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).
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.
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!!