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What Really Is a “Medigap” Plan?

Many people confuse the term “Medicare Supplement Plans” with “Medigap Plans”. It should be noted that Medicare supplement plans fill in some gaps in coverage in original Medicare which is known as “Medigap”.

There are 10 standardized Medigap plans available for senior citizens, each marked with the letters A to N.  And these plans are only available through private insurance companies, and it is not necessary for the insurance companies to sell all the 10 Medicare supplement plans. Every insurance company selling Medicare Supplement policy have to offer at least Plan A and if they offer any other policy than they must also offer either Plan C or Plan F.

Please note that Medicare Supplement plans can be used only to pay Original Medicare expenses. These plans can be used to cover expenses that you may have in Part C Medicare. If you enroll in Medicare Advantage plan, you can keep your Medigap plan as long as you keep paying the monthly fee, but you will not be allowed to enjoy Medigap plans on the cost of Medicare advantage plans. There are few things that you need to keep in mind before going for Medigap plans.

First and foremost, the beneficiaries must be enrolled in Medicare Plan A and Plan B. Secondly, if the beneficiary has a Medicare advantage plan than they can apply for Medicare policy and you will have to leave Medicare Advantage plan before you can enroll in Medigap. These Medigap policies are only able to cover one person. If anyone from your family want to avail then they will have to enroll themselves.

Monthly premiums will have to be paid to private insurance companies in addition to monthly Plan B premium. You are not bound by any insurance company, you can select any insurance company you like that is licensed in your state. Each standardized Medigap policy is guaranteed renewable, even when suffering from health problems. This means that the company cannot cancel Medicare Supplement insurance contracts as long as you pay the premiums. Medicare supplement plans allow you to use any provider that can accept Medicare. Among all the states of America, Arizona is considered as one of the best places to live after retirement. Arizona provides the best Medicare and Medigap help to senior citizens.

There are two specific Medigap plans (Plan k and Plan L) which are capable of covering out of pocket limits, because once your basic health care costs reaches the limit, your Medigap plan will cover 100% of all the expenses for the rest of your year. It is worth mentioning that original Medicare don’t have the ability to include a yearly out of pocket limit. Remember, Medicare supplement plan is meant to work side by side with your original Medicare coverage. You only need to remain enrolled in original Medicare to take the benefits of Medigap.

Although private insurers are required to offer the same benefits for each Medicare plan, these companies can change the costs of premiums they charge for this coverage. So if you are looking for Medigap coverage, you must contact different insurance companies to find a Medicare Supplement plan that is appropriate for your medical and financial needs. Remember that insurance companies use different methods to price their Medigap plans. Pricing method that company uses may affect the amount of premium you pay when you first enroll in a Medicare Supplement plan, as well as your long-term costs.

Medigap can be used only by people enrolled in traditional Medicare only. It is not a Government-run program but you can buy private insurance to cover some or most of your expenses in traditional Medicare. Medicare advantage plans consist of variety of private health plans for every type of needs. HMOs and PPOs are the most commonly used among the beneficiaries. Most of the plans include drug prescription coverage at no extra cost. Some plans are capable of covering routine hearing and vision services but not all. By law, all plans have annual limits for out-of-pocket costs.

Another difference from the traditional program is that most plans require you to go to the doctors and hospitals within their network and if you want to go out of the network, you will have to pay extra.

If you enroll in Medicare Advantage health plan, you can’t use a Medigap policy to cover your expenses, and it is illegal to sell insurance Medigap policy if you are enrolled in a Medicare Advantage plan. If you want to stay in traditional Medicare, you will need a separate Part D plan to get prescription drug coverage and pay an extra premium for it. A Medigap does not cover drugs outputs of- pocket.

