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A Clear Explanation of Medicare Part D

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Although the government finally stepped up to the plate to offer prescription savings to the elderly, not every participant will see savings. The Medicare Part D plan has proven itself to be far from the Home Run, many consumers were hoping to see. Instead of eliminating the need for participants to pay high prices for their prescription medications, the cost-sharing rules of Medicare Part D require most participants to continue paying for a considerable share of their drug costs.

Before Selecting a Plan - There are some basic things everyone should know before selecting a plan.

 What medications are currently prescribed and what is the average retail cost?
 What is the total annual cost of these medications if paid out-of-pocket
 Is there an existing health plan in place that includes prescription coverage?
 What are the expenses and the savings using Medicare Part D?
 What supplemental plans are available to help defray out-of-pocket expenses?

The Medicare Part D law is extremely complex. In fact, Medicare Part D is not just one plan. Unlike government run insurance programs used by federal employees and the Veterans Administration, there is no national negotiation for the cost of medications for participants of the Medicare Part D plan. The government laid out only general guidelines and left it up to the insurance industry to create its own plans, each with their various incentives to attract participants to their programs. Consequently, each insurance company must negotiate medication pricing with the pharmaceutical manufacturers causing the prices to medications will vary from plan to plan. This is only one of the reasons for continued confusion.

Selecting a Formulary Plan – The biggest hurdle for most participants is selecting the correct formulary plan. Most insurance companies have divided the available medications into three tiers. Each tier contains a selection of medications decided upon by the insurance company, based on cost. The per-prescription cost escalates with each successive tier. The least expensive tier may include many common medications, but often excludes brand name medications taken by the participant.

 The participant must choose “one” formulary tier each year.
 The participant can not change tiers during the year.

Petitioning the Plan Administrator – If the participant is prescribed a medication during the year that is not included in the formulary plan selected, the plan administrator can authorize that medication to be added to a personal plan. However,

Neither the participant, nor their family can request a change. The request must come from the prescribing physician.
 The participant must pay full price for the specified medication until a decision has been made in their favor.
 If the request is denied, the participant will only be able to switch to a more expensive tier at the beginning of the following year.

Medicare Part D Costs – There are many costs associated with the Medicare Part D program. It is important that a participant gain a full understanding of these costs from the beginning. The table below provides some examples of coverage.

 Most plans include a monthly fee to participate. These fees average about $27.35 a month or $382.20 a  year. These fees do not include the cost of medication.
 There is an annual upfront deductible of $250.
 Some plans reduce the impact of these initial costs by spreading them out in the form of higher co-pays throughout the year.
 After the deductible is met, the participant pays a co-pay (equivalent to 25% of each prescription) for the next $2000 worth of medications they purchase.
 After spending $2,250 in total medication expense, the participant must pick up the full cost for the next $2,850 in medication. This cost is commonly referred to as the “doughnut hole” as it represents a hole in coverage between the standard coverage (above) and the catastrophic coverage (explained below).
 If the participant has contributed a total of $3600 in out-of-pocket medication expense in one year, any
additional medication expense is classified as catastrophic. The participant would then pay only 5% of any remaining prescription costs for the year. Like all of Medicare Part D coverage, the qualification for catastrophic coverage must be met each year.

Adding Supplemental Programs – There are many gaps in the Medicare Part D benefit. All participants have out-of-pocket expenses regardless of the plan they select. To offset these costs, insurance companies offer various forms of supplemental insurance policies. Each of those policies includes a monthly premium, which vary based on health, income, and assets. Participants can also offset their out-of-pocket expense with a Prescription Discount program.

Prescription Discount Programs – Every consumer, regardless of age, pre-existing health conditions, or financial circumstances can help negate medication costs by taking advantage of a prescription discount service. A good service will review medication costs and offer options as to the least expensive way to purchase. For a minimal annual fee, these programs are able to offer retail pricing that is often lower than insurance co-pays, thanks to extensive negotiation with the pharmaceutical industry on a national level.

The promise of a prescription savings program for seniors was a good move toward improved healthcare services for everyone. However, it appears in the case of Medicare Part D, that lobbyists for the pharmaceutical and insurance industries have created barriers to those savings. Consequently, the overall cost of medication is increasing, and leaving people over the age of 65 vulnerable to becoming a captive audience, rather than recipients of manageable and affordable health care choices.

Prescription Discount programs offer consumers the opportunity to make quality decisions as to how and where to spend their health care dollars without negatively impacting insurance premium costs. A viable prescription discount service is a smart choice for smart consumers and in most cases provides the missing link in a quality health care package.

The following links provide additional information on the Medicare Part D program:

Under the Influence – 60 Minutes – Steve Kroft Reports of Drug Lobbyists’ Role in Passing Bill That Keeps Drug Prices High.  www.cbsnews.com/stories/2007/03/29/60minutes/main2625305.shtml?source=search_story

No Bargain: Medicare Drug Plans Deliver High Prices – A Report by Families USA www.familiesusa.org/resources/publications/reports/no-bargain-medicare-drug.html

Medicare Drug Plans: Restriction on Access to Formulary Drugs – A report by the House of Representatives prepared for Representative Henry A. Waxman
http://oversight.house.gov/documents/20060323101029-28542.pdf

 
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