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Health Care Reform:

Health Insurance & Affordable Care Act

Medicare Rx Benefit: Sorting Out the Options

WebMD looks at the choices facing Americans who enroll in Medicare's prescription drug benefit.

Employer-Based or Retiree Plans

Millions of seniors already have drug coverage through a retiree health plan or a current employer. If that includes you, you'll have to decide whether to keep your private coverage or join Part D.

First, your employer will have to let you know if they are keeping coverage. One possible effect of the new government coverage is that it may cause private insurers to drop their drug plans. Medicare is trying to avoid this by paying subsidies to private plans as an incentive for them to keep prescription insurance.

"It appears that many if not most of them will continue, at least for the time being," says Cheryl Matheis, director of health strategies for AARP.

Employers are required by law to inform beneficiaries about their existing drug coverage and whether they're keeping it. If so, they are also required to tell you whether that coverage is as good or better than what Part D is offering.

They key word to look for is "creditable." A private plan that is creditable is one that is functionally equivalent or better than Part D. If yours is, you can stay with it or choose to go with a Medicare plan. And if you choose private coverage and go with Medicare later, you won't have to pay a penalty for late enrollment.

Participation in Part D is purely voluntary. But if your private coverage is not creditable, you'll pay a premium penalty if you decide to switch to Medicare after May 15, 2006.

Again, you'll want to use Medicare's web site to compare formularies and out-of-pocket costs like co-payments, deductibles, and co-insurance to see which kind of coverage is best for you.

The key is that letter from your employer. If you don't get one by the end of October, get in touch with your employer's human resource department to find out when it's coming and whether your coverage is creditable.

Medigap

Some seniors on Medicare get drug coverage through supplemental insurance plans known as Medigap. Medigap plans are labeled by letters from A to L.

Plans H, I, and J are the only Medigap plans that carry drug coverage, but in almost no cases do they qualify as creditable. In these cases almost all Medigap customers would be best served buying into Part D insurance, Matheis says.

Possible exceptions are so-called nonstandardized Medigap plans in Massachusetts, Wisconsin, and Minnesota. Some of these plans may be creditable, so it is best to wait for that letter from the carrier to see if that magic word shows up.

State Pharmacy Assistance

Some states have publicly-funded Pharmaceutical Assistance Programs for low-income seniors not on Medicaid. Most of those programs are expected to "wrap around" Part D, meaning that they can still help pay some of your co-payments and deductibles once you sign up for a plan. Medicare has not yet completed all of its agreements with the state plans but should have the arrangements ironed out soon.

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