Some states even offer Medigap plans for beneficiaries under 65 years of age who are eligible for Medicare because of disability or under certain conditions. Federal law doesn’t allow states to sell Medicare Supplement insurance for under 65 years, but depending on where you live, some states offer Medigap coverage for beneficiaries under 65 years of age. Every state can have its own eligibility criteria and terms. If you are a Medicare beneficiary under 65 years of age and interested in purchasing a Medicare Supplement insurance, contact your state insurance department to find out if you qualify for Medigap coverage in your state or not.

Select the Best Medicare Supplement Plan for Yourself

Many of us spend a lot of time trying to understanding the difference between Medicare and Medigap plans. Today, you will clearly get to know the difference between these two. This article will also help you to wisely select your plan.

Basically, Medicare supplement plans are also known as Medigap plans or policies and they can cover some of the costs that original Medicare coverage doesn’t include. Originally, the government provides Part  A and Part B of Medicare coverage to all the eligible individuals. However, this Medicare coverage might not fulfill your demands at later stage so you will need to decide at some point whether the traditional coverage is enough for you which is provided by the government or you need some other Medicare supplement plans.

Medicare and Medigap plans are federal healthcare programs which is designed to fulfill the needs and to help senior citizens during their golden years. According to the law, any senior citizen who is 65+ and currently enrolled in Medicare can apply for a Medigap plan. There are about 10 Medigap plans available to choose from. According to the Centers for Medicare and Medicaid Services (CMS), all the Medigap plans have to offer the same coverage plans, regardless of the company which is selling it or where they are located. It means that Plan A and Plan B is exactly the same in all 50 states of America.

In recent years, private Medicare plans have become more popular than the traditional plans. It has been observed that more than 10 million senior citizens has enrolled in the Medicare advantage plans. These plans actually help to combine the physician and hospital services into one package. Before selecting the perfect plan for yourself or your loved one, you need to keep in mind few things.

First of all, if there are no Medicare advantage or supplement plans are available in your region than you will be in traditional Medicare, which is administered by federal government. You can select any doctor who accepts Medicare in the traditional Medicare and you will have to pay deductibles of the cost of care. If you had a Medigap policy, those expenses would have been covered by your Medigap plan. So, a Medigap plan covers a vast variety of treatments which Medicare wouldn’t cover. There are multiple types of Medicare supplement plans.

Most plans such as health maintenance organizations and preferred provider organizations, manage to control costs. Other like HMOs and PPO, which is based on a network of doctors, so you want to make sure that your doctor and the hospital of your choice are involved in the network. You can also ask about the policy for referrals, In case of a PPO, you may want to know how much you have to pay to see doctors who are not on the network. Private plans fee-for-service provides more choice because they are not allowed to have a network of doctors and hospitals.

Sometimes, Medicare supplement plans have extra benefits like eye exams, dental care and hearing coverage. For many people, this coverage doesn’t seem to be enough, and this is where private insurance, such as Medicare Supplement plans come in. These plans may offer coverage of health services not covered for Part A and Part B. To participate in a Medicare Supplement plan a beneficiary must be enrolled in Part A and Part B, live in the state where it is offered, and generally be over 65 years. But you must make sure you understand each and every point of the Medicare advantage plan you will be selecting.

One benefit of Medigap plans is that Medigap policies are renewable, as long as you pay your monthly fees and your insurance company doesn’t go bankrupt, you cannot be dropped from your plan. Medicare has a small network of doctors, but Medigap provides access to an extensive network of doctors. In short, Medicare is designed for those on a tight budget and if your pocket allows you then you have to go Medigap.

According to the latest research, Medigap plans are usually more expensive than Medicare Advantage plans. Medigap offers a variety of supplemental insurance to Medicare, while Medicare coverage and Medicare Advantage are almost identical. Furthermore, you also need to keep in mind that if you travel a lot or migrate yearly as per job requirements or you live in an area where there are lack of medical facilities, then you must go for a Medigap policy. No doubt, there are other ways to supplement your Medicare coverage but Medigap offers the best flexibility.

