4 Key changes to Medicare Drug Coverage

By Kimberly Lankford, Contributing Editor, Kiplinger’s Personal Finance

Here’s what to look for when reviewing your Part D options during open enrollment this year.

Should I consider changing my Medicare Part D plan during open enrollment? Will there be many changes to Part D prescription drug plans for 2011?

Yes to both questions. New coverage rules, rising premiums and co-payments, the elimination of some popular plans, and the introduction of some intriguing new competitors means it is particularly important that you review all of your Medicare Part D options this year. You have from November 15 to December 31 to pick a Part D plan for 2011.

Doughnut hole shrinking. The big news is the shrinking of the doughnut-hole coverage gap. In 2010, the coverage gap kicks in when your prescription-drug expenses total $2,830 for the year (including both your share and the insurer’s share of the costs). At that point, you generally have to pay all of your drug bills yourself until the total cost of your drugs for the year reaches $6,440, when the insurer picks up most of the bill. Those limits rise slightly in 2011, to $2,840 and $6,448. (By 2020, the dreaded doughnut hole will have shrunk dramatically.)

New in 2011: a 50% discount on brand-name drugs in the doughnut hole. Beneficiaries also get a slight break on the cost of generic drugs in the doughnut hole next year– paying 93% of the cost rather than the full 100%. So if you’ve been paying extra for coverage in the doughnut hole, it’s a good time to reassess your options.

Premiums rising. Average premiums for Part D are rising by just $1 in 2011, to $30 per month, according to the Centers for Medicare & Medicaid Services. But several of the more popular plans are increasing their premiums substantially. Premiums for the ten largest Part D plans are rising by an average of 10% in 2011, according to a study by Avalere Health. And for several plans, those increases come on top of significant increases over the past few years.

Popular plans leaving. Also, a few popular plans are leaving the business, as insurers consolidate some of their offerings. For example, United HealthGroup’s AARP Medicare Saver, the second-most popular Part D plan last year, is going away, and customers will be switched to another of the insurer’s plans. If you are among those moved over, be sure to review all of your options. Another plan may be a better match for your medications.

New plans appearing. Meanwhile, a few interesting, low-cost plans are entering the business in 2011, such as the Humana Walmart-Preferred Rx plan, which costs just $14.80 per month – well below the average price for Part D policies. But your out-of-pocket costs will vary depending on where you purchase your medications. If you buy them at Walmart, Sam’s Club or RightSource Rx mail-order pharmacy, you’ll pay $2 to $5 for generics (or $0 for generics through RightSource); 20% of the cost of preferred brand-name drugs; and 35% of the cost of non-preferred brand-name drugs. But if you use an outside pharmacy, your co-pay for both levels of generics is $10, and you’ll pay 37% co-insurance for non-preferred generics and preferred brand-name drugs, and a whopping 50% for non-preferred brand-name drugs.

How to compare plans

As always, when comparing your options, consider premiums as well as the coverage for your specific drugs — a plan with a low premium could cost you more if you have to pay high co-payments for your medications. Ask your doctor if you can switch to generics or other lower-cost drugs before you pick your 2011 plan – the plan with the best deal for brand-name drugs might be different than the best plan for generics (see our Doughnut Hole Calculator to find generics and other lower-cost alternatives).

Depending on the drugs you take, your total out-of-pocket costs can vary even among plans offered by the same company. A beneficiary in Miami who takes four common medications would pay a total of $573 over the year for co-payments plus premiums under the new Humana Walmart Preferred Rx plan, as long as he or she used one of the preferred pharmacies . But, says Ross Blair, CEO of PlanPrescriber.com, that beneficiary would pay much more for the same drugs under other plans offered in Miami: $784 for Humana Enhanced, $1,485 for Humana Complete, $743 for United Healthcare AARP MedicareRx Preferred PDP, $1,230 for United Healthcare AARP Medicare Rx Enhanced PDP, $605 for Wellcare Signature and $706 for Wellcare Classic.

To compare the total costs for your specific medications, go to Medicare.gov’s newly improved Plan Finder tool, which lets you type in your zip code, drugs and dosages, and shows the total out-of-pocket costs — premiums plus co-pays — you’d pay for the year.

