I’m doing some research for a client on Medicare Part D, the new outpatient prescription drug benefit which goes into effect January 1, 2006. I’ve also been in touch with the Center for Medicare Services in Washington regarding enrollment guidelines. It’s going to be quite an undertaking for individuals as well as insurance providers.

Created by the Medicare Prescription Drug, Improvement, and Modernization Act (MMA), the new program is designed to ease the cost of prescription drugs for America’s seniors. Under the plan, beneficiaries must pay monthly estimated premiums of $35 in addition to premiums for Medicare Part B. The standard benefit includes a $250 annual deductible, with 75 percent coverage of the next $2,000 in prescription costs.

Then there is a “doughnut hole”…. Once a beneficiary goes over $2,250 in drug costs year-to-date (YTD), they must pay the full prescription cost until they’ve accumulated $5,100 in YTD prescription costs. After that, Medicare will pay 95 percent of the remaining YTD prescription costs. So to get to the 95 percent level, a beneficiary has to pay $3,600 out–of–pocket plus the average $35 per month in premium, according to CMS.

Enrollment begins in November. You might be interested to know:

  • Of the estimated 43.1 million Medicare beneficiaries, 29.3 million are expected to enroll in Part D effective in 2006. (That’s a lot of enrollments — I’d hate to see it all done on paper forms. Geesh!)
  • Another 9.8 million retirees are expected to receive drug coverage comparable to Part D under an employer plan.
  • For those who miss the open enrollment chance, there is a penalty — one percent of the base premium for each month enrollment is delayed will be added to the premium — for life.
  • Also, beginning in 2006 beneficiaries can’t enroll in Medigap Part B Plans H, I, & J once enrolled in Part D.
  • Part D Plans can also establish a network of preferred pharmacies that charge lower costs.

So that’s some of the high points of Part D. Clearly, healthy seniors may not want to enroll in Part D, but they will be assuming a risk of higher Part D premiums later when they do need the benefit. And if they do enroll in Part D and are currently using Plans H, I & J, the will need to choose a different Part B Plan — once again a complicated decision.

From a Web-assistance standpoint, online education and decision counseling of beneficiaries will be critical to effective decision–making and smooth transitions to the new drug benefits. Creating an enrollment process for all that choose to enroll that includes an online, paperless option (with a tight development timeline) will present a big challenge for insurance companies. Needless to say, it would be smart to get started now and avoid under–estimating the scope of the project. In our mind, developing an effective Web site for this situation should take IdeaStar about four months from start to finish.

If a company wants to do this project in-house, development of the Web component will be longer. You have May, June, July, August and September to get ready — with one month for CMS testing before enrollment begins in November. Wouldn’t it be great to give members an Internet tool to make their enrollment easy? Or better yet, how about including a calculator that will help the insured keep track of their YTD prescription drug situation? Make this a priority project today.