With Medigap, you are free to receive care from any hospital and any doctor which accepts Medicare. If you have a need for vision or dental benefits, then you will also have to buy Medicare supplement plans for that which will be covered by your Medigap policies. Now that Medicare Part D is also here, so all Medigap plans which used to offer prescription drugs are being phased out.

Last but not the least, if you have signed up for a Medigap plan but you later realized that it wasn’t right for you, there’s no need to worry because as long as you make that discovery within a month of coverage, you can cancel the coverage for a full refund.

For Arizona residents who are confused about which plan to choose, visit for all the details and help on Arizona Medicare Supplement plans.

Arizona Medicare Advantage Plans

According to the latest statistics, a huge amount amount of retired people find Arizona the best place to live because of the warm climate and medical facilities. Millions of residents are depending upon the Medicare for health and life insurances. Since basic Medicare plan doesn’t cover everything, people may want Medigap or Medicare advantage plans.

Arizona is only state which has the most amount of Medicare recipients. Phoenix, Tucson and Mesa are the largest cities of Arizona and there are about 15% Arizonians who are 65 years and up receiving Medicare and about 14% Arizonians receiving Medicare. Almost all seniors are dependent on Medicare benefits for health insurance. Among all the senior citizens, approximately 30% will choose the Arizona Medicare Advantage plans. The other 25% will choose Medigap plan instead. The remainder may have a different public or private coverage, but most do not just rely on Part A and Part B Medicare, because they want to ensure that health care costs remain affordable.

Anyone choosing Medicare insurance or any other type of health insurance needs to strike a balance between premiums and benefits. Medicare Advantage plans for Arizona are attractive because many still have a very low or even $ 0 premium surcharge. Medicare Advantage plans also include Part D drug coverage at no additional cost.

On the other hand, these cheaper plans have many co-pays and deductibles. Also many recipients operate on a tight budget during retirement. Everyone has their own plans for retirement, for some people it makes more sense to pay a hefty amount for the Medigap insurances that covers all the health expenses that are not originally covered in Medicare.

Interestingly, Medicare supplement insurance plans C and F are usually the most expensive but they are also the most popular among the people who purchase supplements.

As a beneficiary, you are free to enroll in any Medicare Advantage plans you like. All the plans offer health benefits under Part A and Part B both. Many Medicare Advantage plans also cover prescription drug coverage (Part D). Additional benefits can also be utilized by paying an extra cost on your Medicare advantage plan. You may qualify for these plans if you are entitled to Medicare Part A and enrolled in Medicare Part B.
There are many private companies who offer Medigap plans for senior citizens. People can easily sign up for one of several Medicare advantage plans if they want to receive the most of their medical insurance coverage company. Keep in mind that if you are going for Medicare advantage plan, you must be enrolled in Medicare Part A and B.

Secondly, you must be living in the area where they have Medicare network providing advantage plans. Most Medicare Advantage plans have prescription drug coverage built into the plan. This is not always the case, because it may be what is called stand-alone Part D plan.

Many people join the Medicare advantage plan as soon they turn 65. This process is called open enrollment period when you have only six months to enroll in the plan. After registration, if you want to change your plan, you’ll have to wait until the annual election period, which occurs every year from October 15 to December 7th. During this time, you can switch plans or return to original Medicare options, for this year you will not be able to move out of your plan, or join a new Medicare Advantage plans for 2016 outside of that enrollment period.

Type of Medicare Advantage Plans:

Below listed are some of the main advantage plans available across the United States:

Health Maintenance Organization (HMO):
Health Maintenance Organization plan only allows  you to select certain doctors and hospitals within the network. Unless it’s an emergency, only then can you go to those approved locations. If you plan to visit someone outside your network, it will not be covered under your plan and it will be charged separately.

Preferred Provider Organization (PPO):
Preferred Provider Organization plan allows you to save your money by selecting the specified doctor and healthcare provider or hospital. You will be required to pay a bit more if you wish to go to those that are not on the list of approved providers.

