James Sullivan

Assisting Clients With Their Medicare Part D Prescription Drug Coverage

The annual open-enrollment period for Medicare Plan Part D gives CPAs an opportunity to assist clients with making important decisions regarding their prescription drug coverage.

November 8, 2010
by James Sullivan, CPA, PFS

The Medicare Part D (prescription drug coverage) annual open-enrollment period runs from November 15 through December 31, 2010. Changes made by Medicare beneficiaries during this period impact coverage in 2011. CPAs can help their clients save hundreds – even thousands – of dollars in 2011 by guiding them through the process. In addition, several changes to Part D were passed as part of the health reform act passed earlier this year. Clients should be made aware of these changes.

The open-enrollment period primarily impacts clients who have “original Medicare” that includes Part A (hospital insurance) and Part B (medical insurance covering doctor and other healthcare costs). In order to secure prescription drug coverage these clients must elect Part D. Coverage under Part B and Part D is voluntary in that the client may elect not to participate in either of these programs. But if they do opt out when first eligible to enroll, they may end up paying a penalty in the form of a higher monthly premium should they elect coverage later. The penalty can only be avoided if the Medicare participant has other coverage (such as an employer’s group health plan), which is creditable, equal to or better than the coverage they could have obtained under Part B or Part D.

Some clients may have enrolled in a Medicare Advantage Plan (MA Plan). These plans are offered by private insurance companies and combine Parts A, B and usually Part D. If prescription drug coverage is included in the MA plan, the Medicare participant does not need to elect separate coverage. MA Plans that include prescription drug coverage are usually referred to as MA-PD plans.

Insurance agents do sell these plans but clients can also enroll or make changes during the open enrollment on their own by going to www.medicare.gov. While a good insurance agent can be helpful, the typical beneficiary may have as many as 50 plans from which to choose. Most agents represent only a few companies. Their natural inclination will be to steer clients to a plan for which they earn a commission. The best plan for your client, however, may be a plan not represented by the agent. For that reason it is recommended that clients (with the help of CPAs, if needed) research the plans online. Once a plan is selected, they can enroll directly from the Medicare website.

Medications Make the Difference

During the open-enrollment period, clients may select a new prescription drug plan. If a client selects a new plan, they will be automatically disenrolled from their current plan as of January 1, 2011. Private insurance companies offer Part D plans. These plans must be approved by the Centers for Medicare and Medicaid Services (CMS). There is no medical underwriting to make the change, i.e., clients can make this change without answering any health-related questions.

Unfortunately, many Medicare beneficiaries focus too much on the monthly premium in making their decision. Often the plan with the lowest monthly premium is selected even though the overall cost of the plan is much higher than other available plans. It is the total cost of the plan that clients should focus on, including the premium, the deductible (a plan may include an annual deductible of up to $310 in 2011), co-payments and any payments made in the “doughnut hole.” The client’s prescription drug regimen drives the total cost of the plan. Which Part D plan is least expensive in terms of the total annual cost, differs from client to client.

Fortunately, the Medicare website will do the total cost analysis for the client.


Once on the landing page, click on Heath & Drug Plans. Under Finding Plans click on Compare Drug and Health Plans. This brings you to the Medicare Plan Finder. The user has a choice to enter only his or her ZIP Code. For a more personalized search the user may enter his or her Medicare information.

After entering basic information, the user clicks on Find Plans arriving at a page labeled as Step 1 of 4. Here they are asked which type of Medicare coverage they have and whether they receive subsidy for the cost of Part D. Most clients will answer that they have original Medicare and are not receiving a subsidy.

Moving on to Step 2 of 4 by clicking on Continue to Plan Results, the user is asked to enter his or her medications. If you do this for a client, ask for a list of their medications, name and dosage. Don’t ask for the names of the medications over the phone — most drug names are hard to pronounce and even harder to spell. If the client does it him or herself, recommend they have their medication bottles in front of them. After a drug has been entered, click on Add Drug after which dosage information will be requested.

After completing the list of drugs, you can save the data for later retrieval (see the box on the right of Find My Drug). This is recommended especially if the client has entered several drugs (many seniors take eight or more prescription medications).

After entering the drugs, click on My Drug List Is Complete to move on to Step 3 of 4. The user is asked to enter the local pharmacies from which they purchase their medications. This is not a required step (in that case, the user clicks on either I don’t want to add pharmacies now or Continue to Plan Results) and is taken to Step 4 of 4.

Notice on the left of the screen the user is asked to Refine Your Search. Most likely the user will want to limit the plan results list to Prescription Drug Plans. After refining the results, click on Continue to Plan Results. The resulting list will include all the Part D plans in the user’s area ranked by annual cost. Through a drop-down menu, the user can also rank the plans by lowest deductible, plan name, plan rating and more.

Once a plan is selected, the user can click on Enroll and complete the enrollment process online.

Changes in 2010 and 2011

The infamous “doughnut hole” is scheduled to disappear gradually. It will be phased out from 2011 through 2020. The doughnut hole represents a gap in coverage. After the beneficiary and the insurance company have spent a certain amount of money for covered drugs ($2,840 in 2011), the beneficiary pays all costs until they reach “catastrophic coverage.” In 2011, the beneficiary must pay $4,550 in total out-of-pocket costs in order to reach catastrophic coverage. Total out-of-pocket costs include the deductible, co-payments and payments made in the doughnut hole. It does not include the monthly premium. Once in catastrophic coverage, the beneficiary pays $2.50 for generic drugs and $6.30 for brand drugs. In 2010, beneficiaries in the “doughnut hole” will receive a $250 rebate check.

In 2011, the open-enrollment period will be changed to October 15 through December 7 for coverage beginning on January 1, 2012.

Like the Part B premium, the Part D premium will be increased starting in 2011 for high-income beneficiaries.

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James Sullivan, CPA, PFS, MAS, is an investment counselor at Core Capital Solutions LLC. He has almost 25 years of experience in individual tax, investing and personal financial planning. Before joining Core Capital Solutions, Sullivan spent 20 years at Arthur Andersen LLP. He is a member of the AICPA PrimePlus/ElderCare Task Force.

* PFP Section members, including PFS credential holders will benefit from additional Medicare resources in Forefield Advisor on the AICPA’s PFP website at aicpa.org/pfp. Non-members can click here to join the section.