In 2010, enrollees have to dig into their pockets to cover the full cost of their prescriptions once they hit about $2,800 in total spending during the plan year. Coverage doesn't kick back in until costs reach about $6,400.
Provisions in the health-reform bills that lawmakers are trying to reconcile would narrow or even eliminate that gap, with President Obama promising drug discounts of up to 50% in 2010 if the law is passed.
Unlike Medicare Part B, which typically has a penalty for late entrants, you're not considered late with Part D if you're getting qualified coverage from your employer, said Rich Fuerstenberg, a Princeton, N.J., principal with Mercer, a consulting firm.
"Employers are required to tell you annually whether or not your coverage qualifies," he said, noting employers also have to disclose that information upon request.
So a person with a certificate of qualifying coverage who waits until she's age 70, for example, to pick a Part D drug plan won't have to worry about paying penalties.
"As long as you have that certificate in hand, you will not be assessed a penalty when you do elect Part D coverage," Fuerstenberg said.
People without such "creditable" coverage from their employers who wait to enroll in Part D could face higher premiums when they do sign up--about 1% more per month.
Considering Long-Term Care
The prospect of suffering from a slow degenerative disease is hardly what active people planning for retirement want to focus on. But it pays to give the subject some thought since some may end up leaning on unpaid family caregivers or home health aides to help them remain in their homes as they age.
More than 10 million Americans, or almost 5% of the adult population, need long-term services and supports to get through the day, according to a 2009 report from the Kaiser Family Foundation. Those numbers are expected to balloon as the baby boom generation advances into old age.
Medicaid, the joint federal-state government program for the poor, is the biggest payer of nursing-home expenses, but middle-class people have to "spend down" their assets to qualify. Assisted-living facilities are a relatively new option for people who need help with activities of daily living but don't require skilled nursing. They can be pricey, too.
"We really don't have a long-term-care system in this country," said David Certner, legislative policy director for AARP. "It's really more ad hoc."
People typically pay for long term-care expenses through their personal savings, a private long-term-care insurance policy if they can afford one or by tapping their home equity in the form of a reverse mortgage, Certner said. AARP sells a branded long term-care insurance policy with Genworth Financial.
People considering private long term-care insurance are wise to compare products when they're still relatively young since premiums are more expensive the older a person is. Some of the key questions to ask are whether the policy contains inflation protection, if there's a waiting period before it kicks in and whether it covers a mixture of both nursing-home care and home care, Certner said.
"Are you buying a daily or monthly benefit?" he said. "What length of time are you buying for? Are you getting care that lasts two years or six years or a lifetime? Obviously, the more you're buying the more it's going to cost you."
Both health-reform bills that passed Congress contain a provision that would create a nationwide long term-care insurance benefit with premiums financed by voluntary payroll deductions. Participating individuals could use the cash benefit to pay for an array of in-home supports and services or institutionalized care.
Copyright (c) 2010, Dow Jones. For more information about Dow Jones' services for advisors, please click here.