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Medicare Part D’s Catastrophic Coverage Still Confuses Patients

Last updated June 17th, 2020

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Medicare Part D, the federal program that covers pharmaceutical drugs for Medicare recipients, has gone a long way to help patients pay for the rising costs of medicines.

But there are some gaps in coverage that consumers, specifically those coping with serious illnesses, need to understand. Some Medicare patients may find themselves overwhelmed with out-of-pocket drug costs that they may not have anticipated.

Data from the Kaiser Family Foundation shows that more than a million Medicare beneficiaries in Part D plans who did not receive low-income subsidies, paid an average of $3,200 per person in 2017 for out-of-pocket drug costs after hitting what’s called “Catastrophic Coverage”. That’s more than twice as many as in 2007, according to Kaiser’s report.

Why Are More People Reaching Catastrophic Coverage?

Medicare Part D, an optional plan introduced in 2006, hasn’t kept up with skyrocketing increases in the cost of pharmaceutical drugs. Specialty drugs, such as non-injectable cancer treatments or medicines used to treat autoimmune diseases and Hepatitis C, are particularly expensive.

People with Medicare who opt for Original Medicare (Part A and Part B, with a Medicare Supplement) can purchase a separate Part D policy to cover prescription drugs. Meanwhile, Medicare recipients who opt for Medicare Advantage plans (Part C) usually find Part D coverage is bundled into their policy.

Either way, under a government formula, Medicare Part D coverage comes with a deductible and various out-of-pocket costs for different types of drugs. Once drug plan members pay more than $6,350 out of pocket for their medications, they enter Catastrophic Coverage. From that point on, the beneficiary pays the greater of $3.60 for generics and $8.95 for brand-name drugs, or 5 percent co-insurance for all medicines.

That’s where the problem begins. There is no lifetime limit on this 5 percent co-insurance. Even after you spend $6,350 each year on drugs, you’ll have to pay something for the rest of the calendar year, no matter how expensive the drugs you need may be.

One example: Before hitting Catastrophic Coverage, one could pay over $6,500 for Idhifa, a drug to treat leukemia. Once in Catastrophic Coverage, the cost drops to $1,300. (Costs can vary depending on location and drug plan.)

Although 5 percent may sound reasonable — and it often can be — for very expensive drugs that didn’t exist when Medicare Part D was introduced in 2006, it can quickly become unaffordable for many people.

What can you do to help keep Medicare Part D out-of-pocket costs down? 

Here are three suggestions to help reduce your drug costs.

1. Check the formulary.

Each drug plan includes a formulary, or in plain English, a list of drugs that are covered under the policy. As you choose between and among Medicare Part D plans or Medicare Advantage plans, it’s important to make sure that the medicines you need will be covered. Otherwise, you pay full price for your medicine.

Always check formularies every year during your open enrollment period. Even if you are happy with your coverage and want to stay with the same plan, you may find your insurer has changed the formulary. It may be that medicines you need are no longer covered. Or you may need a new medicine that isn’t part of your plan. Checking formularies is one of the ways to compare Part D and Medicare Advantage plans available in your area.

If you are eligible for dual enrollment in both Medicare and Medicaid – or if you have certain chronic conditions – ask an agent about Medicare Advantage dual eligible special needs plans (D-SNP). Depending on your health issues, you may find you have broader coverage of prescriptions under these plans.

2. Talk to your doctor about drug prices.

Let your healthcare provider know you have Medicare Part D and you are wondering about your long-term out-of-pocket drug costs. Your doctor may be able to suggest a generic with a low copayment to help you keep costs under control.

If you need to stick with a brand name medicine, your doctor may know of discount offers and coupons that can help manage the price.

3. Get help with expensive specialty drugs.

Check manufacturers’ websites to see whether discounts are available. 

4. Use the right pharmacies.

A network pharmacy has a contract with a Medicare drug plan. If you go to a pharmacy that isn’t in-network, your plan might not cover your drugs.

Find out whether your plan has preferred pharmacies. You will probably pay less at a preferred pharmacy because it has agreed to charge plan members a lower price.

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