Because you're reading this column at, odds are you haven't given Medicare a thought. But if you don't want to end up paying some very expensive prescription drug bills for your mom or dad (or even grandma), you should encourage them to sign up for the new Medicare prescription drug benefit -- even if they aren't taking any pills right now.

Medicare Part D, as it's called, is an exercise in governmental complexity that far outranks the Alternative Minimum Tax and the Earned Income Credit combined! The government put together a plan that involves a monthly payment, a deductible, co-payments, a "doughnut hole" during which no benefits are paid, and "catastrophic" coverage that will cover most costs for seniors who must regularly take very expensive prescriptions.

Don't try to figure it out! It has taken me weeks to condense that description. Fortunately, Medicare Part D is a government plan design; it's being implemented and offered by private insurance companies on a competitive basis. They're spending a lot of money to convince your parents that they have the best plan. The result is a pile of confusing booklets and ads directed at seniors.

Here's your opportunity to repay Mom and Dad for that college education by helping them through the process of choosing a Part D plan. Believe me, the process will make very good use of all your online skills!

Don't procrastinate. Signup starts Nov. 15. The plans go into effect on Jan. 1. But if seniors delay signing up after May 15, 2006, it could be very costly. Even if your parents are healthy, don't take pills, and currently have plenty of money, they need to sign up for a plan. Here's what you need to know to help them:

Who should sign up?

All seniors age 65 and older who are eligible for Medicare should sign up for the new prescription drug insurance program (with a few exceptions noted below) -- even if they are not currently taking prescription medications. You never know when drug costs will arise.

Are there income limits?

No, this plan is for all seniors, regardless of income or assets. But there is a government "extra help" program that will assist low-income seniors in paying the monthly premium (see below).

If you're currently healthy, why join now?

To make this plan work, even healthy seniors have to join the program. So there's a penalty for signing up late -- after May 15, 2006, for current seniors, and for joining more than six months after reaching age 65 for future seniors. The penalty is a charge of 1% per month of the average of all monthly plan premiums. (The penalty is likely to be $2 or $3 per month for every month you delay.)

Wait, it sounds like there's more than one plan!

Right, and that's the second part of the complexity. The government laid out the basic rules -- and let private insurers design their own plans, as long as they cover the required basics of the government design and cover most of the drugs on the government's formulary (list) of most-used drugs. So there are actually several types of plans:
  • Basic plans stick to the government design, and cost about $25-$32 a month, depending on where you live.
  • Premium plans may offer extra coverage, less complexity, lower co-payments, but charge a higher monthly premium.
  • Medicare Advantage plans work sort of like an HMO, wrapping overall Medicare Part B (doctors visit coverage) and drug coverage into one low-cost plan. But you might be restricted to a certain network of physicians.
  • Is that all?

    Nope, I'm just getting started. To pick the right plan for your Mom or Dad, you have to do more than compare monthly costs.

    First, you have to make sure the plan you choose covers the drugs Mom currently takes. If she doesn't use prescriptions now, but does later, she can always switch to a plan that covers her drugs. In fact, seniors will be able to switch plans once a year without penalty.

    Then you have to make sure the plan uses a convenient pharmacy. If your local Walgreen's or CVS isn't part of one insurer's drug plan, you'll want to choose a different plan. Many plans also offer mail order.

    Do they expect seniors to figure this out?

    Sort of. Call home and your parents will tell you they've been swamped with advertisements and brochures from the insurance companies offering plans in their area. But it's impossible to compare without help -- computerized help. And it's on the way. Within the next two weeks, there will be tools available at the government Web site ( that will help in this process.

    One tool at the Web site is the "Formulary Finder." You click on your state of residence, then list the drugs your parent is currently taking, and it will display all the plans that cover those drugs. The other tool is called the "plan finder." It lets you compare plans offered in your ZIP code, based on price, pharmacies in the network, and drug formulary lists. (See, I told you it would test your computer skills!)

    If Mom or Dad isn't an online expert, spend Saturday morning working through these online tools with them to start the selection process. But be ready with answers to a few more commonly asked questions.

    What if seniors are still working, or retired, and covered by a company drug plan?

    The company or union must give the senior a letter certifying that its drug coverage is "creditable" -- that is, equal or better than the Medicare drug-plan requirements. If at some future date the company drops its retiree coverage, or the senior retires and no longer qualifies for coverage, there will be no penalty for signing up late. But keep that letter!

    What if mom already has a Medicare supplement that covers prescription drugs?

    The new Medicare Part D coverage is almost always better than the coverage traditional supplements proved, because of the Part D catastrophic coverage future. Contact the supplement provider. They'll probably reduce the price, and your mom can use the savings to pay the monthly premiums for a Part D plan. You can not have both types of coverage.

    What if dad has veterans benefits?

    A senior can have both VA and Part D benefits, and might want to use both. The VA might cover some drugs not on the Part D formulary (drug) list. You just can't get coverage for the same drug under both plans.

    What if my mom, or her friends, can't afford even these low monthly premiums for Medicare Part D?

    The government does have a program to assist low-income seniors in paying the monthly premium. Assistance is available to seniors with income less than $14,355, and for couples earning less than $19,245. To determine how much federal "Extra Help" assistance you qualify for, contact the Social Security Administration at (800) 772-1213 or apply online at Your state may have additional programs to help low-income seniors. Contact your state Department on Aging.

    Just one more thought. You already are helping to pay for this Medicare Part D prescription drug coverage through those FICA deductions from your paycheck. Now be sure to get your parents signed up so you don't wind up paying twice -- once in that payroll deduction, and a second time when you have to dig into your wallet to help mom and dad pay the bills. That's The Savage Truth.
    Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column by the Chicago Sun-Times is nationally syndicated, and she released her fourth book, The Savage Number: How Much Money Do You Need? in June 2005. Savage also was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. A Phi Beta Kappa graduate of the University of Michigan, Savage currently serves as a director of the Chicago Mercantile Exchange Corp. She also has served on the boards of the McDonald's and Pennzoil corporations.

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