 Private Fee for Service (PPFS):
Private Fee for Service a plan which does not require you to go to an approved list of providers. Instead, you will have the choice to select any provider you want. The only drawback is that there are very few people who accepts the PPFS plan.

Special Needs Plans (SNPs):
Special Needs Plans are basically designed for the people who have some specific and severe disabilities and diseases. The list of accepted providers is made on the needs of the subscriber and who will be able to fulfill their needs.

Every Medicare advantage plan is created to operate on a network. It means that all health care providers will be located within a specific area. You are required to live in the local area if you want to get covered by a certain plan. If you move to a new area, you may change your provider or insurance plan, depending on where you moved and what type of network is used.

Everything You Need to Know About Medigap Plans

Diseases don’t only take their toll on your physical and mental wellbeing – they can also deplete your life savings. Most US citizens over the age of 65 rely on Medicare to cover their healthcare expenses, at least to a certain degree, as its coverage is not comprehensive. As a way to avoid excessive medical costs, Medicare beneficiaries can extend the scope of their health insurance coverage by purchasing one of the supplemental Medigap plans. Read on to find out what really matters when you are considering a Medigap policy for your healthcare needs.

Basic facts about Medicare

Medicare is the national health insurance program, addressing the needs of people aged 65 or above and other people with certain qualifying conditions.

There are 2 ways to get your Medicare coverage: Original Medicare, consisting of Part A (hospital insurance) and Part B (medical insurance) or Medicare Advantage (Part C), which is a standalone plan designed as a substitute for Original Medicare, administered through Medicare-approved private insurance companies.


If needed, users of Original Medicare and Medicare Advantage can add prescription drug coverage by purchasing Medicare Part D. Original Medicare beneficiaries in Arizona can also buy supplemental coverage known as Medicare Supplement Insurance (Medigap), which can only be used in combination with Original Medicare. Medigap and Medicare Advantage are mutually exclusive and you cannot have both.

Medigap – concept and important facts

Medigaps are private health insurance policies designed to supplement Original Medicare and cover some of the costs left out by Original Medicare. These are referred to as coverage gaps, hence the name Medigap. Coverage may include out-of-pocket costs such as deductibles, coinsurance, copayments, as well as hospice or additional hospital coverage.

When you receive healthcare as a Medigap beneficiary, Medicare pays its share of the Medicare-approved amount, after which the Medigap policy pays its share, thus supplementing the costs of your Original Medicare benefits. Medicare doesn’t cover any of the purchase costs for your Medigap policy. One Medigap policy only covers one person.

In Arizona, insurance companies can only sell you “standardized” Medigap policies, labeled by letters (A, B, C, D, F, G, K, L, M, and N). Standardized means that all providers selling a particular Medigap plan must offer the same coverage and benefits.

However, unlike the benefits, the costs of same-lettered plans do differ across providers. This is why, when purchasing a healthcare plan, it is best to choose the plan that fits your needs first and foremost, and then shop for the best price.


Arizona companies are not required to offer Medigap plans to disabled Medicare beneficiaries. Medigap policies are renewable (with the exception of policies purchased before 1992), meaning that your insurance provider cannot cancel your policy, unless you stop paying premiums or the company goes out of business.

Medigap plans offer the following basic benefits:

  • Hospitalization – Part A coinsurance plus additional 365-day coverage after Medicare benefits end
  • Medical Expenses – Part B coinsurance (usually 20% of Medicare-approved expenses) or copayments for outpatient services
  • Three pints of blood each year, if you need transfusion
  • Hospice care – Part A coinsurance

Medigap plans – coverage scope and costs

As a rule, Medigap policies sold in Arizona do not include long-term care, vision or dental care, hearing aids, eyeglasses, or private‑duty nursing, but some of them do offer coverage while traveling abroad.

As of 2006, Medicare Supplement plans in Arizona do not include prescription drug coverage. Your Medigap plan comes with a monthly premium, in addition to the monthly Medicare Part B premium. Monthly premiums for Medicare Supplement plans in Arizona range from around $40 to $300, depending on the beneficiary’s age and provider.

