Is there a need for a Prescription Drug Plan?
When my husband turned 65, we had a very nice man come to our house and sign him up for a Medicare Supplement Plan. Signing up for a supplement plan is fairly easy if you have a good broker because there are basically 3 things to look for: Use the PAS system to remember them.
- Price- monthly premiums. Since all the supplement plans with the same letter cover exactly the same thing, the price is what to look for.
- Annual increase rates: If you don’t live in California, this is very important because after your initial enrollment period you must pass medical underwriting to change to another insurance company. You don’t want to start with a plan that is the cheapest in the beginning if they have the highest increase rates each year. In California, it’s a little different because you can change to a like plan once a year on your birthday.
- Strength of the company. Financial Ratings from Standard and Poor (S&P) and Moody’s determine the strength of the company. You don’t want to be with an Insurance Company that will go out of business.
What happens when you sign up for a Supplement Plan
Once my husband had signed up for the supplement plan, he was asked what drugs he took. My husband didn’t take any drugs, so he decided not to sign up for a prescription drug plan that year. Of course, now I wish that this gentleman had explained what could happen a little better, but he didn’t and that’s how this webpage began….
We forgot all about prescription drug plans until five years later. I started to work on a financial plan for the two of us and since both of us had parents that were aging and taking a lot of medicines; I wanted to factor that into the plan. It was then that I discovered that there was a 1% per month penalty for not enrolling into a prescription drug plan when he was first eligible.
No problem, I thought, we’ll just enroll in one now…. Unfortunately, he couldn’t. He had to wait until the next enrollment period, which was six months away. So the 1% penalty continued to accrue.
I researched the Medicare prescription drug plans available in our area, and the least expensive one at the time was $12.60 per month. I figured that the penalty would be based on THAT plan. It was a big surprise to find out that the actual penalty would be based on the national average of drug plan costs which was closer to $34.50 per month.
In the end, we wound up paying more in penalties each month than the actual premium for the plan. The longer you wait to start a drug plan, the higher those penalties are going to be. And…the penalties NEVER go away, and they will increase each year as the average national monthly premium increases.
This is why I decided to learn all I could about Medicare Supplements, Medicare Advantage Plans, and Medicare Prescription Drug plans. I wanted to help YOU learn from our mistakes. Hopefully, you find this website helpful, because that’s why it’s here.