Yesterday I met with a client who is turning 65 in June. He is a doctor, and this doctor was amazed by how complicated Medicare Part D drug coverage is.

As I explained how Part D drug coverage works, the doctor asked, “Why is this so complicated?” I told him I usually find myself apologizing to clients about Part D, especially people who take no prescription drugs, or use just one or two low-cost generics.

Late Enrollment Penalty

The doctor takes one inexpensive statin drug, so he was thinking he might not even sign up for Part D. I explained the late-enrollment penalty, which is 1% for each month a person delays enrollment in Part D after he has Medicare. The calculation for the penalty is also a bit complicated, but it currently totals a bit less than $4 per year that a person has delayed enrollment. A person who goes five years without Part D would pay around $19 more per month for any Part D plan he enrolls in. So a $30 monthly premium would be$49 with the penalty. And this penalty will increase in the future as the average cost of Part D increases.

The doctor’s wife advised him that he might need a Part D plan in the future, if his health situation changes.  I said I usually suggest that people who want to be “in the system” enroll in the lowest-cost plan (which is $18.50 per month in Arizona).

Lower- cost plans have a deductible.

This $18.50 plan has a $325 deductible, so a person enrolled in this plan is paying a premium and still must pay for his drug costs until he meets the deductible. The doctor would pay $18.50 per month for drug coverage that would not pay for his generic drug cost- unless his prescriptions change drastically during the year. The doctor was not impressed with this option. I wrote last fall about plans with deductibles.

The “Donut Hole”

This “coverage gap” affects people who take several expensive drugs. Every Part D plan has a limit on what the plan will pay for a person’s prescriptions.  In 2013, when what the individual pays PLUS what the Part D plan pays adds up to $2,970, that person goes into the donut hole. This means the plan no longer pays for that person’s drug costs, and the person takes on the full cost. However... as part of Obamacare, pharmaceutical companies agreed to give seniors a  discount on their brand drugs (52.5% in 2013).  So if a person’s monthly brand drug costs were $600, they would only have to pay $285 (47.5% of 600).

Catastrophic Coverage

Next I explained to the doctor how Part D works for people with extremely high prescription costs. Most people who go into the donut hole do so near the end of the year and do not come out of it. But, people using very expensive drugs will go into the donut hole and then reach what is called “catastrophic coverage”.  To get to this point, a person must have spent out of his own pocket $4,750. (What the Part D plan paid out is not included in this figure.) At this point, a person would pay $2.65 for generics, or $6.60 for brand or specialty drugs – or 5% of the cost, whichever is greater.

Step Therapy

The doctor doesn’t take expensive drugs, but I told him Medicare requires me to tell him about “step therapy”.  Every Part D plan requires step therapy if a person is prescribed certain expensive drugs.  The Part D plan will reject the expensive prescription and tell the patient  to first try less expensive drugs. A person must first try drug A. If that doesn’t work, he must try drug B, and then drug C, and so on. If lower-cost drugs don’t work for the patient, his expensive prescription will be approved.

Why doctors hate Part D.

At this point, the doctor said, “This is why doctors hate Part D!”  He said Part D plan requirements have created extra work for doctors’ office staff – and this extra time and work costs money – but doctors are not compensated for this cost.

I told him I hate Part D too! Why are there 26 plans to choose from in Arizona? Why does one plan cost $18.50 per month and another $90?  And why is the co-pay for the same drug $45 on one plan and $$95 on another plan? I could go on and on.

I don’t really hate Part D.

I just hate that it is so complicated. And, by the way, Part D plans change every year, so people need to to review their plan details every Open Enrollment Period (October 15 – December 7).

Part D can be a good deal for people who take expensive brand drugs. If the retail cost for a drug is $200, and a person pays a $45 co-pay, that’s a good deal.  But as more and more brand drugs go generic, the value of Part D is declining for many people.  And yet, most people are spending, on average, $32 per month for their Part D plan when they take $4 to $10 generics.

I recently wrote about a study that showed most seniors are enrolled in the wrong Part D plan and are paying too high a premium based on the drugs they take. Why is this the case?  Because Part D is too darn complicated and there are too many plans!!

At this time of year, people enrolled in a Medicare Advantage plan cannot change their plan, or dis-enroll from their plan – unless they meet certain requirements such as: they are moving to a new state; they qualify for a chronic illness plan; they get help with their prescription costs through the Low Income Subsidy (LIS). These people get a “special election period” to enroll in a new Medicare Advantage plan at this time of year.

So how did a client of mine get changed from one Medicare Advantage plan to another when she did not qualify for a “special election period”? The answer is that her husband made a mistake by using an on-line application for a product he did not understand.

Bill was trying to help his wife, who is disabled and under 65. She has been enrolled in a Medicare Advantage plan since she got her Medicare last summer. But because Medicare Advantage plans pay 80% of the cost for durable medical equipment, Bill went on-line to see if he could get some kind of supplement to cover 20% of the cost of the expensive wheelchair his wife will need soon.

