Whether you’re new to Medicare or a longtime beneficiary, you’ve probably heard the same advice about prescription drug coverage more than once: Always make sure the medicines you need are covered.
First a little background. Medicare Part D was started in 2006 to help seniors pay for their medicines. Traditional Medicare beneficiaries were allowed to sign up and pay premiums to private insurers for drug coverage through a new Part D plan.
Many Medicare Advantage (Part C) plans also offer drug coverage as part of their wider benefits than traditional Medicare. By law, Advantage plans must include the same hospitalization and doctor visit coverage as Medicare’s Part A and B. But Medicare Advantage plans are permitted to have different payment rates (usually lower), their own provider networks (comparatively extremely limited) and extras like gym memberships. In addition, many Advantage plans offer the convenience of one-stop shopping, meaning you can enroll for dental, vision, and prescription drug coverage, under one inclusive premium.
Almost all Advantage plans now bundle in Part D prescription drug benefits. However, as with all Part D plans, the specific medicines and dosages Advantage plans cover vary widely from plan to plan. Also, Part D costs vary depending on what drugs and treatments are covered.
So just how can you tell whether the drug coverage you’re considering will include the specific medicines you need? Here’s what to look for.
Check the Formulary — Then, Check It Again
Every Part D plan, whether sold separately or bundled into an Advantage plan, has a formulary — a list of approved medicines, including exact dosages that are covered by the private insurance company offering and administering the plan. If you ever need a drug or a dosage that’s not on that approved list, you will have to buy it on your own, unfortunately often for big bucks.
So it’s imperative that you check that the medicines you currently use – or you’re likely to need – are included in the plan’s formulary. If not, keep shopping until you find a plan where your medicine is approved for coverage.
You’ll also want to make sure you understand the cost of any copayments you’ll owe for your medicines, suggests Flaviu Simihaian, CEO of Troy Medicare, a Medicare Advantage company that focuses on providing comprehensive pharmaceutical coverage with tiered copayments.
Part D plans group drugs into different cost levels, or “tiers”. And each tier commands a distinct amount that you’re responsible for out of your own pocket, from a few bucks for lowly generics to up to 50% as your coinsurance for expensive top-tier cancer drugs. For example, a plan may charge $0 to $5 for Tier 1 drugs, $8 to $45 for Tier 2, $43 to $80 for Tier 3, around 45% for Tier 4, and often 25% or more for extremely expensive Tier 5. In addition, many policies add a deductible of $400 or more for drugs in Tiers 3, 4, and 5.
Tier 1 usually applies only to generic drugs and always has the lowest copay. Tier 2 is typically for “preferred” brand-name drugs. Tier 3 is often for “non-preferred” brand names. Tier 4 or higher is generally for “specialty” drugs used to treat rare conditions, like different cancers, and they can cost $10,000 to $20,000 a month. Often those top tiers carry a coinsurance rate of 80/20 or worse, meaning the insurer pays the higher percentage of the cost, say 80%, and you are billed for the rest. Every Part D plan negotiates a price with the manufacturer for each drug and dosage it covers. “Preferred drugs” are those in the plan offered at the best-discounted price. “Nonpreferred drugs” command higher prices.
Look beyond your current plan.
If you have Medicare prescription drug coverage that you like this year, don’t assume that your plan’s formulary will be just as good next year. Quite the contrary. These approved drug lists change every year, often substantially, for better or worse..
Before Medicare’s October to December Annual Election Period, you should receive a notice of plan changes in the mail. Check this document carefully or simply call your insurer to see whether your medicines, or their exact dosages and tier levels, are still OK, says Leslie Fried, senior director of the Center for Benefits Access at the National Council on Aging. In addition, you can always call a licensed insurance agent for help.
Consider future needs.
Always think about the medicines you might need, especially if you have an ongoing health concern. If so, discuss what medicines might be on your horizon with your doctor or at least your pharmacist as you compare plans. Formularies must include at least one choice for each class of drug, such as blood pressure medicines or blood thinners. Some plans offer many choices, others only a few. So shop with care.
Bear in mind that it’s not unusual for Medicare beneficiaries to be prescribed a new medicine during the coverage year that’s not on their plan’s formulary. If that happens, you might have to choose between paying the full price on your own, or perhaps settling for a less than ideal medicine that is covered.
Of course, you can’t predict the future. That’s why it is so important to plan ahead, preferably face-to-face, with your doctor each year.
Double-check your final choice.
Before you sign up, do one more thing. Call your potential insurer and ask for the latest version of the formulary. Insurers can — and do — make changes throughout the Medicare Open Enrollment period that ends December 7.
Understand that Medicare Advantage plans don’t always cover drugs.
A minority of Advantage plans don’t include Part D benefits. They tend to cost less, often featuring low out-of-pocket maximums and perhaps no premiums at all. So they might be viable alternatives for healthy people taking no prescriptions.
On the other hand, a number of Medicare Advantage plans that offer zero premiums do include Part D coverage.
If you have existing Part D coverage that you enjoy – either because it addresses a chronic illness or gives you peace of mind – you probably have no good reason to shop for Advantage plans without drug benefits.
Watch Out for Drug Coverage Limits
Step therapy is here, and here to stay. In a ruling released in August 2018, the Centers for Medicare and Medicaid Services (CMS) permitted Medicare Advantage plans to implement “step therapy,” meaning the plan can demand that you try cheaper medicines first before your insurer will pay for costlier drugs, despite what your doctor may recommend.
For many patients, the less expensive medicine turns out to be effective, and it saves them money. But in other cases, step therapy imposes time-consuming experimentation with unwanted side effects before the patients can get the plan’s OK for the costlier medicines they need.
It’s wise to call the Medicare Advantage plans you are considering and ask: 1) are they implementing step therapy; and 2) if so, how does their process work. The same advice applies each year even when you plan to stick with your existing Medicare Advantage plan.
Watch for coverage caps.
Look for other limitations in your drug coverage. Sometimes plans cap how much of a certain medicine they’ll pay for each month, or impose other similar volume restrictions. Such limits are common with medicine for migraines, for example. Your doctor may want you to have four pills a week on hand. But the plan may only chip in for three. What a pain.
Beware the “catastrophic” 5% rule.
Unfortunately, if you get ill and need costly medicines, you could face ruinous drug bills. Whether you add Part D to traditional Medicare or buy it bundled into an Advantage plan, there is no cap on what you might pay for drugs in a given year.
Once you pay more than $6,350 this year out-of-pocket for your medicines, you hit the catastrophic threshold. From that point on, you pay 5% co-insurance for all medicines for the rest of the year. This may sound reasonable, but it can be potentially ruinous for people with illnesses such as cancer or hepatitis C, who must take drugs that cost upwards of $15,000 a month. Do the 5% math, that’s $750 a month, $9,000 for 12 months. Lawmakers for years have debated capping Part D costs at $2,000 to $3,000 a year, but they’ve never pulled together enough bi-partisan votes to scrap the odious “catastrophic” 5% rule.
You Have a Little Extra Time to Change Your Mind
If you’ve opted for a Medicare Advantage plan, you have a longer window during open enrollment to change your mind. You have up to three months, until March 31, to dump your Medicare Advantage plan. During this period, you’re allowed to switch to either another Medicare Advantage plan or to Original Medicare (Parts A and B) with a standalone Part D prescription drug plan. So you can test drive your Advantage plan and keep your options open for a few months,