How insurance companies set their premiums

The ways in which insurance providers price their Medigap policies are important, as they will affect your present and future expenses. Premium rates can be set as follows:

  • community-rated i.e. no-age-rated:  premiums are the same, regardless of the beneficiary’s age;
  • issue-age i.e. entry-age rated:  premiums are based on your age when you first buy the policy. The sooner you enroll, the less you will pay;
  • attained-age rated: premiums are based on your current age, and they increase as you grow older.

When to purchase a Medigap policy in Arizona

It is recommended that you join a Medigap plan during the open enrollment period (OEP), when you have a guaranteed issue right to buy a Medigap policy, regardless of your health status (i.e. when the provider is required by law to sell you a Medigap policy).


The 6-month Medigap OEP automatically starts on the first day of the month you turn 65 and are enrolled in Medicare Part B. However, you may have to wait up to six months for coverage of a pre-existing condition.

If you enroll in a Medicare Supplement Plan outside of your OEP, you may be subject to medical underwriting, which can affect the premium rates and whether the provider will sell you a policy or not. This basically means the company can ask you to take a physical, review your health information and then decide whether to offer you coverage, at which price and under which conditions.

Choosing a Medigap policy in Arizona

Arizona residents can choose from 10 standardized Medigaps, offered by around 50 insurance providers. More than half of the beneficiaries statewide use Medigap Plan F, followed by Plan C as the distant second.

Medigap providers don’t have to sell all Medigap plans, but their Medigap offer must include Plan A. If they offer any plan in addition to Plan A, they must offer Plan C or Plan F.

Plan F is also offered as a high-deductible plan. This means that you have to pay for Medicare-covered costs (coinsurance, copays, deductibles) up to the deductible amount of $2,180 before your policy pays anything.


For Plans K and L, after you meet your annual out-of-pocket limit and Part B deductibles ($147 in 2015), the Medigap plan pays 100% of the covered services for the rest of the year.

Plan N pays 100% of the Part B coinsurance (except up to $20 copay for some doctor visits and up to $50 copay for ER treatments that don’t require inpatient admission).

When choosing a Medigap policy, check if the company offers discounts, such as discounts for women, non-smokers, or married people, yearly payment discounts, multiple policy discounts etc.

Generally, your choice of health insurance policy should match your medical needs but also your financial abilities. When choosing a plan, always consider your current needs and try to foresee future concerns.

Medicare Supplements in Phoenix AZ – Do You Qualify for Medicaid?

Medicare is the principal state-administered health insurance program in Arizona and the rest of the US. It aims to address the needs of seniors (65 and older), as well as younger adults with qualifying disabilities and diseases. Since it’s not all encompassing in terms of coverage, many people purchase additional coverage, such as one of the Medicare supplements in Phoenix AZ, commonly referred to as Medigap plans.

Meanwhile, financially vulnerable populations can use the benefits of the joint federal and state program called Medicaid, designed to help with their medical costs. Here are some Medicaid basics explained to help you get more acquainted with this health insurance program.

What is Medicaid?

Medicaid is a health insurance program providing assistance to families with low income and limited resources that cannot afford healthcare coverage. The program provides full coverage for its low-income beneficiaries, whereas moderate-income beneficiaries receive substantial coverage.

Medicare supplements in Phoenix AZ Medicaid eligibility

Medicaid is jointly funded by the federal and state governments and managed by the states. Each state has the freedom to set its own eligibility criteria. Common criteria for all states include US citizenship and permanent residency status. Low-income families, people with certain disabilities and pregnant women can also qualify for Medicaid.

Poverty is a criterion, but it does not make a person automatically eligible for Medicaid. Financial eligibility is defined in terms of income and resources. Thanks to the Patient Protection and Affordable Care Act, the eligibility and funding for Medicaid have increased significantly.

