current plan, he or she need do nothing. 

Unfortunately, many Medicare beneficiaries’ decision focuses too much on the monthly premium. Often the plan with the lowest monthly premium is selected even though the overall cost of the plan is much higher than other available plans. It is the total cost of the plan that clients should focus on—including the premium, deductible, co-payments, and any payments made in the infamous “doughnut hole” (or gap in which the participant must pay 100% of his or her drug costs). The total cost of the plan is driven by the client’s prescription drug regimen. Which Part D plan is least expensive in terms of the total annual cost differs from client to client. 

Fortunately, the Medicare website at medicare.gov provides a total cost analysis for the client.

Once on the landing page, click on “Drug Coverage (Part D)” located near the top of the page; from the dropdown menu select “Find health & drug plans.” A general search of available plans can be done by the participant entering his or her ZIP code and clicking on “Find Plans.”

For a more personalized search, the user may enter Medicare information (such as claim number) in the box below the box requesting the ZIP code. If the client has opened a MyMedicare account, he or she can manage prescription drugs and enroll through the account. (Clients can create an account at medicare.gov; click on “MyMedicare” in the upper-right corner of the screen).

Clicking on “Find Plans” takes the participant to “Step 1 of 4: Enter Information.” Here participants are asked which type of Medicare coverage they have and whether they receive a subsidy (or “Extra Help”) for the cost of Part D. Most clients will answer that they have Original Medicare and do not receive any Extra Help.

After answering the questions, the participant clicks on “Continue to Plan Results,” arriving at a page labeled as “Step 2 of 4: Enter Your Drugs.” The user is asked to enter his or her prescription medications. If you do this for a client, ask for a written list of his or her medications, including dosages. Don’t ask for the names of the medications over the
phone—most drug names are hard to pronounce and even harder to spell. If the client does it himself or herself, recommend that he or she read the names straight off the medication bottles. After a drug name has been entered, click “Find My Drug.” A list of drugs will open up. Click on “Add Drug” across from the correct drug name. Dosage information will be requested, once entered along with the pharmacy type (retail or mail order) used to purchase the drug, click on “Add drug and dosage.”

After completing the list of drugs, you can save the data for later use (refer to the box on the screen labeled “Retrieve My Saved Drug List” for the drug list identification number and password date—save both for later use). Saving the data is recommended especially if the client has entered several drugs.

After entering the drugs, click on “My Drug List is Complete” (just below the box containing the list of drugs) to move on to “Step 3 of 4: Select Your Pharmacies.” The user is asked to enter the local pharmacy or pharmacies where the medications are purchased. This is an important step since the final cost of the plan can depend on the pharmacy selected. The client will want to check if his or her pharmacy is in the selected plan’s network. After entering the pharmacy, click on “Continue to Plan Results.” The participant will land on “Step 4 of 4: Refine Your Plan Results.”

Notice on the left of the screen the participant is asked to “Refine Your Search.” Most likely, the user will want to limit the plan results list by clicking on “Select Drug Options.” Here there are four options to choose, including plans that provide coverage in the doughnut hole (or “gap”); offer mail order (which is frequently less expensive than using a local pharmacy); have no restrictions on drugs (such as preapproval or quantity limit); and have all the participant’s drugs on the formulary. On the right side of the screen, go to the box labeled “Summary of Your Search Results,” where the participant can limit the results to just “Prescription Drug Plans (with Original Medicare)” (the participant may also limit the search to Medicare Advantage plans with or without prescription drug coverage).

After refining the results, click on “Continue to Plan Results.” The resulting list will include all the Part D plans in the participant’s area ranked by annual cost if the drugs are purchased at a retail pharmacy. The user can also select to rank the plans by a number of other factors such as annual cost if mail order is used.

Once a plan is selected, the user can click on a plan for additional details (such as whether all of the client’s drugs are on the plan’s formulary) or compare up to three plans side by side. Once a plan is selected, he or she can click on “Enroll” and complete the enrollment process online.  

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James Sullivan CPA/PFS, is a financial planner located in Naperville, Ill., who specializes in working with individuals suffering from chronic illness and their families.

* The AICPA’s PFP Section provides information, tools, advocacy, and guidance to CPAs who specialize in providing tax, retirement, estate, risk management, and investment advice to individuals and their closely held entities. PFP Section members, including PFS credential holders will benefit from a new publication, The CPA’s Guide to Financing Retirement Healthcare, and other elder planning information in the Resources section and in Forefield Advisor on the AICPA’s PFP website at aicpa.org/pfp.All members of the AICPA are eligible to join the PFP section. CPAs who want to demonstrate their expertise in this subject matter can apply to become a PFS credential holder.