Between now and November 15, Americans over 65 will be bombarded by insurance company promotions encouraging them to join the new Medicare prescription drug benefit. It may sound like a lifesaver, but figuring out the right plan is no easy task. Wall Street Journal online contributor Kirsti McKaye joined us to get to the bottom of this bundle of benefits.

Kirsti, what is the goal of this new Medicare prescription drug benefit and who is it really going to help?

Kirsti: Well, there are 25% of senior citizens who don’t have any drug coverage at this point, so this will give them a chance to have prescription drug coverage, and it is also being done through private insurers so that the government does not have the entire burden, although the plan is expected to cost the government $720 billion over the next ten years.

When does it take effect?

Kirsti: The new plan takes effect January 1, but enrollment begins November 15 and runs through May 15 of next year.

I guess you would go to those private healthcare companies to enroll?

Kirsti: Yes, there will many, many plans in each state offered from private insurers with various cost structures, and you would have to go to the individual plans to consult them to find out and then to sign up.

There is a lot of homework to do. This can get really overwhelming for a lot of people. How can they break it down from bullet points as to what you should be looking for in a plan?

Kirsti: Well, the premiums can be under $20 or much higher. The average premium is $32 per month, so you would look at the cost structure and their copayment structure afterward and the deductible, and then of course it is very important to find out whether the prescription drugs that you take are covered under a particular plan.

Now, what if you don’t need help with your drug costs right now and you hold off on signing up for a month or a year or two. Is that to your benefit?

Kirsti: There is a penalty for each month after the May 15 deadline when the enrollment period ends. There is a 1% penalty for each month that you delay signing up, and that penalty will carry as long as you are on a Medicare drug plan. So if you waited for two years, that 24% extra in premiums would last for as long as you use the plan.

So do you think that makes sense that even if you don’t need it right now, sign up now to offset those higher premiums later?

Kirsti: Experts are encouraging people to take it, the same way that you might take out insurance on your house. You don’t anticipate a fire, but you may need coverage at some point. You can’t know what your health will be two to three years from now.

What if you take a medication like Lipitor, let’s say, and the plan you choose has it on their plan and then six months down the road, can they just pull that drug?

Kirsti: Well, that’s the thing. I think there is going to be some effort to steer people toward generic drugs. The structure of the plan, the payments are sort of encouraging the use of generic drugs, and they can change which drugs are covered under any plan and only provide 60 days notice. So they are required to provide only 60 days notice but the plan would last a calendar year.

Now, unfortunately, the government recently handed out millions of pamphlets describing this drug benefit with erroneous information, so where can people go to get reliable information on this?

Kirsti: You may want to consult your physician or your local pharmacy, but also Medicare has a 1-800-MEDICARE phone number for information and the www.Medicare.gov web site has a lot of information. You could put in how many drugs you take, which drugs you take, and they will try to steer you toward a plan that is appropriate for you.

All right. Thanks so much.
Source: CBS Market Watch