What does Medicaid cover?

Medicaid coverage varies between states and people are advised to contact their state’s Medicaid office in order to fully understand the coverage options. Under federal law, each state must provide a minimum benefit package, including:

  • hospital inpatient and outpatient services
  • doctor services
  • skilled nursing  
  • home care
  • lab and x-ray tests
  • health screening follow-up services for children under 21
  • nurse-midwife services
  • family planning services
  • rural health clinic services
  • transportation services

Although Medicaid doesn’t cover prescription drugs, the program can pay the premium for Medicare prescription drug coverage (Medicare Part D). In addition to Medicaid, each state also runs a Children’s Health Insurance Program (CHIP), designed to cover children from families whose income is modest, but still too high to qualify for Medicaid. In some states, CHIP also assists parents and pregnant women.

Medicare supplements in Phoenix AZ, Medicaid CHIP

The Children’s Health Insurance Program covers dental care, eye exams and eyeglasses, regular checkups, prescription drugs and vaccines, specialty services and mental healthcare, hospital care, medical supplies, x-rays, lab tests and treatment of pre-existing conditions. In each state, Medicaid and CHIP work closely together to address the needs of their target populations. They are evolving and improving from the aspect of eligibility, enrollment and renewal, thanks mainly to the flexibility enabled by the Affordable Care Act.

Medicare supplements in Phoenix AZ and Medicaid – are they related?

Many people confuse Medicare and Medicaid, despite their apparent differences. In a nutshell, these are the main differences between the two programs:

  • Medicare is a federal program addressing the needs of people aged 65 and older, as well as people with certain diseases and disabilities. Medicare is available to people of all income levels and the coverage is the same in all states.
  • Medicaid is a joint federal & state program providing healthcare benefits to people of all ages, available to those of low income and resources. Medicare programs are different in each state.

Sometimes, Medicaid can work together with Medicare to cover healthcare costs. In other words, Medicaid can help Medicare policyholders with the payment of excessive medical bills that Medicare doesn’t cover. In this case, for services covered by both Medicare and Medicaid (doctor visits, hospital care, home care and skilled nursing facility care), Medicare is the primary payer, whereas Medicaid covers the remaining costs, such as coinsurances and copays.

Who is eligible for Medicaid?

Each state has its own eligibility and application rules within the federal standards, and the state Medicaid offices are best suited to answer all your questions. Medicaid and CHIP provide assistance to around 60 million Americans, including children, pregnant women, parents, elderly and disabled people. Federal law requires all states to include certain population groups in their Medicaid coverage (mandatory eligibility groups).

Each state has the freedom to cover additional groups (optional eligibility groups) and many states have decided to expand the scope of coverage, especially for children, beyond the required federal minimum. Since each state individually decides how to design its Medicaid program, a person’s ability to qualify can depend on whether their state of residence has decided to expand its Medicaid coverage to include more people.

Medicare supplements in Phoenix AZ,  Medicaid coverage

Generally, the eligibility assessment for Medicaid and CHIP coverage is based on income, household size, disability, family status and some additional factors. Certain states have expanded Medicaid coverage to all low-income adults. In this case, people can qualify for Medicaid based solely on income and family size.

Some people are eligible for both Medicare and Medicaid. This is called dual eligibility. If a person has Medicare and full Medicaid, most of their healthcare costs are likely to be covered. In all states, people can apply for Medicaid in one of two ways – either directly through the state’s Medicaid agency or by filling out a Marketplace application. The applications for Medicaid and CHIP can be submitted any day of the year (not only during Marketplace Open Enrollment).

What is Medicaid spend-down?

Spend-down is an option within Medicaid designed to help people pay huge medical bills, which are beyond their payment abilities. People whose income exceeds the Medicaid eligibility levels are referred to as having excess income.

