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Money Management (Distributed by the New Jersey Society of Certified Public Accountants)

Time to Sign Up For Medicare's Drug Benefit

Beginning November 15, 2005, everyone who is entitled to Medicare Part A or enrolled in Medicare Part B will need to decide whether to enroll in Medicare's new prescription drug benefit. Medicare Part D, as it is called, begins January 1, 2006. According to the New Jersey Society of Certified Public Accountants (NJSCPA), this new Medicare plan can offer savings on prescription drugs.

How Medicare Part D Works
Medicare beneficiaries who choose to remain in the traditional fee-for-service Medicare program can sign up for drug coverage through a stand-alone prescription drug plan (PDP) from a private insurer. All beneficiaries are guaranteed to have at least two qualifying plans from which to choose. You also have the option to elect to receive all Medicare covered benefits, including new prescription drug benefits, under Medicare Advantage, the new name for the Medicare HMO program.
If you have coverage for prescription drugs through a former employer or union, check with the benefits administrator. Medicare prescription drug coverage may be different for you.

When to Enroll
The initial enrollment period for Medicare beneficiaries runs for six months, beginning November 15, 2005 and ending May 15, 2006. For those who join by December 31, 2005, drug coverage takes effect on January 1, 2006. Join after that date and coverage becomes effective the first day of the month after the month of enrollment. If you become eligible for Medicare after November 15, 2005, the Medicare program will inform you of your six-month enrollment period.
The new drug benefit is voluntary. If you are eligible and don't enroll during your six-month enrollment period, but change your mind and sign up later, you will pay more. The late enrollment fee is approximately 1 percent of your premium for each month you delay, or 12 percent per year, and you'll pay it as long as you stay in a Part D plan. For example, should you decide not to join a Part D plan when eligible, but change your mind two years later, your monthly premium will be 24 percent higher for the entire length of time you are enrolled in a Part D plan.

What Coverage Includes
Each plan has its own list of covered drugs (called a formulary), and the list may change during the year. Prepare a list of the name, dosage and cost of the prescriptions you use. Since the drugs covered vary from plan to plan, this will help you choose the plan that best meets your needs. Be aware that you will be required to pay the full cost of drugs not on the plan's formulary.

Medicare Part D Costs
Medicare Part D participants pay a monthly premium set by the plan, an annual deductible and co-payments. Each plan can set up its own premium and co-payments, within certain guidelines set by Medicare. Under the standard plan, in 2006, individuals will pay a premium of about $37 per month and will have a $250 annual deductible.
After meeting your deductible, you are responsible for paying 25 percent of the cost of covered drugs, with Medicare making up the difference until your total drug expenditures reach $2,250. Beneficiaries are responsible for paying 100 percent of drug costs between $2,250 and $5,100. Once the $5,100 threshold is exceeded, Medicare pays 95 percent of your prescription drug costs, with no maximum benefit amount.

Subsidy Available to Qualifying Individuals
As part of the new benefit, extra assistance is available through Medicare Part D for low-income individuals. Applications mailed this past summer will provide millions of qualifying individuals with a Medicare drug plan with little or no premiums or deductibles and low co-payments.

Additional Resources Available
For additional information about Medicare Part D and how it may help you address your medical needs, contact your CPA or visit www.medicare.gov where you will find helpful information about choosing a plan. If you don't have a CPA, you can easily locate one online using the NJSCPA Find-A-CPA service. Visit www.findacpa.org to locate a highly qualified professional who is right for you.

If you would like to receive more information on various financial matters, subscribe to E-CPA, the NJSCPA's free, monthly email newsletter. To subscribe, visit www.njscpa.org/finances or email a subscription request to e-cpa@njscpa.org.

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Money Management is a weekly column on personal finance distributed by the NJSCPA.

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