Also keep in mind that starting in 2011, individuals who earn more than $85,000 (or $170,000 if married filing jointly) will have to pay a high-income surcharge for Part D premiums, similar to the high-income surcharge for Medicare Part B. The amount of the surcharge has not yet been determined .

The system is bigger than the economy of most countries. Find out how to maximize your payout

By Emily Brandon, U.S. News & World Report Money

The Social Security program turns 75 this week. Since Franklin Delano Roosevelt signed the Social Security Act on August 14, 1935, few workers have not been impacted by the social program. Almost all Americans pay into the system, and Social Security is the largest source of income for citizens age 65 and older. Yet this huge entitlement has many facets, some of which are not widely known. Here are 10 things you may not know about Social Security:

The system is bigger than the economy of most countries.
For the past 20 years, the Social Security program has been the largest single item in the federal government’s budget. “The amount of money flowing through the Social Security system each year is larger than the total economies of all but the 16 richest nations in the world,” says Larry DeWitt, the U.S. Social Security Administration historian. The Social Security program has collected $13 trillion in income and expended $10.6 trillion in payments since the first tax collections began in 1937 through 2007. That’s an amount of money that Social Security’s first beneficiary, Ida May Fuller of Ludlow, Vt.—who collected initial payments of $22.54 a month for 35 years—probably never dreamed of.

It’s not just a retirement program.
The original Social Security program paid benefits only to retired workers. Later, disability benefits and payments for a beneficiary’s spouse and children and were added to the program. “If you graduated from college four years ago, you are already protected against disability,” says Edward Berkowitz, professor of history and public policy and public administration at George Washington University. “If you are married and have children, your dependents are protected.” Annual Social Security Administration mailings to all workers age 25 and older include an estimated amount that you would be paid if you become disabled and how much your spouse and children would receive if you should pass away.

You pay 6.2 percent of your income into the system.
Almost all American workers (94 percent) pay 6.2 percent of their taxable income, up to $106,800 annually, into the Social Security trust fund. Employers pay a matching 6.2 percent for each worker. Self-employed workers must contribute 12.4 percent of their income annually.

There haven’t always been cost-of-living increases.
Annual cost-of-living adjustments didn’t become a part of Social Security until 1975 (as a result of a 1972 law). Prior to 1975, an act of Congress was required to increase benefits to keep up with consumer prices. “Before then, benefits were protected from inflation only when Congress chose to notice it,” says Berkowitz. Now increases in payments are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. Annual increases have ranged from 1.3 percent in 1996 and 1998 to 14.3 percent in 1980. For the first time in 2010, there was no cost of living boost because the index did not increase between the third quarter of 2008 and 2009.

Retirees can increase annual payments by waiting to claim.
Workers can begin receiving Social Security benefits at age 62. But payouts increase by 7 to 8 percent for each year you delay your start date, up until age 70. Workers who sign up early receive smaller monthly checks over a great number of years, while those who delay claiming receive bigger payouts for the rest of their life. “If you know you are going to live past the age of 80, you are better off delaying Social Security,” says Lita Epstein, author of The Complete Idiot’s Guide to Social Security and Medicare. “Baby boomers who know they are going to have a long life are much better off waiting.” Epstein, who is spending down her Roth IRA assets in order to delay claiming Social Security, says her benefits will increase by about $500 each month by waiting until age 70 to sign up.

Couples have extra options.
Spouses are entitled to Social Security benefits of up to 50 percent of the higher earner’s check if that amount is higher than the payments based on his or her own working record. Widows and widowers are entitled to the higher earner’s full retirement payout. Duel-earner couples who have reached their full retirement age can even claim twice by first signing up for a spousal payment, then claiming again later based on their own work record (which will then be higher due to delayed claiming). Ex-spouses are also eligible for benefits if the marriage lasted at least 10 years.

Existing beneficiaries can get a do-over.
If you’ve already signed up for Social Security and received a reduced payout, it’s not too late to boost your check. If you pay back the entire amount you have already received from Social Security without interest, you can then qualify for higher payments for the rest of your life.

