If you read the newspaper or listen to the news, it won’t take long before you encounter some reference to Medicare and lately, to Medicare Part D. Politicians, insurance companies, pharmacies, drug manufacturers, and most importantly, healthcare consumers, all have an important stake in prescription drugs.
Unfortunately, and to borrow a movie title, “It’s Complicated.” Even if you were to read every current publication on the topic, chances are you would still have questions. So, let’s see if we can simplify things down to the essentials…
What You Really Need to Know About Medicare Part D
- Not until The Medicare Modernization Act of 2003 (implemented in 2006), was Medicare mandated to implement a prescription drug program that included plans being administered by private insurance companies.
- Eligible plans are driven by your zip code. Typically, there are 20–25 different drug plans from which to choose.
- Prescription drug plans (PDP) place drugs into different levels called “tiers.” The tier determines how much a drug will cost you.
- In 2023, the estimated national average prescription drug plan premium is $32.74. The standard Part D annual deductible is $505.
- Enrolling in a Part D drug plan is not mandatory. However, if you do not enroll in a Part D drug plan according to the regulations, you will be assessed a penalty for every month you were without Part D should you enroll later.
- Enrollments into Part D plans are only accepted during designated Medicare enrollment periods.
How Medicare Part D Prescription Drug Plans Work in 2023
Part D drug plans are structured into four phases or stages. During each phase, Medicare, the prescription drug plan, and the consumer, each contribute different amounts toward the retail cost of the drug.
Because of this cost-sharing approach, a consumer may pay a different amount from month to month for the exact same drug! The four phases are as follows:
#1. The Deductible Phase
This phase begins with your first prescription of the plan year. If the deductible applies to the prescriptions you are purchasing, you will stay in this phase until your out-of-pocket costs hit the deductible threshold.
Not all drugs count towards the deductible and some people never leave this stage.
With plans allowed to have up to a $505 deductible, this phase often shocks consumers at the beginning of the plan year.
#2. The Initial Coverage Phase
During this stage, your plan pays for a portion of your prescriptions and you pay the remainder — determined by the Tier classification of your drug. You will remain in this phase until you and your plan have accumulated $4,660 in retail drug costs and you enter the Coverage Gap phase.
This phase makes good sense to consumers and eases their concerns.
#3. The Coverage Gap (aka “The Donut Hole”)
Here, your plan limits the amount they pay towards the cost of your prescriptions; you will pay approximately 25% of the retail cost of your drugs.
You will remain in the coverage gap until you and the plan have paid a total of $7,400 toward the cost of your drugs.
This phase confuses consumers because the cost of their prescriptions can go up exponentially.
#4. Catastrophic Coverage
During this phase, your plan and Medicare will pay 95% of the cost of your drugs.
This phase can be helpful to some, however, with the retail cost of some prescription drugs as high as $20,000/month, even the remaining 5% can still be significant ($1,000/month).
The Inflation Reduction Act, passed in August of 2022, has already had a significant impact on the Medicare Part D benefit:
- For insulin, the out-of-pocket cost sharing under Part D drug plans is now limited to $35 per month.
- Cost sharing for adult vaccines covered by Medicare has been eliminated.
- Drug companies will be required to issue rebates to Medicare for Part B drugs if the cost of these drugs rises faster than the inflation rate.
- Beginning in 2025, out-of-pocket prescription drug cost sharing will be capped for all Medicare beneficiaries at $2000 a year. This will be a huge development for those who take very expensive chemotherapeutic or biologic medications.
- Beginning in 2025, beneficiaries will have the option of “smoothing” their Medicare Part D drug costs, allowing for monthly installments spread over the year.
- Beginning in 2026, the federal government will be required to negotiate prices directly with drug manufacturers. So excited about this development!!!
Things to Do
- Conduct a detailed analysis before enrolling. Consider your eligibility, the specific drugs you take, the dosage, how often you take them, and your preferred pharmacy.
- Create a Medicare account and access a tool called the Plan Finder. (Healthassist will be offering webinar training on how to effectively use this tool prior to the next open enrollment season.)
- Compare pharmacies. Larger chain pharmacies with significantly more buying power typically offer much lower costs.
- Review the monthly explanation of benefits (EOB) you receive from your drug plan. It will show you the retail cost of your drugs, what Medicare contributed, what your drug plan paid and your out-of-pocket costs. This information will aid you in anticipating potential cost changes.
- Investigate “Extra Help.” These government-sponsored programs can reduce prescription drug costs. Eligibility is based on income.
- Use drug manufacturer coupons. Ask your prescribing physician about such programs. They may be able to assist you with accessing the program and completing required paperwork regarding your clinical status.
- Investigate companies like Good Rx and SingleCare Rx. These companies distribute coupons and provide information on retail costs at varying pharmacies. Analyze first!! If you buy certain prescriptions without using your Part D drug plan, these purchases do not count towards the out-of-pocket costs tracked by Medicare and can affect your movement from one Part D drug plan phase to another.
There is much to learn about the reform provisions to the Medicare Part D Prescription Drug Program. Sorting fact from fiction, understanding changes to the program, and assessing the financial and practical impact to you as the Medicare consumer will not be easy.
But, an investment of time and effort will help you to get the most from it. Be sure to use trusted and reliable sources to gather information and stay abreast of the changes. It remains “complicated.”