Medicare Prescription Drug Plan
In keeping with our theme of "Run by Agents, for Agents," discussing the new Medicare Part D might help.
Yes, it's here, the Medicare Prescription Drug Plan. Since most retired State Farm agents are at least age 65 and eligible for Medicare, this should be of interest if not for you, then for extended families, relatives, friends and acquaintances who have questions.
I will try to provide some insight and perspective while keeping it simple. Using examples of certainlevels of annual prescription drug expense might be the best way to do that.
Let's start with the costs. The premium reportedly will be $32 per month, or $384 per calendar year. Then there comes something familiar to health insurance plans, but not so familiar to prescription drug plans, a $250 deductible,. Prescription drug plans usually don't have a deductible, but do have co-payments. Co-payments being a certain dollar amount that the person who has the prescription drug plan has to pay on each prescription drug being purchased. These co-payments usually are higher if the drug is a brand name or lower if the drug is generic.
Yet another term, familiar to health insurance plans, but not to prescription drug plans, is coinsurance. Coinsurance being a percentage of each dollar of the cost of drugs that the drug plan usually promises to pay. In the case of the Medicare Prescription Drug Plan, coinsurance takes the place of a co-payment, Medicare's coinsurance share is 75%, and your coinsurance share expense is 25%. Then there's a black out amount, through which there is no benefit under the Medicare Prescription Drug Plan.
Perhaps an example would better illustrate. Let's say your normal prescription drug costs are about $2,500 per year. Under the Medicare Prescription Drug Plan here's how that would play out. Well, first your out-of-pocket cost in premiums for the year would be $384 ($32.00 per month times 12 months). Then you must pay out of pocket the next $250 of drug costs, to meet your deductible. Adding the $250 to the premiums for the year of $384, brings your out-of-pocket outlay to $634 so far. Then comes the coinsurance part. Under the Medicare Prescription Drug Plan, after the cost of your annual premium ($384) and your deductible ($250) you will be obliged to pay 25% of the next $2,000 of your prescription drug costs, or $500, while your Medicare Prescription Drug Plan pays 75%, or $1,500. If our addition is correct so far, $384.00 premium, $250.00 deductible, and $500.00 under your coinsurance share, totals $1,134 out-of-pocket costs to you for just $2,250 of prescription drugs coverage under the Medicare Prescription Drug Plan. This would still leave you another $250.00 of out-of-pocket expense to get to your regular drug expenses of $2,500. per year, for a total out-of-pocket cost of $1,384.
If your annual prescription drug expenses were $5,000 per year, the example of your out-of-pocket costs would be as follows: $384.00 premium, plus $250.00 deductible, plus $500. of 25% coinsurance cost, total cost so far of $1,134. and then the impact of the blackout amount. Since Medicare does not count your premium expense as an out-of-pocket cost toward the blackout amount of $3,600, you must take yet another $2,850. out-of-pocket on top of the $750. you already paid toward the deductible and your 25% coinsurance share of $500. You see you must reach a $3,600. out-of-pocket expense BEFORE your Medicare Prescription Drug Plan kicks back in to pay 95% of drug costs over that amount, and you still get to pay 5% coinsurance of those drug costs. The bottom line in this example to you in out-of-pocket costs on your $5,000. of annual drug expenses would be $4,054, while the drug plan paid only $1,330.
At the $10,000. annual drug expense level the Medicare Prescription Drug Plan looks a little better. Your out-of-pocket costs, including your premium would be $4,304, while the drug plan would pay $6,080.
If you already have a prescription drug plan, your insurance carrier must tell you if the plan that you have is equal to the Medicare Prescription Drug Plan or not.
To further complicate the matter immensely, each state will have an array of prescription plans available at costs that will be different than the $32 per month Medicare premium, both higher and lower, with different benefits, better, or worse, and they too must tell you if the plan you choose is equal to the Medicare Prescription Drug Plan.. This little factoid is surely going to get your head spinning: in seven states there is a prescription drug plan being offered that is designed exactly the same as the standard benefit and it costs only $1.87 per month? Even more important is that in choosing between the various prescription drug plans, one also needs to check to see if their particular needed drug is one that is covered by that particular drug plan.
If this sounds like something that came from politicians who simply wanted to be able to say they gave you a prescription drug plan and use it as a campaign platform plank for the next 20 years . . . you're probably right! So do your shopping carefully.
In the mean time keep in mind the fact that NASFA is the only professional association dedicated to helping just State Farm agents. It is an organization where agents help agents deal with the ups and downs of the cyclical business in which we make our living. It is the place to go to get agent's answers to agent's questions.
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