How to Pick the Best Medicare Part D Prescription Drug Plan

Seniors should scrutinize their Medicare Part D prescription drug plan for coverage and cost changes. Next year, the average monthly Part D premium will increase by 11 percent if beneficiaries remain in their current plan, according to a recent analysis of 2010 plans by researchers at the Kaiser Family Foundation, Georgetown University, and the University of Chicago. Another change in 2010: More plans will have deductibles. Luckily, seniors can change their prescription drug plan during Medicare's annual open enrollment period from November 15 through December 31. “Everybody should shop around during the open enrollment period because even if you are happy with what you have right now, that doesn’t mean it won’t change next year,” says Laura Summer, a senior research scholar at the Georgetown University Health Policy Institute and coauthor of the report. “There will be more plans out there with deductibles, premiums will go up, and there can be changes with the drugs that plans cover and the copayments.” Here's how to pick the best plan for your prescription drug needs.

[See America's Best Affordable Places to Retire.]

Consider premiums. About 1.2 million beneficiaries enrolled in Medicare Part D plans will experience an increase of at least $10 in their monthly premium unless they select a less expensive plan, according to Kaiser Family Foundation calculations. The 2010 increase in monthly premiums is likely to result in reductions in monthly Social Security checks for Part D enrollees who have premiums deducted from their Social Security payments. That is because no Social Security cost-of-living increase is projected in 2010. Find out if there are other plans in your area that cover your medications that charge lower monthly premiums.

Watch out for new deductibles. Premiums aren’t the only factor that can affect your out-of-pocket prescription drug costs. About 61 percent of drug plans will charge a deductible in 2010, up from 45 percent this year, the Kaiser Family Foundation found. “You might be in a position where your premium hasn’t really gone up, but if you don’t check, there may be a deductible that is new next year,” cautions Summer. More than half of the plans with a deductible will make beneficiaries pay the first $310 of their drug costs next year before picking up any of the tab.

[See 3 Groups That Will Soon Face Higher Medicare Premiums.]

Weigh cost-sharing provisions. After you pay your deductible and premiums, insurance coverage kicks in. But many retirees will be subject to other cost-sharing provisions next year. Most Medicare drug plans have a copayment for each prescription filled or charge beneficiaries a percentage of the cost of medications. Some drug plans also have tiers of drugs with different costs. “There will be changes [next year] in provisions of cost sharing, particularly for brand-name drugs,” says Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation and another coauthor of the report. “There is so much variation across plans in terms of which drugs they cover, and even if drugs are covered, they may be far more expensive under one plan than another, and there may be restrictions in some plans.”

Examine coverage gaps. Most Part D plans have a coverage gap—or doughnut hole—during which beneficiaries must pay 100 percent of their drug costs. The gap begins when an enrollee incurs $2,830 in total drug spending in 2010. Seniors must then pay the full cost of their prescription needs until they reach $6,440 in total drug costs and catastrophic coverage kicks in. Some 80 percent of prescription drug plans will not offer any gap coverage next year, the Kaiser Family Foundation found, up from 75 percent in 2009. Of the 20 percent of drug plans that offer doughnut-hole coverage, most limit payments to generic drugs only.

[See Most Medicare Part D Enrollees Don’t Choose the Lowest-Cost Drug Plan.]

Compare plans online. The Centers for Medicare and Medicaid Services has a tool that allows beneficiaries to enter the drugs they expect to take next year and compare expected out-of-pocket costs under various local plans. Seniors should evaluate how their drug plan will change next year and make sure that there isn't a better local plan that covers the necessary medications at a lower cost. “The idea behind Part D is that seniors would change plans each year and choose the best plan to meet their needs each year,” says Neuman. “But the experience thus far has been that people tend to choose a plan and stay with that plan.” Inertia could cost retirees hundreds of extra dollars a year for medication.

Corrected on 10/13/09: An earlier version of this article misstated the percentage of plans that charged a deductible this year. The percentage is 45 percent.