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January 01, 2009 at 07:00 PM
Medicare and Medicaid definitions are filled with jargon that is difficult for agents to understand, let alone explain to their clients. But you could be offering your clients a helping hand by describing Medicare Part D, a federal prescription drug service that could save them hundreds or even thousands of dollars per year on their pharmacy costs.
What is Medicare Part D?
Medicare Part D is a federal program that subsidizes the costs of prescription drugs for Medicare beneficiaries. The program began as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and went into effect in 2006.
Medicare prescription drug coverage is insurance that covers both brand-name and generic prescription drugs at participating pharmacies. A typical person who has Medicare but no prescription drug coverage could see total drug costs drop by about 50 percent with Medicare Part D.
Even if a client is not currently spending a great deal of money out of pocket for medication, the government is encouraging them to join a prescription drug plan (PDP) as soon as they are eligible. Why? Because there is a strong probability that as they get older, their cost for prescription drugs will increase.
When someone becomes eligible for Medicare, they can enroll in a Medicare Part D plan. Their initial enrollment period (the time during which they can first enroll in the plan) begins three months before the month in which they first become eligible, and ends three months afterward. They can enroll any time during this seven-month period without penalty. If they choose not to enroll in a Part D plan during their initial enrollment period, they could be charged the Medicare-imposed late-enrollment penalty (LEP), and may have to pay a higher premium if they decide to join later. The LEP is equal to about 1 percent of the national average premium per month, or 12 percent each year if they are not enrolled for a full year.
For example, if a beneficiary decides to join a plan three years after they initially become eligible, the LEP would increase their premium by 36 percent. This penalty remains for the length of time that they have Medicare Part D coverage, regardless of the plan. If they qualify for extra help, they will not have an LEP. Also, if they have other prescription coverage (also known as creditable coverage) they may not be assessed an LEP. There is no limit on the penalty, so the longer they wait to enroll, the higher the premium they will pay. A person should join when they first become eligible to avoid the late-enrollment penalty.
As a concerned agent, you can advise your Medicare-eligible clients to save money by signing up for Medicare Part D as soon as possible. They will in turn save on prescription drugs, and will not have to pay the monthly penalty.