Medicare supplements in Phoenix AZ, Medicaid spend-down

They can nonetheless become eligible under the spend-down program (as persons that are medically needy), if this excess income is spent on medical bills. With the spend -down option, the person pays the bills up to the excess amount and Medicaid pays the rest.

To become eligible as medically needy, a person’s resources must be under the resource amount allowed in the particular state. The spend-down option is available to children under 21 years of age, adults over 65 years of age, the disabled and the blind, as well as families where one or both parents are absent, diseased, disabled or out of work.

The Price Of Not Enrolling In Medicare

Nearly half of all workers polled in a recent survey conducted by Robert Half say that they will delay retirement beyond the “traditional retirement age.” Survey respondents also identified health care insurance as one of their most valuable benefits. A recent Pew Research Center survey found that more than one-third of workers age 62 or older had already delayed their retirement plans due to the recession.

What does the plan to keep working do to Medicare eligibility? Even if you plan to continue working, the choice to enroll in or decline Medicare insurance shouldn’t be taken lightly. As the system is designed now, you become eligible to enroll in Medicare during an initial enrollment period that includes the 3 months before you turn 65, the month in which you turn 65 and the 3 months following your 65th birthday.

If you elect not to enroll in Medicare and later decide to join the plan, you’ll pay a penalty for delaying enrollment, and your Medicare premiums will be higher than they would have been had you enrolled during the special enrollment window. Your premiums will include the penalty for as long as you have Medicare coverage. The penalties for not enrolling increase the longer you wait. Further, you may have to wait to enroll in Medicare and you may experience coverage gaps while you wait for open enrollment.

The problem may be made worse if you’re covered by private insurance through your employer. Once you turn 65, your employer-paid insurance plan may expect Medicare to become your primary payer. If you don’t enroll in Medicare, your private insurance plan may refuse to pay for otherwise covered expenses as a primary payer.

If you plan to work past the age of 65 and have health insurance as a benefit of employment, talk to your benefits administrator to determine what coverage you’ll have once you become eligible for Medicare.

2011 Medicare Part D Choices Require Research Says Firm

Avalere Health, a healthcare policy research firm, says that Medicare beneficiaries must do some research before making their Medicare Part D plan election for 2011.  The company says that significant changes await some enrollees, even if they elect the same Part D provider they had in 2010.  According to the company, many Medicare Part D providers have changed their formularies and co-pay costs, meaning that some drugs that were covered in 2010 may not be covered in 2011.

One of the more noticeable changes may be in the way providers structure co-pays.  According to Avalere Health, more providers are structuring their Part D plans with five or more tiers, which will allow providers to charge different co-pays for drugs in different plan tiers.  The number of tiered plans has risen from 27% in 2009 to more than 40% in 2011.  Some plans that already use tiered payment structures have two different tiers for generic drugs.

Another major change for consumers will be in their choice of pharmacy.  Some Part D plans will use preferred pharmacies and will base consumer out-of-pocket costs not only on the prescribed drugs, but also on whether or not prescriptions are filled at a participating pharmacy.  Consumers who use non-plan pharmacies may find themselves paying up to 50% more in out-of-pocket costs for prescription drugs.

More Part D plans are also using pre-authorization and limiting the quantity of medications that can be dispensed at one time, creating an overall higher cost to the consumer for pharmaceuticals in the form of additional co-pays.  The end result of these changes is a net decrease in the number of drugs covered by the top ten prescription drug plans (PDP) for 2011.

Among the top ten plans, the 2011 formularies cover between 50% and 87% of prescription drugs.  To illustrate the potential impact of changes among drug plans, Avalere’s analysis shows that while the AARP’s 2011 formulary covers four popular rheumatoid arthritis drugs with a 33% cost-share, Humana-WalMart’s 2011 formulary covers only two of the four drugs and has a 35% cost-share on the covered formulations. In addition, the cost-share at non-preferred pharmacies is significantly higher.  Enrollees must pay out-of-pocket for drugs not covered by their provider’s formulary. More information about the Avalere Health study can be found at

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