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Is the Medicare card right for you?

"Today" financial editor Jean Sherman Chatzky talks about what seniors need to consider before signing-up to the federal government's prescription drug program.
/ Source: TODAY

If you're 65 or older you can now get a Medicare-approved discount card offering discounts on prescription drugs. The big question is whether to sign up for one, or not. “Today” financial editor Jean Chatzky talks about what seniors should consider before signing-up.

Last week, people age 65 and older could begin signing up for a Medicare-approved card offering discounts on prescription drugs. This program is administered by the Commission on Medicare Services (CMS).

There are about 70 Medicare-approved cards to choose from. How does this program work? You have the month of May to do your research and figure out whether you want a prescription discount card at all and which of the dozens (there are more than 70 when you include national and regional ones) of cards on the market is right for you because you can only choose one. 

Then, the cards become active and can be used on June 1. You can sign up (or enroll) for only one card per calendar year. And you can have only one card at a time. Generally, you'll pay a fee of no more than $30. Then you can buy prescription drugs at the discounted price your particular card offers 

Who wants a card?
Any senior who is not on Medicaid (you can't get a card if Medicaid pays for your drugs) and who is under the income threshold of 135 percent of poverty — which means you have annual income of no more than $12,569 (singles) or $16,862 (married couples). About 7 million of the 36 million seniors in this country are in this group, which is a considerable number... remember many seniors are retired and not earning an income. These people will get a $600 credit on their card that they can use to pay for their prescriptions.

Some seniors already have private cards provided by their health insurance companies or an organization. You can compare the cost difference, and if there is very little price difference between these cards and the Medicare-approved cards, you may not even need to get a Medicare-approved card.

How do you get your $600 credit?
You have to apply for it. By now most seniors are receiving applications through mail solicitations from companies offering discount cards. Or look for the discount application form you want at. Look for an enrollment form specifically for the $600 credit and a card that has been approved by Medicare. If you qualify for that credit, Medicare will pay your annual enrollment fee for the year. As long as you have your Medicare-approved drug card, you'll get another $600 credit on the card at the beginning of 2005, so you don't have to reapply. (If there is any money left in your credit from 2004, you may be able to carry it over.)  

Who won't qualify for the $600 benefit?
You don't qualify for this benefit if you already have outpatient prescription drug coverage from Medicare, military health insurance, employer group health insurance or health insurance for federal employees or retirees.

What happens when the $600 runs out?
In some cases, you'll have to pay for the drugs yourself — at the discounted price your card is offering. But and this is a big but, there are some manufacturers that have said they will supply drugs for free if your $600 runs out before the end of the year. They're big name drug companies like Merck, Novartus and Lilly. You have to register with each of them and you are only eligible for the free drugs if you have one of these Medicare discount cards. To get more information on these free drug programs go to a Web site called Benefitscheckup.org. There are a number of other assistance programs explained there as well.

Can seniors who aren't low income benefit from this at all?
It's kind of a mixed bag for them.  Drug cards aren't new — there have been private ones out there for quite some time.  If you have health insurance through a previous employer, you already have a card.  If you have Medicare supplementary insurance (Medigap) you already have a card. If you're one of these people, it might be interesting to take a look at what the new cards are offering, but I wouldn't expect to see big improvements.  If you don't have a card at all — by all means sign up for one because you'll be able to save at least a little bit of money.

How do you know which card to sign up for? You need to look at three things in this order.

Does it cover your drugs?
One type of card covers every drug available but generally gives moderate discounts on those drugs. The other type has a "formulary," a list of the drugs it will cover. It covers only certain drugs but gives bigger discounts on the drugs on its list. If you don't take a lot of different medications and you can find a formulary model that works, you'll be better off. If you take a lot of different medications, you'll be better off with a card that covers every prescription available.

Does your local pharmacy accept it?
It should have an agreement with your local pharmacy (you don't want to have to drive miles for your prescriptions)

What is the price of your Rx?
Medicare has a Web site where you can compare prices on drugs and you can see which cards are offering your drugs. You'll find it at pricecomparison.medicare.gov. (If you don't have Internet access you can get the same information by calling Medicare at 800-633-4227.)

But what's to stop the cards from changing the list of the drugs they offer and the prices?

It could happen but not anytime soon. Remember we're in a period right now where the companies are trying to get seniors to sign-up.  If they start raising prices or eliminating drugs then as soon as those seniors are able — at the end of the year — to get a different card, these card companies are going to see a mass exodus. That's not smart business. And the folks at the AARP say they'll be watching to point fingers at any card that seems to be operating in this way.

How good is the information on pricecomparison.medicare.gov?
In fact, some of the prices listed have been off by as much as 15 to 20 percent. Health and Human Services Director Tommy Thompson cautioned seniors to wait at least a week — "because there's more information coming in" — before choosing a plan.  I'd probably wait a couple of weeks for all the information to settle down.  There's no real rush, the cards can't be used until June 1.

Other Information
A Harvard University study suggests that these prescription cards could save seniors who don't have any other drug coverage as much as 17.4 percent in out-of-pocket costs (totaling a billion $ a year) on the roughly 18 prescriptions they purchase annually. But Henry Waxman, a democratic congressman from California, did his own analysis and told The New York Times that the prices "available with the Medicare cards are higher than the prices available in Canada… and no lower than the prices available to individuals who do not have the cards."

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Copyright © 2004. For more information, go to her Web site, .