By SARAH LUECK
Staff Reporter of THE WALL STREET JOURNAL
September 26, 2005; Page R8

Marcella Adler, a volunteer at the Gulfport Senior Center in Gulfport, Fla., has been getting questions for months from fellow seniors about the coming Medicare prescription-drug benefit. " 'What does it mean? What are they going to do?' I just keep saying you'll have to wait until October," she says.

Now October is almost here -- the month when private insurers and the government will disclose to Medicare beneficiaries the specific options for drug insurance in their area. Seniors can expect a barrage of mail, telephone calls and advertising aimed at attracting them to a specific drug plan. They may get in-person sales pitches at drugstores and recreation centers that they frequent.

So how to prepare for what's coming? Medicare experts recommend understanding the basics of how the insurance will work, which are examined below, to make it easier to evaluate specific plans in time for the sign-up period that starts Nov. 15. They also say to keep it simple. Consider your specific circumstances and make a choice based on your needs.

"Everyone doesn't need to know everything," says Mark McClellan, the head of the federal agency that runs the program. "It's not a civics test on how Medicare works."

Should I sign up?

If you don't have good drug coverage now, the answer is probably yes. Most people paying for medications on their own will save hundreds of dollars or more each year with coverage. And it's important to note that the new plans are voluntary, so if you want one you have to enroll.

Medicare
www.medicare.gov
The first stopping point for most consumers, Medicare's Web site provides a good introduction to the new prescription-drug coverage and will soon feature a tool to help beneficiaries compare drugs plans in their locales.

Medicare Rights Center
www.medicarerights.org
This advocacy group for Medicare recipients provides an exhaustive look at, and evaluation of, new drug coverage. On the home page, check out "Medicare Drug Coverage 101: Everything You Need to Know About the New Medicare Prescription Drug Benefit."

Kaiser Family Foundation
www.kff.org
A nonprofit group and one of the best sources of information about dozens of health-care issues. On the left side of the home page, go to "Medicare" and click on "Prescription Drugs." Scroll down to: "Resources: On the Medicare Prescription Drug Benefit."

For people with low or no drug costs, the decision might be tougher. About one-third of Medicare beneficiaries not in institutions will spend $250 or less on medications this year. With such a small tab, it might seem a waste to spend $30 or so per month in premiums for drug insurance that might not be used.

But the idea is the same as with homeowner's insurance: You can't wait for a fire to buy coverage. Some people will pay more in than they get back while they're relatively young and healthy, but serious illness and high costs might hit later.

"The unfortunate truth is as we grow older we get sicker, and illnesses down the road could mean really high drug costs," says Tricia Neuman, a Medicare expert at the Henry J. Kaiser Family Foundation, a research group in Washington, D.C.

In addition, beneficiaries who wait past the initial enrollment period face a penalty: Premiums automatically increase 1% for each month you delay. Thus, if you're eligible to enroll in drug coverage but put off doing so for one year beyond your enrollment period, your monthly premium will be 12% higher permanently. If you wait five or 10 years, the penalties would be even steeper.

The penalty doesn't apply to people who currently have what the government calls "creditable" drug coverage. Coverage is creditable if it's at least as good as the Medicare benefit, and letters you will receive from any current sources of drug coverage, such as a former employer, will explain whether what they are offering fits the bill. If you stick with a creditable policy and end up switching to Medicare in the future, you won't have to pay the premium penalty.

What are the choices for getting coverage?

The drug-benefit plans are being approved and subsidized by the government, but they're being designed and sold by an array of private companies. The number and types of coverage choices will vary based on where a person lives. A menu of options in your area will appear in the "Medicare & You" handbooks that the government plans to mail out next month.

If you decide to participate in a drug-only plan, also called "Part D" or "standalone," you'll continue to receive hospital and doctor coverage from traditional Medicare. Most of the drug plans will have a monthly premium -- the national average is $32.20, though some will be cheaper -- plus a deductible and some cost-sharing for prescriptions.

Most beneficiaries also will have the option of signing up for a Medicare Advantage plan that combines all medical benefits in one policy. Such programs won't be available in all parts of the country. But if they are, they might be a way to trim out-of-pocket costs. The plans are getting big subsidies from the government and have increased their benefits because of it, for drugs and other medical care. The downside is that the plans may not include your doctors and hospitals in their networks. And seeking treatment from health-care professionals and facilities that aren't on the plan list could mean much higher costs.

The sheer number of plan choices is raising concerns that many people will be confused and avoid signing up at all. For example, beneficiaries in California will have roughly 40 drug-only insurance plans to choose from, according to preliminary government data. New Yorkers will have about 34 plans, while beneficiaries in Ohio will have 28. Those figures don't include Medicare Advantage plans.

"The problem is going to be simplifying the choices that are available to patients," says Billy Tauzin, head of the drug-industry group PhRMA.

To narrow the choices, Medicare is setting up a feature on its Web site (www.medicare.gov) that will help beneficiaries compare plans. The program also has a toll-free number, 1-800-Medicare, that beneficiaries can call if they have questions about what is available where they live.

How do I sign up?

The first enrollment period for Medicare drug insurance runs from Nov. 15 until May 15, 2006. Next year and each year after, there will be shorter enrollment periods when people can switch plans or join for the first time. Beneficiaries will be able to sign up through the government's Web site or 1-800-Medicare, or they can contact the plan they've chosen directly. They must sign up by Dec. 30 to guarantee coverage on Jan. 1. From January to May 15, beneficiaries can change their minds and switch plans, but in most cases only once.

What if I can't afford to pay for drug insurance?

