ED GORDON, host:
As you just heard, there's a lot of confusion about the new plan. Many seniors aren't sure what to do. So we asked Mellody Hobson, president of Ariel Capital Management of Chicago and a regular financial contributor on ABC's "Good Morning America," to join us to try to sort out the basics.
Mellody, welcome.
Ms. MELLODY HOBSON (President, Ariel Capital Management): Thank you.
GORDON: Hey, listen, I read a Kaiser Family Foundation poll that said two in 10 planned to enroll right now. Many of them said it's just too confusing. What's best for these folks?
Ms. HOBSON: Well, actually, enrolling is best because they'll end up saving a lot of money. The average person is expected to save anywhere between 23 percent and 50 percent on their prescription drugs. So even though it seems confusing, what I've been advising people, `Think of it like regular insurance.' And that will lead people not to feel so under siege by this plan. Ultimately, it's going to be great for them.
GORDON: What about those who already have private insurance? Should they look at this as an alternative?
Ms. HOBSON: Absolutely. If you have private insurance with your employer and they offer you prescription drug benefits in your retirement, you want to call your human resources department and ask them about their plan, more details, and then compare it to the Medicare plan that is being offered. If your plan is at least as good as the government plan, stick with yours. If it's not as good, you may want to switch. One other thing to keep in mind, if for some reason your company discontinues their prescription drug plan, know that you have 63 days to enroll in the government plan with no penalties and no issues, so it's always going to be a fall-back option for you even if you have private coverage.
GORDON: The Bush administration is suggesting, with so many insurance companies involved, competition will bring down the prices for this insurance. How real is that? And, if so, do you anticipate that to be the long-term story?
Ms. HOBSON: Well, I do think that the competition story is a sound idea, that the more people in their bidding for participants, the lower the prices will ultimately be for the participants. That's sort of what America is based on. At the same time, I wish when the plan were put into place that they didn't have so many companies in each plan. The average state has 36 plans that are being offered. Here in Illinois where I live, we have 42. Some states have as many as 50. I would have thought that they could have still encouraged competition with maybe a dozen or so plans, not so many that are so overwhelming.
But the other thing that's very important to keep in mind: Each plan is different. And you need to make sure you sign up for the plan that's right for you, and that's based upon the drugs that you take, not the lowest cost.
GORDON: What of those who are concerned that they just don't know where to go? So many seniors can't use the Internet. They're not going to go on there. The 800 numbers can sometimes keep you going on hold forever. What would you tell seniors who are just frightened and not sure where to turn?
Ms. HOBSON: Well, I would tell them, `You're right. This is obviously a daunting task.' Seventy-nine percent of seniors have never been on the Web, so that this is going to be very difficult for a lot of them. I would start by saying the Web is actually the best place to go, www.medicare.gov. And if you are uncomfortable, call a friend, call a neighbor, have one of your children come over, because they have a really excellent Web site that has a prescription drug plan finder that allows you to type in the prescription drugs that you take and then ultimately match you up with the plan that covers your drugs, which will ultimately save you more money.
Now again, if that's not an option, the 1 (800) number, 1 (800) MEDICARE, is a good place to start, where someone on the phone will walk you through these same things that are on the government's Web site. If you aren't comfortable with the 1 (800) number, you can always call your state or local insurance agent for your state, the public advocate, and talk to them. So there are some safety nets here that will allow you to get the best information, but it is going to take a little bit of work. I'm not going to...
GORDON: Yeah.
Ms. HOBSON: ...suggest that it's going to be just a snap of the finger.
GORDON: Yeah, call with some patience. What of those who are concerned about deductibles or premiums they may have to pay? How does this plan cover them in that respect?
Ms. HOBSON: Well, you're going to pay a monthly premium. The government says on average it's going to be about $32 a month for the average person. After you pay your deductible, which will not exceed $250, you will start paying 25 percent for the cost of your prescription drugs and the government is going to pick up the rest of the cost, the other 75 percent. For those who can't afford the premium, which is one in three people, the government says they'll not only the pay the premium, they'll also pay the full price of the drug.
GORDON: All right, Mellody Hobson, president of Ariel Capital Management, always good to talk to you and thanks for the advice here.
Ms. HOBSON: Thank you.
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I'm Ed Gordon. This is NEWS & NOTES.
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