Medicare Prescription Drug Coverage

Medicare Prescription Drug CoverageIf you’re covered by Medicare, here’s some welcome news—Medicare drug coverage can help you handle the rising cost of prescriptions. If you’re covered by original Medicare, you can sign up for a drug plan offered in your area by a private company or insurer that has been approved by Medicare. Many Medicare Advantage plans will also offer prescription drug coverage in addition to the comprehensive health coverage they already offer.

Although prescription drug plans vary, all provide a standard amount of coverage set by Medicare. Every plan offers a broad choice of brand name and generic drugs at local pharmacies or through the mail. However, some plans cover more drugs or offer a wider selection of pharmacies (for a higher premium) than others, so you’ll want to choose the plan that best meets your needs and budget.

prescription drugs
You should compare the details of each plan available in your area before choosing one. You can get personalized plan information at the Medicare website, www.medicare.gov, or by calling a Medicare counselor at 1-800-MEDICARE.

How much will it cost?

What you’ll pay for Medicare drug coverage depends on which plan you choose. But, here’s a look at how the cost of Medicare drug coverage is generally structured in 2014:

A monthly premium: Most plans charge a monthly premium. Premiums vary, but average $31. (Source: Centers for Medicare and Medicaid Services.) This is in addition to the premium you pay for Medicare Part B. You can have the premium deducted from your Social Security check, or you can pay your Medicare drug plan company directly.

An annual deductible: Plans may require you to satisfy an annual deductible of up to $310. Deductibles vary widely, so make sure you compare deductibles when choosing a plan.

A share of your prescription costs: Once you’ve satisfied the annual deductible, if any, you’ll generally need to pay 25% of the next $2,540 of your prescription costs (i.e., up to $635 out-of-pocket) and Medicare will pay 75% (i.e., up to $1,905). After that, there’s a coverage gap; you’ll need to pay 100% of your prescription costs until you’ve spent an additional $3,605. (Some plans offer coverage for this gap.) However, once your prescription costs total $6,455 (i.e., your out-of-pocket costs equal $4,550—you’ve paid a $310 deductible + $635 + $3,605 in drug costs—and Medicare has paid $1,905), your Medicare drug plan will generally cover 95% of any further prescription costs. For the rest of the year, you’ll pay either a coinsurance amount (e.g., 5% of the prescription cost) or a small co-payment for each prescription.

Again, keep in mind that all figures are for 2014 only—costs and limits may change each year, and vary among plans.

Prescription ChartNote: Health-care legislation passed in 2010 gradually closes the prescription drug coverage gap. In 2014, if you have spending in the coverage gap, you’ll receive a 52.5% discount on covered brand-name drugs, and a 28% discount on generic drugs. Other changes will take effect in future years.

What if you can’t afford coverage?

Extra help with Medicare drug plan costs is available to people who have limited income and resources. Medicare will pay all or most of the drug plan costs of seniors who qualify for help. If you haven’t already received an application for help, you can get one at your local pharmacy or order one from Medicare.

When can you join?

Seniors new to Medicare have seven months to enroll in a drug plan (three months before, the month of, and three months after becoming eligible for Medicare). Current Medicare beneficiaries can generally enroll in a drug plan or change drug plans during the annual election period that occurs between October 15 and December 7 of each year, and their Medicare prescription drug coverage will become effective on January 1 of the following year. If you qualify for special help, you can enroll in a drug plan at anytime during the year.

Note: Medicare beneficiaries can switch to a 5-star Medicare prescription drug plan during a Special Enrollment Period that runs from December 8, 2013 through November 30, 2014 if one is available in their area (limited to one plan change per year). A 5-star plan is one that has been rated as excellent by Medicare. Beneficiaries whose Medicare Part D drug plan fails for three straight years to achieve at least a 3-star quality rating will also be offered a special enrollment period that will allow them to move to a higher-rated plan.