People with limited incomes may be eligible for extra financial help with premiums and cost-sharing. A person with an income of less than $1,197 a month, or a married couple with an income of less than $1,604 a month, would qualify for federal subsidies. They also must have limited assets such as savings accounts and investments -- less than $11,500 for individuals or $23,000 for married couples. If you think you might qualify, contact the Social Security Administration at 1-800-772-1213 to get an application, or contact your state Medicaid office. Some states and patient-advocacy groups also are planning to offer extra help.

What drugs will Medicare plans cover?

Generally, the insurance companies providing Medicare drug coverage will have a list of drugs that are cheaper under each of their plans. The lists will be different from plan to plan, and some medications might not be covered at all. These lists are called formularies.

One good first step when picking a plan is to list the prescriptions you take now. That way, you can find out if your medications are on the list. If your list of medications doesn't match up with what the plans cover, you may be able to switch to a generic or to an alternative brand-name drug that is covered by the plan. Talk to your doctor. Also keep in mind that plans can change their formularies as long as they give at least 60 days' notice, so the formulary might not stay the same. Beneficiaries can use the time to request an exception or appeal such changes.

What if I have employer-sponsored drug coverage?

In general, retirees with comprehensive drug coverage should stick with what they have. Employer plans tend to be more generous than the Medicare plans will be, and companies can get funds from the government if that's the case.

One important piece of information to watch for is a letter saying whether the employer's drug coverage is "creditable" or comparable to Medicare's. If it isn't, that means you probably should sign up for a Medicare drug plan. Some employers may help pay retirees' premiums.

If the former employer's drug coverage is creditable, it means the government has decided it's at least as good as the Medicare benefit. But that doesn't necessarily mean it's the best choice for you, says JoAnn Volk, a health-policy expert at the AFL-CIO. The union has been critical of what it says are relatively relaxed requirements for employers in documenting their drug coverage for Medicare.

"You really have to do a comparison given your particular drug spending," Ms. Volk says.

If the employer plan has high out-of-pocket costs, you might want to consider the Medicare drug plans in your area. The same is true if you are eligible for the extra low-income help from the federal government.

Before making any changes to employer-sponsored coverage, it's important to contact the plan administrator to clarify your options. Giving up drug coverage may mean you won't be able to get it back, or that you risk losing other medical benefits.

Should I keep my Medigap policy?

Millions of seniors purchase Medigap plans, also known as supplemental policies, to cover Medicare deductibles and other costs. Several of these plans also provide some prescription-drug coverage. Once the drug benefit starts, companies can't sell new Medigap policies that cover drugs. People who already have such policies can keep them, but they might be better off shifting to a Medicare plan.

For one thing, the government doesn't contribute to Medigap drug coverage, but will be paying about 75% of premiums under the new Medicare drug plans. Also, having Medigap drug coverage doesn't protect people from the penalty if they decide to sign up for the Medicare drug benefit late.

Medigap plans without drug coverage still will be sold.

* * *

Ms. Adler, the volunteer in Gulfport, is herself a Medicare beneficiary. The 80-year-old, who used to work in medical-records departments in hospitals and nursing homes, is keenly interested in seeing how the new drug coverage might help her save money. She lives on a Social Security income of just $1,214 per month, and almost one-third of the money goes to pay for three prescriptions she takes for high cholesterol, respiratory problems and low bone density. "It's a big chunk," Ms. Adler says.

Under the standard Medicare drug benefit, Ms. Adler would save about $1,000 a year on her medications. Still, she's living by her own advice and delaying any decisions about what to do until she sees the plan details.

"I'm just going to wait and see what happens," she says.

--Ms. Lueck is a staff reporter in The Wall Street Journal's Washington bureau.

Write to Sarah Lueck at encore@wsj.com.

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Millions Apply for Medicare Drug Benefit

By KEVIN FREKING
The Associated Press
Thursday, September 22, 2005; 5:26 PM

WASHINGTON -- About 3.1 million people have applied for the extra assistance the government will give poor people when Medicare\'s prescription drug benefit kicks in Jan. 1, the agency said Thursday.

Under the coming drug benefit, everyone on Medicare can get drug coverage through a private plan regardless of income or health status. While there has been some debate over the adequacy of the new benefit, even its most outspoken critics acknowledge that the program is a good deal for the poor.

Officials estimate the subsidy will average about $2,100 per low-income Medicare recipient; for some, it will cover all of their premiums and deductibles. For the Medicare population as a whole, the subsidy will average about $750 per recipient, analysts say.

The Social Security Administration said it viewed the number of applications as a good sign.

We're really pleased with where we are, but my main message today is we're not done yet," said Jo Anne Barnhart, commissioner of the Social Security Administration.

One advocacy group said the number of applications was meaningless. Government agencies reject scores of applications for assistance in other programs, said Robert Hayes, president of the Medicare Rights Center in New York City.

"How many applied is kind of irrelevant compared to how many will get assistance," Hayes said. "If they reported 3 million people enrolled in the extra help today, we would be opening the champagne bottles."

Barnhart said the agency was still reviewing most of the applications, and did not yet know how many would get approved.

The additional help is for those whose incomes are at 150 percent of the poverty level and below _ about $1,200 a month for an individual or $1,600 a month for a couple. The value of assets, such as savings accounts and investments, must be less than $11,500 for singles or $23,000 for couples.

About 15 million people are believed to be eligible for the extra help with their prescription drug expenses. About half will be automatically enrolled because of their participation in other government programs. The other half must apply.

Barnhart said about 19 million applications were sent out with the knowledge that many of the people who got them would not be eligible. Officials said they believe about 7.5 million of the people who got applications are eligible for the benefit.

The last wave of applications went out in mid-August. The SSA made telephone calls to many of those who did not initially respond to the letters.

"If you look at it in terms of the 19 million people, it's a tremendous response rate for a mailing," Barnhart said. "If you look at the subgroup in terms of who we thought would be eligible, it's a very good number."