New drug plan puts premium on planning

NEW YORK — Chryssa Kolios is confused. Kolios knows Medicare will start offering drug coverage next year but has no idea how she’ll pick a plan appropriate for her and her husband.

The $85 Kolios spends monthly on her cholesterol-lowering pills is a strain on the family budget, but she wonders whether paying a premium for drug coverage will lower that substantially. Her husband takes medication for Parkinson’s disease and receives help paying for it through a New York state program, but Kolios isn’t sure how that will be affected by the new Medicare plan.

“This is very tricky. You need to be a lawyer to figure out what to do,” said Kolios, a 66-year old retired seamstress from Huntington, N.Y.

Medicare recipients like Kolios will be inundated with pitches from health plans offering the long awaited Medicare Part D drug benefit which goes into effect in January. Insurers are jumping in, even though the program’s profitability is in dispute.

The array of choices is dizzying: Insurers are offering about 40 prescription plans per state with premiums ranging from $1.87 to $104.89 a month, according to Banc of America Securities.

The standard Medicare drug benefit calls for a premium of about $32 a month and a deductible of $250. The patient pays 25 percent costs from $250 to $2,250, then 100 percent of costs up to $5,100. The customer pays 5 percent of costs beyond that.

Many plans simply mimic the basic benefit, although many are available for less than the $32 thanks to the competition for patients. Plans with higher premiums offer features like no deductibles or some type of coverage through the benefits gap.

Health plans have invested major sums in marketing and administrative costs to participate in the program but it remains unclear if it will be an earnings bonanza. Analysts worry that if the cost of the program balloons and the federal deficit expands, the government will slash spending on the drug program, cutting into profits.

But insurers insist they have strengths that will help them lure customers. For example, UnitedHealth Group Inc., has an exclusive agreement to co-market its products with AARP.

Humana Inc. has worked with Medicare for over 20 years, so it understands how to operate profitably, said Scott Latimer, market president of Central and North Florida.

“We can change out business plans (according to market conditions), he said. “We are very optimistic.”

Ed Kroll, an analyst at S.G. Cowen & Co. estimated the program could add anywhere from 3 percent to 10 percent to a company’s earnings as of 2007. UnitedHealth will emerge a winner because of its relationship with AARP, Kroll said, and WellPoint Inc., the parent company of 13 Blue Cross Blue Shield Plans, should benefit from the brand’s reputation.

Wading through the promotional material will be daunting, so experts suggest beneficiaries assess their various options and consult a doctor, pharmacist, financial planner or trusted adviser before making a choice. Medicare is offering assistance on its toll free phone line, 1-800-Medicare, and offers a drug plan cost estimator on its web site. Various state organizations such as the Medicare Rights Center in New York also offer help.

Enrollment begins on Nov. 15, but beneficiaries have until May 15 to choose a plan without incurring any penalties. Medicare adds 1 percent to premiums for participants who wait until June to enroll.

“Take a deep breath and say to yourself that you have six months and you don’t have to rush,” said Susan Rawlings, president of senior services at Wellpoint.

Choosing a plan will vary depending on an individual’s circumstance. For example, many states have programs that help low-income seniors pay for their drugs, so individuals should check with either Medicare or state authorities to see how those plans will interact with the new federal benefit.

Individuals who are disabled or over 65 years old and are now on Medicaid, the state-run health program for low-income people, will be automatically enrolled if they don’t select a plan by the end of the year.