Choosing a Medicare Prescription Drug Plan

doctor and mature patient

  • Start by making a list of all the prescription drugs you currently take and the price you pay for them to see how much you’re spending on prescription drugs.
  • Next, compare plans. Does each plan cover all of the drugs you currently take?
  • What deductible and co-payments does each plan require?
  • What monthly premium will you pay?
  • What pharmacies are included in each plan’s network?
  • Finally, ask for help if you need it. A family member or friend can help you find information, or you can call a Medicare customer representative at 1-800-MEDICARE.

 
If you already have Medicare drug coverage, remember to review your plan each fall to make sure it still meets your needs. Before the start of the annual election period, you should receive a notice from your current plan letting you know of any important plan modifications or additional plan options. Unless you decide to make a change, you’ll automatically be re-enrolled in the same drug plan for the upcoming year.

Do you have to join?

No. The Medicare prescription drug benefit is voluntary. However, when deciding whether or not to enroll, keep in mind that if you don’t join when you’re first eligible, but decide to join in a future year, you’ll pay a premium penalty that will permanently increase the cost of your coverage. There’s an exception to this premium penalty, though, if the reason you didn’t join sooner was because you already had prescription drug coverage that was at least as good as the coverage available through Medicare.

What if you already have prescription drug coverage?

Like many people, you may already have prescription drug coverage through the Medicare Advantage program, private health insurance such as Medigap, or your employer or former employer’’s health plan. You can generally opt either to keep that coverage or join a Medicare prescription drug plan instead. If you already have other prescription drug coverage, you’ll receive a notice from your current provider explaining your options.

What happens after you join?

Once you join a plan, you’ll receive a prescription drug card and detailed information about the plan. In order to receive drug coverage, you’ll generally have to fill your prescription at a pharmacy that is in your drug plan’s network or through a mail-order service in that network. When you fill a prescription, show the card to the pharmacist (or provide the card number through the mail) even if you haven’t satisfied your annual deductible, so that your purchase counts toward the deductible and benefit limits.

What if you have questions?

If you have questions about the Medicare prescription drug benefit, you can get help by calling 1-800-MEDICARE (1-800-633-4227) or by visiting the Medicare website at www.medicare.gov. Look for information in the mail from Medicare and the Social Security Administration (SSA), including a copy of this year’’s “Medicare and You” publication that will give you details about the prescription drug plans available in your area.

Contact our Peoples Investment Services, Inc. representative at 828-464-5620 or  www.raymondjames.com/PeoplesInvSvcs. 

This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. The material is general in nature. Past performance may not be indicative of future results. Raymond James Financial Services, Inc. does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC, an independent broker/dealer, and are not insured by FDIC, NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

Adjustable Rate Mortgages – Friend or Foe?

Adjustable Rate Mortgage - Friend or Foe?With the changing rate environment, some have wondered about whether an Adjustable Rate Mortgage (ARM) is a better alternative to the traditional fixed-rate mortgage loan. Here are some tips to help you decide if an ARM would be right for you.

As with any loan, it is important to balance the risk against the reward. ARMs typically come with a lower initial rate that is variable, meaning it can go up if a certain index rate increases, but only to a certain level, and usually with caps on how much it can go up at a time. So with that uncertainty, how to decide if it is more to your advantage than a fixed-rate loan? Ask yourself the following questions:

  • How long are you going to stay? Generally, if you plan to move out of a home within a few years, you are more likely to benefit from an adjustable rate mortgage loan.
  • Which bank has the best features? Some ARMs may have a fixed rate for 10 years before the interest rate can change, others may reset after three. One may be better for you than another, depending on your circumstances. Also, the maximum rate increases during the interval and the life of the loan can be different from one lender to the next. Some lenders “discount” the initial rate of the ARM, which means that your payments are likely to increase A LOT beginning with the first reset period (when the 1st rate adjustment takes place).
  • Am I OK with the loan payment if the rate soars to its highest level while I still own the home? Your lender has to disclose the worst-case scenario with respect to rates, so assess the implications of that situation. Remember to factor the possibility of increasing property tax and insurance, because while your income may not increase, the property expenses probably will.

