Should you choose a Part D plan with a deductible? Most clients’ eyes glaze over as I explain how the deductible works.  And I’ve gotten calls from clients who forgot about the deductible in their Part D plan and wondered why they paid such a high price for a drug.

I have quite a few clients who signed up for a Medicare supplement and needed a stand-alone Part D plan – even though they take no drugs, or just a couple of generics.  They could pay $30 or more for a Part D plan that has no deductible, and they would pay $4 to $15 for their generics. The crazy thing is that they could buy those generics for $4 to $8 without Part D.

But these folks know that, while Part D is “voluntary“, there is a penalty for people who don’t enroll in a plan and then later find out they need the coverage. So I tell them they should pay the lowest premium just to be in the Part D system. And the lowest-cost Part D plans have a deductible.

In 2013, the standard deductible is $325 for Part D plans that have a deductible. These plans have monthly premiums that range from $15 (sorry, not in Arizona), or $18 to $26. I don’t know why a person would pay a higher price for a plan with a deductible when you can pay $32 for a plan without one.

An example of Part D confusion

I had a client call me about what she and her husband paid for the Shingles vaccine. They have different Part D plans. Her plan has a deductible, and his plan does not. Her plan costs $15.10 per month, and his costs $28.60 (in 2012).  She paid $166 for the Shingles vaccine and he paid $95.

The husband’s plan has a $45 co-pay for “preferred brand” drugs. It has a $95 co-pay for “non-preferred brand” drugs. I looked up Zostavax in his Part D plan formulary. Sure enough, Zostavax is a “non-preferred” brand drug on his plan.

The wife’s plan as a $320 deductible (in 2012). I checked her plan formulary and the retail price for Zostavax is $166. Because she paid the full retail price, this means she has not yet met her plan deductible.  She takes two generics that probably cost $4 per month, so that will not add up to $320 throughout the year – so she will never meet her deductible. Although, now she has paid $166 toward that deductible because of the Zostavax.

The wife asked me, “Why am I not in the same plan as my husband?”. I had to remind her that we had discussed her drug costs and options when she first enrolled in her plan. I reminded her that she got her Part D plan pretty much to be in the Part D system. I also explained to her that, if she had already met her deductible, her co-insurance for the Zostavax would have been just 20% of $166, or $33.

So, I tell people who don’t really need a Part D plan that they have some choices: 1) Don’t enroll in Part D. 2) Pay a higher monthly premium for a plan with no deductible – which is paying a high price for something they don’t even need. 3)  Pick the plan with the lowest premium – but that plan will have a deductible.

This deductible question is just one of the many things that make Medicare Part D confusing. I always end my post on Part D with the question: Why did the Powers-That-Be make Part D so complicated?

I looked up Part D drug plans for Arizona on Medicare.gov to find out how many stars they get. For 2012, there will be 30 Part D plans available in Arizona, and most of them get 2.5 or 3 stars, which is average. The star ratings go from 1 to 5, five being the best.

Only one Part D plan in Arizona gets 4 stars. This plan costs $47.20 per month and has a $320 deductible.  I don’t know if this 4-star plan is worth $47.20 per month when you can get a 3-star plan with the same deductible for $15.80.

The $320 deductible means you pay the first $320 of your drug costs, and then the plan kicks in.

To compare plans, I put two drugs into the Medicare.gov Plan Finder:  Crestor and Proventil HFA.   The $15.80 plan covers Crestor for 20% of the retail cost of the drug after the deductible is met. So, once the $320 deductible is paid (after two months), the cost of Crestor would be $27.20.  This plan doesn’t cover Proventil (which costs $57).

Most of the plans do not cover the Proventil inhaler. Most cover Crestor for a $45 co-pay (plans with a deductible and plans without). Only a couple of plans cover Proventil for a $27 co-pay.

The 4-star plan didn’t have any information on what its co-pays are, or what the drugs I entered would cost, so I can’t say if it’s worth $47.20 per month.

My conclusion is that 4 stars vs 3 stars is not a big deal. The key is:  Which plan covers your drugs at the lowest overall cost for the year?  The Medicare.gov Plan Finder will give you that info, but you need to figure out where to find it.

And I will say once again….”Why are there so many Part D plans? Why does it have to be so complicated? Is it saving Medicare money?”

Insurance companies manage Part D plans and negotiate prices with drug companies, but Medicare pays the bills – to the tune of $78 billion in 2010!!

Part D really bugs me because it is so complicated – and plans change each year. One of my clients called me to say her $25 plan premium is going to $71 for 2012.  I have left messages for two other clients who are enrolled in that plan, which seemed like a good deal two years ago.

Medicare handed Part D over to insurance companies and made it ridiculously complicated.  Why? Why? Why?

PS:  I know why.