Medicare Part D, Basic Information

The Federal government has enacted a limited, catastrophic drug program for qualified retirees, over age 65 who are covered under Medicare Part A (hospital) and [at least eligible for] Part B (medical). It is commonly referred to as Medicare Part D.

The Part D program is privately administered by insurance companies who offer a variety of policies featuring: 1) a formulary of covered drugs, 2) a "front-end" deductible, 3) a range of annual costs where the enrollee pays a moderate percentage co-pay, 4) a range of annual costs where the enrollee pays all costs - 100% co-pay - also known as the "doughnut hole" and 5) a range of annual costs where the enrollee pays minimal percentage co-payment toward drug costs. For this coverage, the Medicare Part D enrollee pays a premium.

The prototype on which the program is based applies a $250 deductible, a 25% co-payment on the next $2,000 of annual drug spending, no coverage between $2,250 and $5,100 annually and a 5% co-payment on annual expenses exceeding $5,100.

The monthly premium estimated on that model was to have been approximately $37 in the first year (2006). Many areas around the country had 40 to 50 competing plans in the first year of operation, with wide variances on premium, deductibles, copayments and formularies.

The PSC-CUNY Welfare Fund Drug Benefit

Eligible plan participants may chose a Medicare Part D plan instead of the Welfare Fund retiree drug plan. Those who do so would relinquish Welfare Fund drug coverage. It is often not advisable to do so.

Analysis of average drug utilization among covered retirees has determined that most retirees would be financially better off with the PSC-CUNY Welfare Fund Medco program. The exception would be those individuals who incur high annual costs. If annual costs exceed $13,800, the Part D program might be beneficial.

The Fund actuaries have calculated that on the average the Welfare Fund drug coverage is equal to or better than the Medicare Part D program. This "Actuarial Equivalence" enables the Welfare Fund to issue a Notice of Creditable Coverage* to its eligible retired members. This Notice assures that a future decision by a participant to enroll directly in Part D (e.g., by a spouse if a retiree dies) is not met with a substantial premium surcharge.

Fund office staff is unable to personally advise on choice of coverage. More information is available on-line at www.medicare.gov.

*The Welfare Fund provides the first year Notice of Creditable Coverage (2005) -- and only the first year.  Carriers, such as Medco, are responsible for subsequent years.