There are other factors to consider when evaluating whether an ARM represents a good opportunity. Your lender can help you decide which loan type makes the most sense, too. The FDIC has a helpful resource on its website, along with links to additional information. Read “The Comeback of the Adjustable Rate Mortgage” or to get the audio recording of the text.

Be In Charge of Your Credit Cards

Be In Charge of Your Credit CardsEver noticed how some people seem to manage their credit cards better than others? Perhaps that’s because managing credit cards starts before you even open the credit account.

Any purchase that is made with a credit card is a loan. It must be repaid. And as with any loan, the payment terms are very important considerations. As important as it is to use credit cards wisely, it is very important to choose a credit card that meets your needs and your financial circumstances. Choose wisely.

Take Charge and Pick the Right Card

Too often people are tempted to simply choose the credit card that came in the mail with the best offer, or the one at the store that offered such a discount on the purchase. But such a convenient circumstance may not represent the appropriate circumstance.

  • Think about how you will use the card. Do you expect to pay your card balance off in full every month? If so, the price discounts and even the points applied to charges may be a worthwhile feature. If not, you may be better off choosing a card with a lower Annual Percentage Rate (APR).
  • Shop and compare. Don’t assume that the credit card offers that come addressed just to you are the best deals for you. Take the time to compare current offers from several lenders. Their websites can help you make that decision. Some websites offer to make the comparison for you, but beware that sometimes the credit cards listed are there because they paid for advertising on the site.
  • Understand the key terms and conditions. The FDIC has published a very handy reference that describes APR, Fees and Rewards. Read that important summary.

A good manager understands the inner-workings of the process and controls what things are possible to control. Be a good manager of your credit cards. Choose wisely, use wisely, to avoid the trap of out-of-control debt.

For more tips and information, start at the FDIC Web page “How to Choose and Use a Credit Card”. Another resource is a set of questions and answers developed by the Consumer Financial Protection Bureau.

Pay Yourself

Pay yourself The actor Michael Caine is quoted as saying “Save your money. You will need twice as much in your old age as you think.” His advice rings true. The cost of things are rising rapidly, often to suit Wall Street (pun intended), and one shouldn’t expect that to stop. It’s out of our hands. However, there are two means to overcome the problem of escalating prices that you can do something about: save your money, and make it work harder by investing it.

Pay Yourself First

One of the key factors to any savings program is pay yourself first, before paying your other obligations, and without going into debt to do it. The idea is to take some of your excess from paying for necessary things like food, clothing, shelter and other demands. Every pay period, and before you are tempted to spend money on optional items, put the money away in a savings account. Your bank can help you set this up so that your checking account automatically transfers some money to your savings account whenever you tell it to.

Having a good budget will help you figure out what to pay yourself. We have a blog post on how to prepare a simple personal budget that will help you get started. If you know how to use Excel, you might also like to download a good budget template from smart people who have already done the work of getting the calculations set up. We like the Family Budget Planner (get the free template) from Vertex42.com because it includes a savings plan as part of the monthly expenses, and shows your money growing if you keep your expenses in line. Their site includes a video demo of how to use the free spreadsheet template, too.

Make Your Money Work

It’s good to have some extra money laying around, but far better to make that money work by investing it. The state of the economy being what it is today, the interest paid on money is low by historical standards. But by today’s standard, it’s a level playing field. Everybody is in now in the same economy you’re in, right? So consult with a financial planner, a real financial planner with real credentials. Your community banker may have a recommendation for you. The NC Secretary of State maintains a list of licensed financial planners, so get information on how to inquire about an investment advisor’s license or status in North Carolina. But before you invest, it is recommended that you have three to six months’ worth of funds to cover your expenses in case of emergency.

Of course, there are other things that a good saver and investor can do to make their money work. Read more about this topic on the US Government’s Save and Invest page.