On Target 2012 Dec./2013 Jan. / Financial Corner Dec. 2012

PRESCRIPTION DRUG AND MEDICARE QUESTIONS
IN AFTERMATH OF SUPER STORM SANDY

In the aftermath of super storm Sandy, which left mass destruction in its wake, many retirees covered by Medicare were forced to use their health and prescription health benefits more than they normal would. This increased utilization led to many questions from retirees regarding these benefits, particularly questions regarding Medicare Part D, the prescription drug plan in which all New Jersey retirees were enrolled in January, 2012. Prior to the change, retirees age 65 and older were covered by a prescription plan that was part of the over-all School Employees Health Benefit Plan. (Since January 2012, all retirees covered by the SEHBP who are over 65 have been covered by Medicare Part A, Medicare Part B and Medicare Part D.)

The major questions from retirees related to the switch to Medicare Part D, which seems to have confused many people who thought that their benefits were different and/or that their personal costs were greater than under the previous plan.

THERE IS NO REASON FOR ANY OF THESE CONCERNS.

The change to Medicare Part D, which was announced to the retirees before January 1, 2012 in material that was sent to all who were already enrolled in Medicare Part A and Part B explained that there would be NO CHANGE IN THE SEHBP PRESCRIPTION BENEFIT STRUCTURE even though the group was being enrolled in the Medicare Part D program. While Medicare Part D has a series of benefits for regular enrollees, the benefits for New Jersey retirees enrolled in the SEHBP program remain the same benefits as they were prior to their enrollment in Part D.

Although there might be slight increases in co-payments in 2013, which would have occurred under the prior program as well, there is no additional cost attributable to Part D for most retirees. The co-payments paid for regular prescriptions and the yearly out-of-pocket maximum for each individual are the same as they would have been if the program had not switched to Medicare Part D.

One change that some retirees might see is a deduction for their Medicare Part D IF THEIR INCOME IS ABOVE CERTAIN LEVELS ($85,000 for single individuals, $170,000 for married couples). If the income level reported by the retiree (and spouse) on their federal income tax form in 2011 exceeded the limits described above, there will be a deduction from the Social Security check of the recipient(s) for the cost of Medicare Part D, just as there is currently for Part B of Medicare. The amount of this deduction will depend on the amount of income that exceeded the limits above. The higher the income, the higher the Medicare Part D deduction from the Social Security check will be.  (MOST RETIREES WILL NOT SEE THIS DEDUCTION, SINCE MOST RETIREES DO NOT EXCEED THE INCOME LEVELS NOTED ABOVE!)

Retirees who currently receive their health benefits without cost to them will be reimbursed for the excess cost attributable to the Medicare Part D deduction explained in the previous paragraph (the amount deducted each month from the Social Security check). This reimbursement will be made by the SEHBP in February or March of the year following the deduction through a one-time reimbursement check for the entire amount that had previously been withheld.  (This is the same procedure followed by the SEHBP for retirees who have additional deductions withheld from their Social Security checks for Medicare Part B because their income(s) exceed the $85,000/$170,000 threshold.)

For individuals who find Medicare confusing, here is a very short primer describing Medicare:

Medicare Part A provides in-hospital care for those retired persons 65 or older and for those retired on Social Security disability who have been retired on disability for two or more years. It requires no premium payment from retirees. The premium for Medicare Part A is (was) paid by individuals during their working years through a regular deduction from their paycheck. The amount of the deduction is 1.45% and usually appears on the paystub as “Medicare.”

Medicare Part B provides medical doctor care for those retired persons 65 or older and those retired on Social Security disability. It covers doctor care whether administered in the hospital or in the doctor’s office. Together with Medicare Part A, it provides full health care coverage for those who are retired at age 65 or older.

Other medical needs, such as out-patient care, lab work, etc. are covered by a combination of Parts A and B.

There are deductibles and co-insurance factors in Medicare Part A and Part B. The SEHBP provides excellent supplemental care for those deductibles and co-insurances for Medicare recipients. If a retiree is covered by Medicare and the SEHBP, the retiree need not purchase any additional supplemental insurance.

Medicare Part D provides prescription coverage for those retired persons 65 or older and those retired on Social Security disability who are not covered by any other prescription program. It has co-insurance and deductible features. (While all New Jersey public retirees are now enrolled in Medicare Part D, they have their own benefit structure and are not subject to the benefit features of the Medicare Part D that covers other retirees.)