Bill is a smart guy, but he made a mistake by filling out an enrollment form on the Humana website. Bill thought he was signing his wife up for some sort of supplement that would fill the gaps in his wife’s Medicare Advantage plan. He put in his wife’s Medicare information and hit the submit button. Then he realized he had made a mistake, so he called Humana and asked them to cancel the application he had just submitted electronically.

The Humana representative told him she would cancel his on-line application, so he thought he was okay. That was near the end of February. Last week, Bill got a $177 bill for the Humana Gold Choice Private-Fee-For-Service (PFFS) Medicare Advantage plan. Uh, oh.

Bill called Humana and they said his wife is enrolled in their Advantage plan. He called Health Net, the plan his wife had been in, and was told she had been dis-enrolled from their plan.

Bill called me and I couldn’t understand how his wife got enrolled in the Humana plan because she is not allowed to change her plan at this time of year. Even though Bill made a mistake by submitting an on-line application, it should have been rejected because his wife does not have a “special election period” (SEP) to change her plan. Humana should have realized this and rejected the application. Additionally, Medicare should have rejected the application.

So what SEP code did Humana use to get this application through Medicare’s enrollment period rules? And why did someone at Humana tell Bill she would cancel the application and then not do it?

Bill and I called Medicare and were told by a representative that there was nothing Medicare could do about the Medicare Advantage plan change because it was done on-line.   The Medicare rep said Bill’s wife is stuck in the Humana PFFS plan until next January.

After some discussion, the Medicare rep got a supervisor who gave us a different answer.  The supervisor said she would put in a “complaint” to Humana and Health Net and ask them to cancel the Humana enrollment and re-instate the Health Net enrollment for Bill’s wife.

All this happened a week ago, last Friday. On Monday of this week, Health Net called Bill.  On Wednesday, Bill got a call from Humana. They said they will try to fix the enrollment mistake. So we’ll wait and see if the Medicare Advantage companies can fix a problem Medicare said it could not fix.

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The lesson here is that even smart people like Bill can make mistakes when they fill out important applications on-line. Enrolling in Medicare Part D, or a Medicare Advantage plan is too important to do on-line. Bill did not understand what he read about the Humana Gold Choice PFFS plan, but he figured it couldn’t hurt to put in an application.

Yikes!  Bill had no idea about the consequences of that application. He did not realize it would cancel his wife’s Health Net Medicare Advantage plan and replace it with a very expensive Humana PFFS plan that requires higher co-pays than the Health Net plan and the same 20% co-pay for an expensive electric wheelchair.

But how did the application get through to Medicare and get approved by Medicare? It should have been rejected by both Humana and Medicare. Hopefully this all gets fixed, but we’ll have to wait and see.

There are two ways to apply for help with Medicare costs and prescription drugs. A person on Medicare can apply through the state Medicaid Program or go through Social Security. I recently helped a lady apply for help through the Social Security website, SSA.gov. Within two weeks she got a letter telling her she qualifies for help with her drug costs.

Rosa is turning 65 in April and is still working. Rosa is collecting Social Security, and if this was her only income she would qualify for the maximum help with her Medicare and prescription drug costs.  Because Rosa’s case is a bit complicated with her two income sources, I figured the best way to ask for help was through SSA.gov.  So we got on the computer, went to SSA.gov  and clicked on the link that says “Get extra help with Medicare prescription drug costs”.

We answered a few questions, hit apply, and Rosa’s request for help was submitted. She had given Social Security permission to check her income tax records which would be used to see if her income is low enough to qualify for help.

About two weeks later, Rosa received a letter from Social Security. I went by her house to look at the letter because the language is not real clear about what level of help she might get. The good news is that she qualifies for the maximum subsidy for her drug costs. That means she will pay $6.60 for brand drugs and $2.65 for generics. This help is called the “Low Income Subsidy”.

The letter showed Rosa how Social Security calculated her income, which (as far as I can tell) says her income is around $1,300 per month.  The letter said Social Security will pass on this information to the State of Arizona to see if she qualifies for help paying her Medicare Part B premium. But $1,300 per month is a bit too high to get this help (as far as I know). So I told Rosa to call me when she gets the letter from AHCCCS (Arizona Health Care Cost Containment System).

A person can apply through their state Medicaid office for help.

Another way to apply for help with Medicare costs and drug costs is to go through AHCCCS (in Arizona). But my experience with AHCCCS has taught me the following:

1) Never go through DES. ALTCS (Arizona Long Term Care System) handles applications for the Medicare Savings Program.

2) The state cannot process an application for help more than one-month before a person’s Medicare is set to begin.

3) If a person is not yet collecting Social Security, the state office can’t deal with their application. I think the same can be said if a person is still working.

4) The state of Arizona does not care if a person has money in the bank, while Social Security does care. So if a person has some savings, but is only living on their Social Security benefits, it is best to apply through the state of Arizona. Social Security will reject an application from a person who has more than $13,300 in savings or a couple with more than $26,580 in savings and investments.