01:00 AM EDT on Tuesday, October 25, 2005

When it comes to picking a plan under Medicare's new prescription drug program, some beneficiaries have a strategy in mind: sign up for a bare-bones plan now, just in case, then switch to a more comprehensive plan later if you need to.

Will you be penalized as a result? That's the question a man from Portsmouth asked MoneyLine:

Q: Although there may be a penalty for late sign-up [for a Medicare prescription drug plan], will there be one for changing plans -- if, for example, I sign up for the most inexpensive plan now and select a more appropriate plan later, when I really need it?

T.G., Portsmouth

A: No, said Roseanne Pawelec, spokeswoman for the Boston regional office of the federal Centers for Medicare & Medicaid Services.

"There is no penalty for changing to another drug plan" if you make the change during an "open enrollment" period, she said.

Medicare, a federal health insurance program that covers many elderly and disabled people, is broadening its coverage to include prescription drugs -- for the first time in the program's 40-year history.

The new coverage will help to pay at least a portion of your expenses for outpatient prescription drugs. But you generally won't receive the broader coverage automatically; you must enroll in one of a number of plans -- insurance plans -- offered by a variety of carriers, and do so during an "open enrollment" period. (Each plan has its own rules, costs and other features.)

The first such open enrollment period will run from Nov. 15, 2005, through May 15, 2006.

After that, there'll be an annual open enrollment period, running from Nov. 15 through Dec. 31.

If you switch during the initial open enrollment period, or during one of the future open enrollment periods, you'll be all set; no penalty will apply, Pawelec said.

Enrolling now in a bare-bones plan, then switching later to a more comprehensive plan, is a "perfectly legitimate" strategy, said Deane Beebe, spokeswoman for the Medicare Rights Center, an independent, nonprofit consumer group based in New York.

If you plan to pursue this strategy, though, please keep in mind the following points:

If you switch to a more comprehensive plan later on, odds are you'll have to pay more for that plan -- in the form of premiums and perhaps other costs, too, Beebe said. ("Premiums are just a piece of it," she said. When choosing a plan, there are other factors to consider, such as which drugs are covered, which pharmacies you may use, and how much money you might have to pay, out of pocket, she said.)

Make sure that the bare-bones plan you choose will suit your needs. For instance, some of the most inexpensive prescription drug plans available are, technically, managed-care drug plans offered through Medicare managed-care plans. In other words, you may enroll in such a plan only if you enroll in a Medicare managed-care plan (sometimes called a Medicare Advantage plan, or Medicare HMO). With such plans, you receive all your health services through the managed-care plan, and must abide by its rules, Beebe said.

Now, what about that penalty you mentioned in your question to MoneyLine? Here's how it applies:

As noted above, the first open enrollment period, which is coming up quickly, is for an extended period, running for six months, from Nov. 15, 2005, through May 15, 2006.

If you don't sign up during that initial open enrollment period, you'll generally have to pay a higher premium if you sign up during one of the shorter open enrollment periods in the future.

TODAY'S TIP: There are lots of rules governing the new Medicare prescription drug feature (technically known as Medicare Part D) and its open enrollment periods, too many to list here. For more information:

Start by reading the "Medicare & You" handbook you recently received in the mail.

Call the Medicare program toll-free at 1-800-633-4227, or use its Web site:

www.medicare.gov

The Medicare Rights Center has a comprehensive Web site that's chock full of plain-language information about the new prescription drug program:

www.medicarerights.org

In Rhode Island, you may obtain free one-on-one counseling, and attend workshops on the topic, through the state's Senior Health Insurance Program. For information, call the state Department of Elderly Affairs at 1-401-462-4000.

One more point to bear in mind:

If you sign up for a plan by Dec. 31, 2005, your coverage will begin Jan. 1, 2006.

If you sign up later during the initial enrollment period, your coverage will kick in on the first day of the following month. (So if you sign up Feb. 15, for instance, your coverage will begin March 1.)

If you sign up during a future open enrollment period, coverage will kick in the following year. (So if you were to enroll in late November 2006, coverage would take effect Jan. 1, 2007.)

Neil Downing is a Journal staff writer and author of The New IRAs and How to Make Them Work for You. Questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail:

moneyline [at] projo.com

Sorry, no personal replies; as many questions and issues as possible will appear here.