Social Security numbers have significance.
The first three digits of your Social Security number are assigned based on geographical region, with the lowest numbers being assigned in the Northeast and increasingly higher numbers assigned to residents in the West. The middle two digits, called the group number, are allocated in a precise but nonconsecutive order between 01 and 99. The last four digits are issued in a sequential order. Over 420 million unique numbers have been issued and they are not reused after a person’s death. Social Security numbers have been assigned shortly after birth since 1989, which makes younger American’s Social Security numbers somewhat predictable if you know a person’s date of birth and home town, which is common information that young people list on social networking websites, according to research by Alessandro Acquisti, an associate professor of information technology and public policy at Carnegie Mellon University. “Do not offer personal information such as date of birth and hometown publicly,” he advises.

Paper Social Security checks will soon be retired.
Social Security recipients will be required to collect payments by direct deposit into a bank account or a government Direct Express Debit MasterCard beginning on March 1, 2011. Existing beneficiaries must switch to electronic payments by March 1, 2013. Paperless payments are expected to save $300 million over five years, according to Treasury Department estimates.

The trust fund has a projected deficit.
The Social Security trust fund is currently projected to be sufficient to provide payments until the end of 2037. Then, unless changes are made to the program, there will only be sufficient resources to pay about 78 percent of scheduled benefits. Congress is currently considering a variety of potential fixes, including tax increases, benefit cuts, and pushing back the retirement age. A U.S. Senate Special Committee on Aging report released in May found that relatively minor tweaks could put the trust fund back on sound financial ground for at least 75 more years. “It’s a shame that the tone of the 75th celebration is sort of nostalgic,” says Berkowitz. “I would hope that the 75th anniversary is not only about how good things used to be, but also about how good things could still be in the future.”

Talking about the decline of driving skills long before problems are evident may help minimize conflict, experts say. Asking “Have you thought about what you’d do if you could no longer drive?” is one way to start a discussion.
The Hartford insurance company offers a brochure, “We Need to Talk,” which includes an advance directive similar to a living will in the event that a person can no longer drive safely and tips about how to have such conversations. To see the brochure, go to http://www.thehartford.com/talkwitholderdrivers/brochure/brochure.htm.

One way to deflect a confrontation may be to focus on powerful medications a person is taking, or a medical problem that’s less stigmatizing than dementia, such as poorly controlled diabetes.

In other cases, emphasizing the possible legal and financial consequences that could result from an accident might be persuasive. Maryland driving instructor Carol Wheatley recalls one woman whose reluctant husband agreed to stop driving after she told him, “Honey, I don’t want to lose our house.”

Families should be prepared to take action by calling a physician or filing a report with motor vehicle officials if a driver denies having a problem. Sometimes it is necessary to confiscate the keys or to disable, remove or even sell a car. If you’re unsure about intervening, consider whether you’d let your children ride with the driver.

— Sandra G. Boodman

— Difficulty merging into traffic or staying in lane.
— Abrupt lane changes.
— Increased aggressiveness or irritation while driving.
— Speeding or going too slow for road conditions.
— Several fender benders or unexplained dents on the car, garage or mailbox.
— Warnings or traffic tickets.
— Difficulty turning the head or moving the foot from the gas pedal to the brake.
— Getting lost in familiar surroundings.
— Using a “co-pilot” such as a spouse or friend to direct driving.
— Sandra G. Boodman
SOURCES: AARP; National Highway Traffic Safety Administration; the Hartford; AAA Foundation for Safety

Families Needed for New TV Show, “Estate Wars”.

Andrew and Danielle Mayoras are consulting for a new television pilot called “Estate Wars,” which involves families fighting or in conflict over personal effects (antiques, coin collections or jewelry) after a loved one passes away. The goal of the show is to have the conflict resolved with the help of an appraiser and mediator.

If you know any families involved in a conflict like this that would be interested in being on TV, please have them contact us at contact@trialandheirs.com as soon as possible. The pilot is being produced for a top-ranked national cable station by the Emmy Award winning production company behind “Storm Chasers”, “The Rachel Zoe Project”, and “LA Ink”.